1 OECD Accruals Symposium U. S. Federal Accounting Standards Update Tom Allen FASAB Chairman

2 Disclaimer  Views expressed are those of the speaker. The Board expresses its views in official publications.

3 Primary Focus of FASAB  Stewardship--Information on whether: the government’s financial condition improved or deteriorated programs are sustainable as currently constructed  Operating Performance—Information to evaluate: The service efforts, costs and accomplishments of government The manner in which these are financed Management of the entity’s assets and liabilities

4 FASAB Projects  Fiscal Sustainability Reporting  Social Insurance  Revisiting Conceptual Framework  Changes in Assumptions  Oil and Gas Resources  Source of GAAP  Legacy PP&E Estimates  AAPC – Technical Releases

5 Social Insurance  Purpose Provide information on  Impact on the government’s financial condition and position as a result of the programs  Whether social insurance programs are sustainable  Likelihood social insurance programs will be able to provide benefits to those planning on receiving them  Background Social Insurance programs have high participation among citizens Fiscal challenges

6 Social Insurance  Information that may be presented Present value of program revenues and scheduled benefits Causes of the changes in present values during the reporting period  Assumption changes  Legislation  Future amounts attributable to events during the period(?) RSI  Cash flow projections as a percent of GDP and taxable payroll  Dependence ratio  Sensitivity analysis Italicized items are currently required by standards.  Issues What is essential social insurance information? How should information be displayed? When expense and liability should be recognized?

7 Changes in Assumptions & Selecting Discount Rates  Purpose Guidance for displaying changes in assumptions Provides more transparent and useful information prepared in a more consistent manner.  Background Change in assumptions may exceed all other costs What Treasury rates should be used when calculating present values for expense and liability amounts

8 Changes in Assumptions & Selecting Discount Rates  Exposure Draft Proposed: Gains and losses from changes in assumptions displayed on the statement of net cost separate from other costs and exchange revenue Components of expenses associated with long-term liabilities disclosed in notes Guidance on what rate to use in present value measurements of long-term liabilities

9 Oil and Gas Resources  Purpose - recognizing assets and liabilities for federal oil and gas resources  Background Federal government has extensive oil and gas resources throughout the country and on the Outer Continental Shelf. Quantity and value of these assets not provided

10 Oil and Gas Resources  Recognizing asset for oil and gas proved reserves at current value  Results in information on: Quantity of proved reserves Value of proved reserves Royalty revenue and depletion of reserves Extensive disclosure and RSI

11 Applicability of FASB GAAP  Purpose Provide FASAB guidance regarding applicability of FASB GAAP to federal entities  Background AICPA recognized FASAB as standards- setter for federal entities Some entities follow FASB GAAP  Federal government corporations  US Postal Service  Others

12 FASB GAAP  Issues What are user needs What requirements would address user needs and Treasury reporting needs What are the reporting costs, burdens, challenges  Status Surveying entities

13 Estimating the Cost of Legacy PP&E  Purpose: Reduce the cost of compliance through amendment to standards.  Background: Some LARGE agencies do not have systems to capitalize cost as PP&E is acquired. The benefits of PP&E accounting are realized primarily through timely data derived from quality systems. The cost of estimating cost may exceed the benefits of doing so.  Issue: When do you stop permitting estimation based on less rigorous documentation?

14 AAPC Status and Activities  AAPC is the source for level D GAAP (Technical Releases). Representatives from central agencies, IG and CFO communities, and FASAB. Implementation guidance can be provided relatively quickly.  Recently Completed efforts: Inter-entity cost implementation Stewardship Land/Heritage Assets Implementaton  Active Effort – General PP&E Q&A

15 AAPC – Q&A regarding General PP&E  Concerns raised regarding the level of precision sought during audits and continuing questions regarding permissible treatments.  Questions expected regarding: Group and Composite depreciation methods Capitalization of indirect cost Spare parts Deployed assets

16 Recently Issued  SFFAC 5, Definitions of Elements and Basic Recognition Criteria for Accrual- Basis Financial Statements Defines 5 elements Provides basic recognition criteria

17 Convergence with Public Sector Accounting Standards Setters  FASAB monitors others’ progress on standards - seeking opportunities to collaborate Members attend meetings Staff track projects  FASAB/GASB Collaboration on Measurement Attributes Planned  Participation in IPSASB’s Fiscal Sustainability Project Planned

18 FASAB On-Line Resources  All exposure drafts and final pronouncements. Electronic mailing list for updates. Active project pages include deliberative material.