The Federal AccountingStandards Advisory Board

From the Grounds, Up, From the Grounds, Up,

and Beyondand Beyond

May 7, 2008May 7, 2008

AGA-DC/GWSCPA ConferenceAGA-DC/GWSCPA Conference

Disclaimer

Views expressed are those Views expressed are those of the speakers. The Board of the speakers. The Board

expresses its views in expresses its views in official publications.official publications.

Objectives

• The “Grounds” or conceptual The “Grounds” or conceptual framework for developing federal framework for developing federal financial reporting standardsfinancial reporting standards

• Anticipating standards starting Anticipating standards starting “Up”, how the FASAB considers the “Up”, how the FASAB considers the cost and benefits of standardscost and benefits of standards

• Once standards are “Up” how the Once standards are “Up” how the FASAB assists with implementing FASAB assists with implementing them and the role of the AAPCthem and the role of the AAPC

• Projects that may lead to standards Projects that may lead to standards “Beyond” the existing ones“Beyond” the existing ones

The Grounds – the FASAB’s Conceptual Framework

• What is the role of What is the role of Concepts?Concepts?– Guide the Board in developing standardsGuide the Board in developing standards– Help users understand the information Help users understand the information

provided by financial reporting provided by financial reporting – Help preparers and auditors in Help preparers and auditors in

understanding the Board’s reasoningunderstanding the Board’s reasoning

• Are Concepts GAAP?Are Concepts GAAP?– Considered other literatureConsidered other literature– May be relied on in the absence of GAAPMay be relied on in the absence of GAAP

The Grounds – the FASAB’s Conceptual Framework

The FASAB Revisiting Conceptual The FASAB Revisiting Conceptual Framework in PhasesFramework in Phases

1.1. Objectives and Qualitative Objectives and Qualitative Characteristics (completed)Characteristics (completed)

2.2. Elements and Basic Elements and Basic Recognition Criteria Recognition Criteria (completed)(completed)

3.3. Financial Reporting ModelFinancial Reporting Model4.4. Measurement AttributesMeasurement Attributes5.5. EntityEntity

FASAB’s Near-Term Focus

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.

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.

Systems and Control

Federal financial reporting should assist report users in understanding whether financial management systems and internal accounting and administrative controls are adequate…

Primary Near-Term Focus

Mission

Comparative Advantage/GAAP Standards Setter

Language from Concepts 1

FASAB’S ROLE

Supporting RoleDirect Role Direct RoleSupporting Role

Secondary Near-TermFocus

Evolving Laws & Administrative Directives

Other Reports Fulfilling Objective

Contribution of Current Standards

Secondary Near-TermFocus

Board’s Authority does not extend to Budgetary Measurement and Recognition

Other ReportsFulfilling Objective

Contribution of Current Standards

The Grounds – the FASAB’s Conceptual Framework

Primary Focus of FASABPrimary Focus of FASAB

• Stewardship--Information on Stewardship--Information on whether:whether:– the government’s financial condition improved or the government’s financial condition improved or

deteriorateddeteriorated– programs are sustainable as currently constructedprograms are sustainable as currently constructed

• Operating Performance—Information Operating Performance—Information to evaluate:to evaluate:– The service efforts, costs and accomplishments of The service efforts, costs and accomplishments of

governmentgovernment– The manner in which these are financedThe manner in which these are financed– Management of the entity’s assets and liabilitiesManagement of the entity’s assets and liabilities

The Grounds – the FASAB’s Conceptual Framework

Issued SFFAC 5 Issued SFFAC 5 Definitions of Definitions of Elements and Basic Elements and Basic Recognition Criteria for Accrual Recognition Criteria for Accrual Basis Financial StatementsBasis Financial Statements

• Defines 5 ElementsDefines 5 Elements• Discusses Basic Recognition Discusses Basic Recognition

CriteriaCriteria– meets definitionmeets definition– measurable measurable

The Grounds – the FASAB’s Conceptual Framework

Financial Reporting ModelFinancial Reporting Model• PurposePurpose

– Guidance for selecting methods of communicating Guidance for selecting methods of communicating information information

– Stewardship objective requires long-range projections & Stewardship objective requires long-range projections & other informationother information

– Enhance comparability and consistencyEnhance comparability and consistency

• Revisiting SFFAC 2, Revisiting SFFAC 2, Entity and Entity and DisplayDisplay– Explain each financial statementExplain each financial statement– Ensure all objectives are adequately addressed by the Ensure all objectives are adequately addressed by the

modelmodel

• Issued ED – Issued ED – Distinguishing Basic Distinguishing Basic Information, RSI, and Other Information, RSI, and Other Accompanying InformationAccompanying Information

The Grounds – the FASAB’s Conceptual Framework

Measurement AttributesMeasurement Attributes• PurposePurpose

– Critical aspect of financial reportingCritical aspect of financial reporting– Defining “measurement attributes”Defining “measurement attributes”– Guidance for selecting measurement Guidance for selecting measurement

attributesattributes– Enhance consistency in standardsEnhance consistency in standards

The Grounds – the FASAB’s Conceptual

Framework

Federal EntityFederal Entity• PurposePurpose

– Ensure users provided with complete financial Ensure users provided with complete financial informationinformation

– Guidance on whether certain activities should be Guidance on whether certain activities should be included with an entity.included with an entity.

– Revisiting SFFAC 2Revisiting SFFAC 2

• Will lead to a STANDARDWill lead to a STANDARD• Federal Entity Task ForceFederal Entity Task Force

– Survey on boundaries of reporting entitySurvey on boundaries of reporting entity

Up - How the FASAB Considers Cost/Benefit in Developing Standards

– Agenda settingAgenda setting• Significance relative to meeting the reporting Significance relative to meeting the reporting

objectivesobjectives

• Pervasiveness of the issue among federal entitiesPervasiveness of the issue among federal entities

– Proposal DevelopmentProposal Development• Consider how the proposal improves financial Consider how the proposal improves financial

reporting and contributes to the reporting reporting and contributes to the reporting objectivesobjectives

– Staff communicationsStaff communications• Communications with task forces, agencies, Communications with task forces, agencies,

councils, AICPA, otherscouncils, AICPA, others

Up - How the FASAB Considers Cost/Benefit in Developing Standards

– Exposure DraftsExposure Drafts• Constituents asked to comment on proposed Constituents asked to comment on proposed

standardsstandards

– Informational presentations at Informational presentations at conferences conferences

– Field testsField tests• Helps to identify implementation issuesHelps to identify implementation issues

Up – How the FASAB Assists with Implementation

• Additional Guidance Additional Guidance – InterpretationsInterpretations

• Clarifies existing standardsClarifies existing standards– Technical BulletinsTechnical Bulletins

• provide guidance for applying FASAB Statements and provide guidance for applying FASAB Statements and Interpretations and resolving accounting issues not Interpretations and resolving accounting issues not directly addressed by them. The following kinds of directly addressed by them. The following kinds of guidance may be provided in a Technical Bulletin:guidance may be provided in a Technical Bulletin:

– Guidance to clarify, explain, or elaborate on an Guidance to clarify, explain, or elaborate on an underlying Statement or Interpretation,underlying Statement or Interpretation,

– Guidance to address areas not directly covered by Guidance to address areas not directly covered by existing Statements or Interpretations,existing Statements or Interpretations,

– Interim guidance on problems in applying an Interim guidance on problems in applying an existing Statement or Interpretation currently under existing Statement or Interpretation currently under study by the FASAB, orstudy by the FASAB, or

– If applicable, guidance for applying FASB or GASB If applicable, guidance for applying FASB or GASB standards to federal activities.standards to federal activities.

Up – How the FASAB Assists with Implementation

– Staff Implementation GuidanceStaff Implementation Guidance• Guidance on the appropriate application of FASAB Guidance on the appropriate application of FASAB

literatureliterature

• Does not result in a new requirementDoes not result in a new requirement

Up – How the FASAB Assists with Implementation

Accounting and Auditing Policy Committee Accounting and Auditing Policy Committee (AAPC)(AAPC)

What is the AAPC?

• A permanent committee established by the FASAB.

• The AAPC’s mission is to assist the federal government in improving financial reporting by timely identifying, discussing, and recommending solutions to accounting issues within the framework of existing authoritative literature.

Up – How the FASAB Assists with Implementation

AAPCAAPC

Is the AAPC guidance authoritative?

• Section III. I (3) of FASAB’s Rules of Procedure authorize AAPC to issue technical releases related to existing federal accounting standards.

• Technical releases are intended to provide guidance on the specific application of SFFASs, Interpretations of SFFASs, and Technical Bulletins.

• AAPC’s technical releases are in the third category of authoritative guidance in the Federal GAAP hierarchy as stated in the AICPA’s Statement on Auditing Standards 91.

• AAPC may not amend existing standards or promulgate new standards.

Up – How the FASAB Assists with Implementation

AAPC

How can I submit an issue to the AAPC for consideration?

• The AAPC encourages the submission of Federal accounting issues to its website at http://fasab.gov/aapc/issue_sub.html.

• However, the AAPC is not intended to serve as a mediator for preparers, program managers, and/or auditors.

Up – How the FASAB Assists with Implementation

AAPC

What is the process for developing technical releases?

• Assigned to AAPC member to develop and to serve as task force chair if necessary.

• The result of the task force’s work, including recommended actions, will be discussed at public meetings of the AAPC.

• AAPC will seek input from a variety of sources, as needed, to reach a consensus.

Up - How the FASAB Assists with Implementation

AAPCAAPCRecent technical releases

• TR7: Clarification of Standards Relating to the TR7: Clarification of Standards Relating to the National Aeronautics and Space National Aeronautics and Space Administration’s Space Exploration EquipmentAdministration’s Space Exploration Equipment

• TR8:Clarification of Standards Relating to Inter-TR8:Clarification of Standards Relating to Inter-Entity CostsEntity Costs

• TR9: Implementation Guidance for SFFAS 29: TR9: Implementation Guidance for SFFAS 29: Heritage Assets and Stewardship LandHeritage Assets and Stewardship Land

Up - How the FASAB Assists with Implementation

AAPC project in process -- GPP&E• Task Force to address General PP&E IssuesTask Force to address General PP&E Issues• The objective of the task force is to assist The objective of the task force is to assist

in developing implementation guidance for in developing implementation guidance for federal G-PP&E as it relates to SFFAS 6, federal G-PP&E as it relates to SFFAS 6, Accounting for PP&E, Accounting for PP&E, SFFAS 23,SFFAS 23, Eliminating Eliminating the Category National Defense Property the Category National Defense Property Plant, & EquipmentPlant, & Equipment, and other related G-, and other related G-PP&E Guidance developed by the FASABPP&E Guidance developed by the FASAB..

• Sub-groupsSub-groups– AcquisitionAcquisition– UseUse– DisposalDisposal– Records RetentionRecords Retention

Beyond – Future Standards

• Fiscal Sustainability Fiscal Sustainability ReportingReporting

• Social InsuranceSocial Insurance• Changes in AssumptionsChanges in Assumptions• Oil and Gas ResourcesOil and Gas Resources

Beyond – Future Standards

Fiscal SustainabilityFiscal Sustainability• Are we able to continue

financing the current basket of goods and services provided by the government indefinitely?

• PurposePurpose– Provide information to help readers determine

whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due. 

– Enhance understanding of long-term fiscal issues

Beyond – Future Standards

Fiscal Sustainability ReportingFiscal Sustainability Reporting• Current ProposalsCurrent Proposals

– Long-term projectionsLong-term projections• Present values of receipts and outlays for major

programs, such as Social Security and Medicare, and all other

• Present values of receipts and outlays also as a percent of present value of GDP

• Narrative discussion and graphs

– Summary Display with net present value as the Summary Display with net present value as the “bottom line” – fiscal imbalance“bottom line” – fiscal imbalance

Beyond – Future Standards

Social InsuranceSocial Insurance• PurposePurpose

– Provide information onProvide information on• Impact on the government’s financial condition and position Impact on the government’s financial condition and position

as a result of the programs as a result of the programs

• Whether social insurance programs are sustainableWhether social insurance programs are sustainable

• Likelihood social insurance programs will be able to provide Likelihood social insurance programs will be able to provide benefits to those planning on receiving thembenefits to those planning on receiving them

• BackgroundBackground– Social Insurance programs have high participation Social Insurance programs have high participation

among citizensamong citizens

– Fiscal challengesFiscal challenges

Beyond – Future Standards

Social InsuranceSocial Insurance• IssuesIssues

– What is essential social insurance What is essential social insurance information?information?

– How should information be displayed?How should information be displayed?– When expense and liability should be When expense and liability should be

recognized?recognized?

• ChallengesChallenges– UnderstandabilityUnderstandability

• Ability to change lawAbility to change law• Size and volatilitySize and volatility

– UsefulnessUsefulness

Beyond – Future Standards

Changes in Assumptions & Changes in Assumptions & Selecting Discount RatesSelecting Discount Rates

• PurposePurpose– Guidance for displaying changes in assumptionsGuidance for displaying changes in assumptions

– Provides more transparent and useful information Provides more transparent and useful information prepared in a more consistent manner.prepared in a more consistent manner.

• BackgroundBackground– Change in assumptions may exceed all other costsChange in assumptions may exceed all other costs

– What Treasury rates should be used when What Treasury rates should be used when calculating present values for expense and liability calculating present values for expense and liability amountsamounts

Beyond – Future Standards

Changes in Assumptions & Changes in Assumptions & Selecting Discount RatesSelecting Discount Rates

• Exposure Draft Issued:Exposure Draft Issued:– Gains and losses from changes in Gains and losses from changes in

assumptions displayed on the statement of assumptions displayed on the statement of net cost separate from other costs and net cost separate from other costs and exchange revenue exchange revenue

– Components of expenses associated with Components of expenses associated with long-term liabilities disclosed in noteslong-term liabilities disclosed in notes

– Guidance on what rate to use in present value Guidance on what rate to use in present value measurements of long-term liabilities measurements of long-term liabilities

Beyond – Future Standards

Oil and Gas ResourcesOil and Gas Resources

• Purpose - recognizing assets Purpose - recognizing assets and liabilities for federal oil and liabilities for federal oil and gas resourcesand gas resources

• BackgroundBackground– Federal government has extensive oil and gas Federal government has extensive oil and gas

resources throughout the country and on the resources throughout the country and on the Outer Continental Shelf. Outer Continental Shelf.

– Quantity and value of these assets not providedQuantity and value of these assets not provided

Beyond – Future Standards

Oil and Gas ResourcesOil and Gas Resources• ED Issued--Recognizing asset ED Issued--Recognizing asset

for oil and gas proved reserves for oil and gas proved reserves at current valueat current value

• Results in information on:Results in information on:– Quantity of proved reservesQuantity of proved reserves– Value of proved reservesValue of proved reserves– Royalty revenue and depletion of reservesRoyalty revenue and depletion of reserves– Extensive disclosure and RSI Extensive disclosure and RSI

How can I stay informed?

• Visit Visit www.fasab.govwww.fasab.gov

• Sign up for FASAB listservSign up for FASAB listserv

• Read bi-monthly FASAB Read bi-monthly FASAB newsletternewsletter

• Attend meetingsAttend meetings

FASAB On-Line Resources

www.fasab.gov

FASAB On-Line Resources

www.fasab.govwww.fasab.gov– All exposure drafts and final All exposure drafts and final

pronouncements.pronouncements.– Electronic mailing list for updates.Electronic mailing list for updates.– Active project pages include deliberative Active project pages include deliberative

material.material.