USSGL Board Meeting May 3, 2012 Amortization and Market Adjustments for Investments Presented by: Sherry Pontell, USSGLAD

2 Amortization of Investments

3 Issue  Both discount amortization and premium amortization (on the liability side) are recorded in the same USSGL account “Amortization of Discount and Premium on Securities Issued by BPD.”  Having them combined in the same USSGL makes eliminations more difficult to reconcile since the discount amortization amount is not easily identified separately from the premium amortization amount.

4 Proposal  Split out the current USSGL account to have two separate accounts: one for amortization of discount and one for amortization of premium. Modification of Account:  Amortization of Discount and Premium on Securities Issued by Federal Agencies Under General and Special Financing Authority New Account:  Amortization of Premium on Securities Issued by Federal Agencies Under General and Special Financing Authority

5 Impact on GTAS Attribute Table USSGL ATTRIBUTESBULK FILE ATTRIBUTES USSGL ACCT NO. Anticipated Budg/ Prop Begin/ End Debit/ Credit Fed/ NonFed Trading Ptnr Trading Ptnr Main NPB/EC/DF/N####### NPB/EC/DF/N#######

6 Impact on GTAS Attribute Table TAS ATTRIBUTES USSGL ACCT NO. Financing Acct Indicator Fund TypeReporting Type Code TAS Status Trans Code N EG/UG/EC/E M/EP/ER/ES /US/ET/UT/ TR/CF/DF E/F/UE/UN/X N EG/UG/EC/E M/EP/ER/ES /US/ET/UT/ TR/CF/DF E/F/UE/UN/X

7 Crosswalk Impact USSGL Acct No. Bal. Sheet Net Cost Net Posit ion Cust Activity P&F/ SF133 SBR2108Reclass ified Bal. Sheet Reclass ified Net Cost Reclassi- fied Net Position Lines 18, 23 N/A Lines 6.2, 7.3 N/A Lines 18, 23 N/A Lines 6.2, 7.3 N/A

8 New Transaction E126 To record in the issuing entity, the amortization of premium on securities held by a nonfiduciary deposit fund. Reference: USSGL Implementation Guide: Nonfiduciary Deposit Fund with Investment Authority and Clearing Account Guidance Budgetary Entry None Proprietary Entry Debit Amortization of Premium on Securities Issued by Federal Agencies Under General and Special Financing Authority Credit Interest Expenses on Securities

9 Transaction Modifications E124 To record in the issuing entity, the amortization of discount on securities held by a nonfiduciary deposit fund. Comment: Reverse this entry for amortization of premium. Reference: USSGL Implementation Guide: Nonfiduciary Deposit Fund with Investment Authority and Clearing Account Guidance Budgetary Entry None Proprietary Entry Debit Interest Expenses on Securities Credit Amortization of Discount on Securities Issued by Federal Agencies Under General and Special Financing Authority

10 Transaction Modifications D308 To record a prior-period adjustment that reduces the value of a liability. Budgetary Entry None Proprietary Entry **Debit Amortization of Discount on Securities Issued by Federal Agencies Under General and Special Financing Authority **Credit Amortization of Premium on Securities Issued by Federal Agencies Under General and Special Financing Authority **For illustration purposes only, only the new and revised accounts are being shown due to the long list of accounts involved in this transaction.

11 Transaction Modifications D312 To record a prior-period adjustment that increases the value of a prior-year liability. Budgetary Entry None Proprietary Entry **Debit Amortization of Premium on Securities Issued by Federal Agencies Under General and Special Financing Authority **Credit Amortization of Discount on Securities Issued by Federal Agencies Under General and Special Financing Authority **For illustration purposes only, only the new and revised accounts are being shown due to the long list of accounts involved in this transaction.

12 Market Adjustment Accounts for Zero Coupon Bonds

13 Issue  SFFAS 5, paragraph 50, states "Fixed value securities have a known maturity or redemption value at the time of issue. These securities should be valued at their original face (par) value net of any unamortized discount or premium.”  BPD discontinued reporting market adjustments on the Zero Coupon Bonds it issues to its trading partners to be in accordance with FASAB standards. Agencies were advised back then to no longer record market adjustments for Zero Coupon Bonds.  However, there are some agencies, like PBGC that follow FASB standards for their stand alone financial statements and do record market adjustments.

14 Proposal  Modify the definitions for the market adjustment accounts for zeros instead of deleting them.

15 Modification of Accounts Account Title: Market Adjustment – Investments in U.S. Treasury Zero Coupon Bonds Account Number: Definition: The accumulated amount of unrealized holding gains and losses for U.S. Treasury Zero Coupon Bond investments due to adjustments to market value. In accordance with FASAB SSFAS No. 5 “Accounting for Liabilities of the Federal Government,” paragraph 50, do not use the account for market adjustments for fixed value securities. Although the normal balance for this account is a debit, it is acceptable in certain instances for this account to have a credit balance. This account does not close at year-end.

16 Modification of Accounts Account Title: Contra Market Adjustment – Investments in U.S. Treasury Zero Coupon Bonds Account Number: Definition: The offset to market adjustments for investments in U.S. Treasury Zero Coupon Bonds. The account provides a mechanism for these bonds to be reported on a basis other than market value on the Balance Sheet. In accordance with FASAB SSFAS No. 5 “Accounting for Liabilities of the Federal Government,” paragraph 50, do not use the account for market adjustments for fixed value securities. Although the normal balance for this account is a credit, it is acceptable in certain instances for this account to have a debit balance. This account does not close at year- end.

17 Modification of Accounts Account Title: Amortization of and Market Adjustment - Investments in U.S. Treasury Zero Coupon Bonds Account Number: Definition: The amount of amortized discount unrealized gains and losses (for market adjustments), and realized gains and losses in Treasury Appropriation Fund Symbols that invest offsetting collections in U.S. Treasury Zero Coupon Bonds.

18 Modification of Transactions D589 To record the adjustment of a U.S. Treasury Zero Coupon Bond in a special or non-revolving trust fund based on the current market value determined monthly by Treasury. Comment: In accordance with FASAB SSFAS No. 5 “Accounting for Liabilities of the Federal Government,” paragraph 50, do not use this transaction for market adjustments for fixed value securities. If the zero coupon bond is reported at market value on the Balance Sheet, USSGL account , “Unrealized Gains,” may be used in place of USSGL account If the market value decreases, use USSGL account , “Unrealized Losses.” Reverse this entry at the time of sale or maturity.

19 Modification of Transactions D590 To record the adjustment of a U.S. Treasury Zero Coupon Bond issued by the Bureau of the Public Debt in a trust revolving fund, based on the current market value determined monthly by Treasury. Comment: In accordance with FASAB SSFAS No. 5 “Accounting for Liabilities of the Federal Government,” paragraph 50, do not use this transaction for market adjustments for fixed value securities. If the zero coupon bond is reported at market value on the Balance Sheet, USSGL account , “Unrealized Gains,” may be used in place of USSGL account If the market value decreases, use USSGL account , “Unrealized Losses.” Reverse this entry at the time of sale or maturity.

20 Questions?  USSGL Division Contacts  USSGL Issues Form