OECD Accruals Symposium

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 • 1999 - 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 • www.fasab.gov • All exposure drafts and final pronouncements. • Electronic mailing list for updates. • Active project pages include deliberative material.