The Federal Accounting Standards Advisory Board

1. The Federal AccountingStandards Advisory Board Back to the Future FASAB Update AGA Denver 24th Annual Professional Development Conference March 10, 2010

2. Views expressed are those of the speaker. Official positions of the FASAB are determined only after extensive due process and deliberations. Disclaimer

5. Communication 10 5

6. Overview • General information about FASAB • Five recently issued documents • Two standards currently under review • Active projects • Other topics of interest

7. GeneralInformation

8. Tom Allen Chairman (Former GASB Chair) Debra Bond Nancy Fleetwood Treasury OMB Bob Dacey Hal Steinberg GAO Alan Schumacher Michael Granof Scott Showalter Norwood Jackson Who is FASAB? (Current as of March 1, 2010) Bios available at www.fasab.gov

9. When does FASAB meet? • Generally six times a year • For 2010: • February 24 – 25 • April 28 – 29 • June 23 – 24 • August 25 – 26 • October 27 – 28 • December 16 – 17 • Open to the public • Agenda and briefing materials on www.fasab.gov

10. Where does FASAB meet? Government Accountability Office 441 G Street, NW Washington, DC 20548 Room 7C13 (Staats Briefing Room)

11. Recently Issued Documents

12. Recently Issued Standards

13. Other Recently Issued

14. Identifies the sources of accounting principles and the framework for selecting them • Incorporates GAAP hierarchy into the accounting literature • Level a – FASAB Standards and Interpretations • Level b – Technical Bulletins • Level c – Technical Releases by AAPC • Level d – Staff Implementation Guides and practice • Addresses federal entities that currently apply FASB

15. Clarifies that reasonable estimates of original historical cost may be used to value G-PP&E • Amends SFFASs 6 and 23 • Reduces implementation costs • Effective for existing and new entities

16. Requires reporting that will help users determine whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due • Resulted from social insurance project • Applies to CFR only • Requires a new basic financial statement and a number of disclosures

17. SFFAS 36 – Comprehensive Long-term Fiscal Projections(contd.) • Basic Information (audited) • the present value of projected receipts and non-interest spending under current policy without change with relationship to projected GDP • changes in the present value of projected receipts and non-interest spending from the prior year • the assumptions underlying the projections • factors influencing trends • significant changes in the projections from period to period

18. SFFAS 36 – Comprehensive Long-term Fiscal Projections(contd.) • Required Supplementary Information • the projected trends in: • the relationship between receipts and spending • deficits or surpluses • Treasury debt held by the public as a share of GDP • possible results using alternative scenarios • the likely impact of delaying corrective action when a fiscal gap exists (“cost of delay”)

19. Example Formats and Illustrations

20. Example Formats and Illustrations

21. Example Formats and Illustrations

22. Defers effective date of Technical Bulletin 2006-1, Recognition and Measurement of Asbestos-Related Cleanup Costs, for two years (now fiscal year 2012) • Provides federal agencies with additional time to resolve implementation issues identified since Technical Bulletin 2006-1 was issued • AAPC currently working on implementation guidance that will be issued as a technical release

23. Provides guidance for implementing the related standard • Q&A format • Addresses questions raised by federal preparers • Does not establish new requirements

24. Standards Under Review

25. Recently Completed Activity Under Review

26. Social Insurance • Preliminary Views issued October 23, 2006 • Exposure Draft issued November 17, 2008 • Board and respondents strongly divided on many aspects • SI project spawned fiscal sustainability reporting project

27. Social Insurance (contd.) • New requirements • Narrative in MD&A • Table of key measures in MD&A • Summary section for SOSI • Statement of changes in SOSI • Effective FY 2011

28. Example Formats and Illustrations

29. Example Formats and Illustrations

30. Example Formats and Illustrations

31. Natural Resources • Natural Resources project initiated in July 1995 • Task force held first meeting in January 1997 • Task force issued discussion paper in June 2000

32. Natural Resources(contd.) • Original exposure draft on oil and gas released May 2007 • Concurrent field test • Revised exposure draft issued July 6, 2009 • Final standard expected to be issued April 13, 2010

33. Natural Resources (contd.) • A schedule of estimated federal oil and gas petroleum royalties: • the present value of future federal royalty receipts on proved reserves known to exist as of the reporting date • the amounts to be distributed to others (state governments) • Required supplementary information for three years beginning in FY 2012

35. Active Projects

36. Active FASAB Projects • Revisiting Conceptual Framework • Deferred Maintenance / Asset Impairment • Evaluating Existing Standards • Use of FASB by Federal Entities

37. Revisiting Conceptual Framework • Completed Phases: • Objectives • Elements • In-Process Phases: • Reporting Model • Federal Entity • Measurement Attributes • Review and Maintenance

38. Reporting Objectives • Completed a review of the FASAB’s role and its environment • Reviewed each of the four existing objectives from SFFAC 1 • Issued report, “Clarifying FASAB’s Near-Term Role in Achieving the Objectives of Federal Financial Reporting.” • Operating Performance and Stewardship are primary near-term focus.

39. Systems and Control Federal financial reporting should assist report users in understanding whether financial management systems and internal accounting and administrative controls are adequate… Budgetary Integrity Federal financial reporting should assist in fulfilling the government's duty to be publicly accountable for monies raised through taxes and other means and for their expenditure in accordance with the appropriations laws that establish the government's budget for a particular fiscal year and related laws and regulations. Operating Performance Federal financial reporting should assist report users in evaluating the service efforts, costs, and accomplishments of the reporting entity; the manner in which these efforts and accomplishments have been financed; and the management of the entity's assets and liabilities. Stewardship Federal financial reporting should assist report users in assessing the impact on the country of the government's operations and investments for the period and how, as a result, the government's and the nation's financial condition has changed and may change in the future. Supporting Role Direct Role Direct Role Supporting Role • Primary • Near-Term Focus • Mission • Comparative Advantage/ • GAAP Standards Setter • Language from Concepts 1 Secondary Near-Term Focus Board’s Authority does not extend to Budgetary Measurement and Recognition Other Reports Fulfilling Objective Contribution of Current Standards Secondary Near-Term Focus Evolving Laws & Administrative Directives Other Reports Fulfilling Objective Contribution of Current Standards FASAB’S ROLE FASAB’s Near-Term Focus

40. Elements • SFFAC 5 defined five elements of accrual-basis financial statements: • Assets, liabilities, net position, revenues and expenses • Recognition criteria • Uncertainty

41. Reporting Model • Revisiting SFFAC 2, Entity and Display • Validate and explain each financial statement • Ensure all objectives are adequately addressed by the model • Concerns exist regarding benefits of accrual-basis financial statements relative to the cost of preparing them

42. Reporting Model (contd.) • Project Approach • User Needs Study • Report on experiences in other countries • Alignment of Model with Needs • Fill voids • Adjust current requirements to improve alignment

43. Reporting Model (contd.) • Cost Accounting • Evaluating the effectiveness of existing managerial cost accounting standards • Surveying federal agencies • Learn more about practices • Identify best practices • Focus on linking cost to performance and efforts to encourage that linkage

44. Reporting Model (contd.) • Cost Accounting • What are your thoughts?

45. Federal Entity • Defined in SFFAC 2 • Conclusive criterion • Indicative criteria • Revisiting • Questionable or unique entities • Consistency, completeness, and accountability • Material weakness

46. Federal Entity(contd.) • Task Force • Surveys • CFO • OIG • FFRDCs

47. Measurement Attributes • Part of the FASAB’s reexamination and expansion of its conceptual framework • Purpose: to provide guidance on the selection of measurement attributes in future federal financial reporting standards • A measurement attribute is the aspect of an item that is measured (e.g., historical cost or replacement cost)

48. Measurement Attributes (contd.) • Developing a statement of concepts to assist the board in establishing standards • Identifying how initial amounts and re-measured amounts contribute to meeting reporting objectives • Defining a suite of measurement attributes • Considering needs in the federal environment, for example: • Value in use • Constant dollar reporting

49. Deferred Maintenance and Asset Impairment • Deferred Maintenance • SFFAS 6 as amended results in RSI - experimental • Deferred maintenance viewed as critical management issue. • Task force formed • Asset Impairment • SFFAS 6 covers complete impairment • How does deferred maintenance relate to: • Depreciation • Asset Impairment

50. Evaluating Existing Standards • Why • Cost/benefit issues • Communication challenges • Expectations • How • Outreach to preparers, auditors and “users” • Development of options