FASAB Newsletter

June 1997, Issue 43

NELSON TOYE APPOINTED TO THE BOARD

At the May Board meeting, Mr. Nelson Toye joined the Board as the member representing defense and international agencies. Mr. Toye was recently selected to serve as the Deputy Chief Financial Officer for the Department of Defense, succeeding former Board member Al Tucker who retired in April 1997.

Mr. Toye, a Certified Governmental Financial Manager, has extensive experience with the Department of Defense. He served as Director for Accounting Policy for over six years and spent over fifteen years in various positions within the Department's budget office. In addition, Mr. Toye served as an auditor with the Defense Contract Audit Agency. During his DOD tenure, Mr. Toye has received the Presidential Meritorious Executive Award and two Medals for Meritorious Civilian Service from the Secretary of Defense.

The Board expects to benefit greatly from Mr. Toye's experience and expertise. We welcome Mr. Toye to the Board.

GOVERNMENTWIDE SUPPLEMENTARY STEWARDSHIP REPORTING

Board members approved the final draft of the Governmentwide Supplementary Stewardship Reporting Standards exposure draft (ED) at the May 30 Board meeting. The document is being printed and is expected to be mailed to the FASAB mailing list by June 15, 1997. The document also will be posted on the FASAB home page on the Internet, at http://www.financenet.gov/fed/fasab/fasab.htm. Respondents will have 90 days, or until September 15, 1997, to provide written comments to the Board. Questions may be directed to Lucy Lomax, 202-512-7359, or email lucylo@aol.com.

TECHNICAL CORRECTIONS TO SSFAS 6 AND SRAS 8 CONSIDERED

At the May meeting, the Board considered draft amendments to the standards for federal mission property, plant, and equipment (PP&E) and multi-use heritage assets. The Board members had placed a higher priority on these amendments due to the fiscal year 1998 effective date and the many pending audit issues related to PP&E. The draft amendments affect both Statement of Federal Financial Accounting Standards No. 6 (SFFAS No. 6), Accounting for Property, Plant, and Equipment, and Statement of Recommended Accounting Standards No. 8 (SRAS No. 8), Supplementary Stewardship Reporting.

The Board tentatively agreed to remove the characteristics for federal mission PP&E; effectively limiting the category to listed items. The consensus was based on experience to date showing that the characteristics are subjective and confusing. In addition to removing the characteristics, the Board suggested that space exploration equipment should be categorized as general PP&E. The tentative consensus provides that only weapons systems owned by defense agencies and the reserve fleet held by the Maritime Administration would be included. The Board will address the pending Coast Guard request to classify some vessels and aircraft as Federal mission PP&E after staff has completed its research into the Coast Guard request.

In another issue related to Federal mission PP&E, the Board considered whether a transition period should be provided for reporting on weapons systems; presumably the only remaining group in federal mission PP&E. During the transition period, quantities by major category would be reported. Under the draft changes, reporting values would be optional during the transition period. After the transition period, the Board is also considering whether both quantities and values should be reported. The Board did not reach consensus on the issue but requested that the defense agency representative identify any issues and present a defense position on the issues.

The draft amendments also provided for the elimination of the multi-use heritage asset provisions in SFFAS No. 6 and SRAS No. 8. The current provisions require that entities treat certain asset costs as general PP&E and other asset costs as heritage assets. The draft amendments would result in all costs of multi-use heritage assets being treated as general PP&E. The Board tentatively approved the modification.

At the June meeting, the Board will take up these issues again as well as additional changes to PP&E accounting.

UPCOMING TRAINING EVENTS

The May issue of FASAB News brought you an update on courses covering FASAB standards. This month, we're providing a list of upcoming conferences at which FASAB Board members and staff will be making presentations.

The Association of Government Accountants' Professional Development Conference and Exposition will be held from June 22 through 26 at the Pointe Hilton Resort on South Mountain in Phoenix, Arizona. The first day, Sunday the 22nd, will include a FASAB-developed suite on the implementation of the new standards. Instructors will be FASAB Chairman Dave Mosso; Ron Young, Former Executive Director; Wendy Payne, Executive Director; and Richard Fontenrose, FASAB staff. Additionally, a panel discussion among three Board members; Dave Mosso, Woody Jackson and Jim Reid, will be held on Monday. Although the registration is already closed for the PDC, we encourage those who are registered to attend the FASAB suite and session.

American Institute of CPAs National Governmental Accounting and Auditing Update Conference will be held August 25-26 in Washington, DC at the JW Marriott Hotel and September 29-30 in Denver, Colorado at the Hyatt Regency Tech Center. Key federal topics to be covered include: Implementing Cost Accounting in the Federal Government, Government Auditing Standards (Yellow Book), OMB Update, CFO Act Audits, Financial Statement Audits of Federal Agencies, FASAB Update, Performance Measurement in Government, Federal Inspectors General Update and Emerging Issues, and Federal Financial Management Reforms. Inaddition, several sessions on using the Internet and computer based auditing will be of interest to all.

The registration fee is $495 (early bird rates are $25 less). You may call 1-800-862-4272 to register or request additional information.

Treasury's Center for Applied Financial Management's 7th Annual Government Financial Management Conference will be held August 20-22 at the Hyatt Regency in Bethesda, Maryland. Topics include Hammer Award Success Stories, Updates to the Standard General Ledger, FASAB Update, Revisions to Reporting Requirements, Finance Office of the Future and Audited Consolidated Financial Statements. FASAB Chair Dave Mosso will be a luncheon speaker and FASAB staff member Bob Bramlett will present an update on FASAB. The registration fee is $495. Further information is available from the Center at 202 874-9560.

SOCIAL INSURANCE

The Board considered a draft accounting standard and pro forma illustrations for Social Security prepared by the staff. The current draft standard addresses the entity level only but eventually would include a requirement for a governmentwide perspective.

One issue was what period of time should be covered in projections. For example, whether to require projections of 35-years or 75-years. It was suggested that it is not necessary to specify a standard time period. There was a consensus for allowing the entity to report using whatever its normal projection period is, and requiring it to discuss crossover points, if applicable, regardless of when they occurred.

Sustainability Discussion -- The Chairman said the issue of "sustainability" is whether the disclosure should be limited to neutral kinds of data or get into policy issues such as weighing and choosing alternatives for solving financing problems. Also, he asked whether the discussion of sustainability belongs in management's discussion and analysis or the footnotes.

A member said he did not want to be too prescriptive. He favored adding a conceptual statement about what the Board was seeking, about the minimum pieces of information the entity should provide. Other members agreed. The pro forma examples would be for illustration only but were necessary to understand the standard.

There was a consensus to add an objectives statement to the proposed standard explaining why a discussion of sustainability was necessary, why the information in the standard was important in that discussion, and other considerations. The members also agreed that, although they wanted a clear statement regarding the sustainability of a program, requiring a policy discussion would be inappropriate.

Next Step -- The Chairman said the Social Security standard and mockup illustrations, as amended, would be considered tentatively approved, and the Board could move on to consider how other programs such as Medicare would fit the Social Security model. Medicare presents additional issues, e.g., the effect of voluntary premiums in the SMI program and the problem ofprojecting health care costs; and it would present additional potential social insurance criteria for the Board's consideration.

Regarding criteria for social insurance programs, the staff presented an exposure draft on social insurance that the Actuarial Standards Board (ASB) recently published. The characteristics described in the ASB ED are similar to those the Board reviewed earlier in the year. A member noted that the ED's scope listed Social Security, Medicare, Railroad Retirement (which is essentially Social Security for railroad employees), and state-sponsored unemployment insurance, and did not mention Black Lung benefits and veterans benefits. He and other members favored limiting the scope of the FASAB social insurance standard to these programs.

SOFTWARE

The staff described the changes made to the internal use software exposure draft (ED) pursuant to the Board's instructions at the previous meeting. An unresolved an issue regarding recognition and measurement of impairment was discussed. The recognition and measurement of impairment has been a concern of the Board for some time.

Ultimately, the Board approved an approach whereby the entity should attempt to measure the cost of impairment through comparison of expected functions with actual functions. If it could not determine the cost of lost functionality of a module or discrete software program, and the software is still operational, the loss due to impairment would not be recognized and amortization would continue over the remaining useful life. The Chairman asked staff to write up the change and send it to the members for review, and to include a specific request for comment on impairment in the ED.

Other Considerations A member asked why this standard does not require both direct and indirect costs to be capitalized since full-costing was the objective of SFFAS No. 4. Another member agreed, noting that if you purchase contractor-developed software you pay for indirect costs. Again, the Board asked that a specific request for comment be included on this issue.

Members were concerned that the proposed effective date of FY99 would be unreasonable. A request for comment on the date is to be included in the ED.

NEW FASAB WEB ADDRESS

The FASAB Internet address has been changed to the following:

http://www.fasab.gov/

This streamlined version will facilitate accessing FASAB on Financenet. However, for those of you with existing "bookmarks", the initial longer version will still work.

VOLUME I OF THE FASAB CODIFICATION PRINTED

We are pleased to announce that the General Accounting Office (GAO) has printed and begun distribution of FASAB Volume I, Original Statements: Statements of Federal Financial Accounting Concepts and Standards. The Volume is being provided to all Chief Financial Officers and Inspectors General.

Unfortunately, the Government Printing Office (GPO) has decided not to offer the document for sale after the initial printing. However, GPO will fill any previously submitted orders. We encourage individuals receiving the document to make an internal distribution. In addition, GAO will be posting the electronic version of the Volume on the Internet as soon as possible. We will provide the Internet location as soon as possible.

AGENDA FOR JUNE MEETING

The next meeting of the Board is scheduled for Thursday, June 19 at 9:00 am in the GAO Building, Room 7C13, 441 G Street, NW. Agenda items include 1) amendments to property, plant, and equipment standards, 2) a review of MD&A comments, and 3) pension accounting issues.