The Federal Accounting Standards Advisory Board

1. The Federal AccountingStandards Advisory Board FASAB Update 20th Annual Government Financial Management Conference August 4, 2010

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

4. Overview • General information about FASAB • Major Challenges • Five recently issued documents • One standard under review • Active projects

5. GeneralInformation

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

7. 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

8. Where does FASAB meet? Government Accountability Office 441 G Street, NW Washington, DC 20548 Room 7C13 (Staats Briefing Room) Contact Charles Jackson at 202.512.7352 or jacksoncw1@fasab.gov to be added to the building access list.

9. Major Challenges

10. Major Challenges • The federal government’s financial health • Primary focus of FASAB is not on one bottom line number • Community involvement • Cost/benefit considerations

11. Source: A Citizen’s Guide to the 2009 Financial Report of the U.S. Government, pg. i

12. World War II peak of 109% Source: A Citizen’s Guide to the 2009 Financial Report of the U.S. Government, pg. ii

13. Source: A Citizen’s Guide to the 2009 Financial Report of the U.S. Government, pg. iv

14. Source: A Citizen’s Guide to the 2009 Financial Report of the U.S. Government, pg. x

15. Source: A Citizen’s Guide to the 2009 Financial Report of the U.S. Government, pg. xi

16. “. . . The nation must change course and bring social insurance expenses and resources in balance before the deficit and debt reach unprecedented heights. Delays will only increase the magnitude of the reforms needed and will place more of the burden on future generations. . . “ Source: A Citizen’s Guide to the 2009 Financial Report of the U.S. Government, pg. xii

17. Example Formats and Illustrations

18. Primary Focusof FASAB • Stewardship--Information on whether: • the government’s financial condition improved or deteriorated • programs are sustainable as currently constructed

19. Primary Focus of FASAB (contd.) • 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

20. Primary Focusof FASAB (contd.) There is a need for more than just the bottom line numbers.

21. Community Involvement • FASAB Community • Preparers • Auditors • Users • Internal • External

22. Community Involvement (contd.) • Formal Feedback • AAPC • Requests for comment • Public Hearings

23. Community Involvement (contd.) • Informal Feedback • Task Forces / Roundtables • Surveys • Field Testing

24. Cost/Benefit Considerations • Costs not readily available • Benefits difficult to quantify • Balance in the eye of the beholder • True user not always easy to pinpoint

25. How Does the Board Address Cost/Benefit? • Agenda-setting • Proposal development • Staff communications • Exposure Drafts • Field Tests

26. Recently Issued Documents

27. Recently Issued Standards

28. Other Recently Issued

29. SFFAS 37: 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

30. 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

31. Example Formats and Illustrations

32. Example Formats and Illustrations

33. Example Formats and Illustrations

34. SFFAS 38: 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

35. 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 issued April 13, 2010

36. 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

37. 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 recently issued implementation guidance

38. Provides implementation guidance for Technical Bulletin 2006-1, Recognition and Measurement of Asbestos-Related Cleanup Costs • Framework • Identifying assets that contain asbestos • Develop estimates of cleanup costs

40. Clarifies the accounting for cleanup costs associated with permanent or temporary closures or shutdown of equipment • Also clarifies accounting for cleanup costs associated with ongoing operations

42. Standard Under Review

43. SAS → SFFAS • At the request of ASB • Guidance basically unchanged • Expected to be issued August 2010

44. Active Projects

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

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

47. 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.

48. 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

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

50. 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