The Federal Accounting Standards Advisory Board

1. The Federal AccountingStandards Advisory Board Back to the Future FASAB Update AGA Richmond Chapter Seminar Holiday Inn Koger Conference Center May 18, 2011

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

5. Communication 10 5

6. Overview • General information about FASAB • Major Challenges • Recently issued documents • Documents under review • Status of Current projects • Other topics of interest

7. GeneralInformation

8. 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 May 18, 2011) Bios available at www.fasab.gov

9. When does FASAB meet? • Generally six times a year • For 2011: • February 23 – 24 • April 27 – 28 • June 22 – 23 • August 24 – 25 • October 26 – 27 • December 19 – 20 • Open to the public • Agenda and briefing materials on www.fasab.gov

10. Where does FASAB meet? Government Accountability Office 441 G Street, NW Washington, DC 20548 Room 7C13 (Staats Briefing Room)

11. Major Challenges

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

13. “. . . The Nation must bring social insurance expenses and resources into 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 2010 Financial Report of the U.S. Government, pg. x

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

15. 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

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

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

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

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

20. 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

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

22. Recently Issued Standards

23. Recently Issued Standards

24. Recently Issued Standards (contd.)

25. Recently Issued Standards(contd.)

26. Identifies the sources of accounting principles and the framework for selecting them • Incorporates GAAP hierarchy into the accounting literature • Level a – FASAB Standards and Interpretations • Level b – Technical Bulletins • Level c – Technical Releases by AAPC • Level d – Staff Implementation Guides and practice • Addresses federal entities that currently apply FASB

27. Clarifies that reasonable estimates of original historical cost may be used to value G-PP&E • Amends SFFASs 6 and 23 • Reduces implementation costs • Effective for existing and new entities

28. Requires reporting that will help users determine whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due • Resulted from social insurance project • Applies to CFR only • Requires a new basic financial statement and a number of disclosures

29. SFFAS 36 – Comprehensive Long-term Fiscal Projections(contd.) • Basic Information (audited) • the present value of projected receipts and non-interest spending under current policy without change with relationship to projected GDP • changes in the present value of projected receipts and non-interest spending from the prior year • the assumptions underlying the projections • factors influencing trends • significant changes in the projections from period to period

30. SFFAS 36 – Comprehensive Long-term Fiscal Projections(contd.) • Required Supplementary Information • the projected trends in: • the relationship between receipts and spending • deficits or surpluses • Treasury debt held by the public as a share of GDP • possible results using alternative scenarios • the likely impact of delaying corrective action when a fiscal gap exists (“cost of delay”)

31. The Sustainability of Fiscal Policy An important purpose of the Financial Report is to help citizens and policymakers assess whether current fiscal policy is sustainable and, if it is not, the urgency and magnitude of policy reforms necessary to make it sustainable. A sustainable policy is one where the ratio of debt held by the public to GDP[*] (debt to GDP) is stable over time. The discussion below focuses on balancing revenues and expenditures over time, and does not consider fairness or efficiency implications of the reforms necessary to achieve sustainability. It is shown below that, under current policy, the ratio of debt to GDP is projected to rise continuously over the next 75 years, eventually exceeding 350 percent in 2085. If these projections were extended beyond 2085, the deficit excluding interest would continue as the population continues to age and if the other assumptions made for the 75-year horizon continue to hold. The persistence of the deficit excluding interest beyond the 75-year horizon implies that the ratio of debt to GDP would continue to grow beyond the 75-year horizon. The continuing rise in this ratio means that current policy is unsustainable. * Gross domestic product FY 2010 Financial Report of the U.S. Government, pp. 142-143

32. FY 2010 Financial Report of the U.S. Government, pg. 140

33. FY 2010 Financial Report of the U.S. Government

34. FY 2010 Financial Report of the U.S. Government, p. 146 Costs of Delay

35. SFFAS 36: Example Formats and Illustrations

36. 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

37. 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

38. Example Formats and Illustrations

39. Example Formats and Illustrations

40. Example Formats and Illustrations

41. 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

42. 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

43. Natural Resources (contd.) • Concurrent field test • Original exposure draft on oil and gas released May 2007 • Evaluated comment letters along with results of field test • Revised exposure draft issued July 2009 • Final standard issued April 2010

45. AICPA SAS → FASAB SFFAS • At the request of ASB • Guidance basically unchanged • Audit standards not included: • Related parties • Going concern

46. Amended the definition only • Repairs – clarify that deferred repairs are included • Capital – clarify that deferred capital improvements are not included • Preserves the notion that management determines acceptable condition

47. Other Recently Issued Documents

48. Other Recently Issued Documents

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