FASAB Update
Baltimore AGA – September 16, 2015
Robin Gilliam, CPA, PMP
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Views expressed are
those of the
speaker
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Overview
• Leases
• Department of Defense (DOD) – Implementation Issues
• Internal Use Software (IUS)
• Risk Assumed (RA)
• Public-Private Partnerships (P3s)
• Reporting Model
• Tax Expenditures
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LEASES
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Leases
• FASAB collaborating with GASB to develop
standards for governmental organizations.
• GASB’s preliminary views document should
improve clarity of ultimate exposure draft.
• Each board will issue an exposure draft.
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Leases
• Tentative decision to establish a single
model (with exceptions for short-term
arrangements – 24 months for federal).
• Leases create assets consisting of the “right to use” a
resource.
• Leases create liabilities consisting of the obligation to
pay for the resource.
• Treatment should help identify the interest
cost associated with leases.
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LeasesIntragovernmental Exceptions:
• Leases between two consolidation entities
(based on assessment in SFFAS 47, page 13, par. 38-39)
would be expensed by lessor when due
and payable.
• Minimal disclosure requirements.
Leases
Tentative Timelines
• FASB/IASB – Final expected late 2015
• GASB – ED early 2016 and final early 2017
• FASAB – ED early 2016 and final early 2017
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Department of Defense
- Implementation Issues -
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DOD – Implementation Issue I
• “Opening Balances for Inventory, Operating Materials and
Supplies, and Stockpile Materials”- Exposed for
Comments
• Statement would apply when presenting f/s for the first time or after
a period when existing systems could not provide the information
• Respondents sought clarification but generally supported proposal.
• Deemed Cost
• Deemed cost is an acceptable valuation for establishing opening
balances
• Several valuation bases permitted
• Flexible dates to allow components to establish opening balances
at different dates
• Expect Issuance by March 2016.
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DOD – Implementation Issue II
• Establishing opening balances for general property, plant,
and equipment
• DoD sought guidance on detail needed for capital improvements to
real property.
• Other issues were identified.
• Tentative decisions:
• Allow deemed cost (estimated historical cost, fair value,
replacement cost) for all general PP&E.
• Provide prospective treatment for internal use software and land.
• Acres of land would be disclosed.
• Look for an exposure draft by the end of 2015.
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INTERNAL USE
SOFTWARE
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Internal Use Software (IUS) - Recap of
Events
• Feb / Mar 2014: Presented Working Group’s (WG)
findings and recommendation to AAPC and FASAB
• Board requested that the WG peruse two concurrent
avenues:
1.
2.
Perform research on information relevant to the users of the
Financial Statements to determine if a change to the standard
would be appropriate
Draft implementation guidance for IUS
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IUS - Changes to the Standard
TO DATE:
• Met with OMB to understand budgetary reporting
requirements to align to the standard that costs
associated with each software development phase should
be reported
• Learned that OMB and GSA are moving toward agile
development acquisition practices to focus on shortterm software capability deliveries
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IUS -Changes to the Standard
TO DATE (cont.):
• Interviewed Program Managers from select agencies to
understand goals and software investment decisions:
• PMs and leadership typically focus on total program / project
costs, not just the development (capital) portion
• Working Group believes that a change to the standard
that does not completely remove the reporting
requirement within the financial statements and notes
would cause agencies to incur costs that would exceed
the expected benefit
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IUS - Implementation Guidance
• February 2015:The IUS Working Group held a re-
entrance meeting to re-engage agencies in drafting
Implementation Guidance.
• Task force included industry representatives from several
public accounting and consulting firms as well as
representatives from 10 major federal agencies.
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IUS - Implementation Guidance
• The guidance promotes an understanding of rapid
changes related to software development practices that
have evolved since the inception of SFFAS10 by:
• Highlighting the common issues identified across the federal
government IUS process
• Clarifying terminology and introducing new terms
• Providing sample IUS practices across the federal government IUS
process
• Exposure draft will be issued in the middle of September
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RISK ASSUMED
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RISK ASSUMED (RA)
Project objectives are to:
• Determine what risks the government assumes when
implementing policy initiatives to provide safety and stabilize
financial markets and the economy.
• Update current standards to include:
• Concise definitions and terminology
• Recognition and measurement for contingent liabilities
• Disclosures to provide clear information on fiscal health
• Account for and report all significant risks assumed in order to
meet the stewardship and operating performance objectives of
federal financial reporting.
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RA –Three Phases:
• Phase I: Insurance Programs including non-loan
guarantee programs
• Phase II: Entitlement Programs, including:
• natural disaster relief;
• entitlement programs other than social insurance;
• national defense and security; and
• Other potential effects on future outflows, such as:
• regulatory actions, and/or
• Government Sponsored Enterprises.
• Phase III: Commitments and other risk areas
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RA – Phase I: Insurance Program
Each federal insurance program:
 fills a gap to manage risk for a certain amount of time or
money, where commercial insurance is not willing or able
to;
 manages unique risk factors and complex certainties;
 will recognize risk assumed through a variety of liabilities,
such as:
 Liability for unpaid claims
 Unearned premiums,
 Liability for losses on remaining coverage, etc.
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RA – Government Cost of Federal Crop Insurance
(Source: CRS R40532)
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RA – Phase I: Insurance Program
Updated standards will:
• Define insurance programs into three Categories
• Exchange Transaction Insurance Programs Other Than
Life Insurance
• Nonexchange Transaction Insurance Programs
• Life Insurance
• Improve terminology
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RA – Phase I: Insurance Program
Updated standards will (CONT.):
• Address measurement uncertainty regarding
estimated losses on open contracts
• Determine best measurement model
• Improve disclosures
• Disclose risk assumed for insurance programs
with:
• Narrative including risk factors
• Coverage in force (maximum loss)
• Provide exposure draft in early 2016
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PUBLIC-PRIVATE
PARTNERSHIPS
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Public-Private Partnerships
• Increased use of public-private
partnerships (P3s) to accomplish goals.
• Sharing of risks and rewards.
• Alternative financing arrangements.
• May be off-budget and off-balance sheet.
• Overall project objective:
• Transparency of the full costs and disclosure of
all risks including those deemed remote.
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Public-Private Partnerships
Phase 1 Disclosures:
• Develop a P3 definition with exclusions
• Must be greater than 5 years
• Exclude:
• Non-lease
• PP&E FAR acquisitions,
• GSA delegated unbundled leases,
• partnerships that don’t share risks/rewards,
• grants to state/local governments, and
• P3s with foreign governments.
• ID riskiest P3s by using conclusive & suggestive
risk-based characteristics:
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Public-Private Partnerships
Conclusive Risk Characteristics
1.
2.
3.
4.
Conveyance or creation of a longlived asset or long-term financing
liability.
The federal entity participates in,
helps sponsor, or is party to a Special
Purpose Vehicle.
Covers a significant portion of the
economic life of a project or asset.
The principal arrangement or
transaction is exempt from either the
FAR (contracts) or OMB
requirements (grants).
Suggestive Risk Characteristics
1.
2.
3.
4.
5.
A Value for Money (VfM) analysis is
performed.
Consideration or items given up are
not readily apparent.
Significant work force duties,
activities, or knowledge are crossshared between public and private
sector P3 parties.
Focus more on collaboration and
informal, real-time, resolution
processes than on formal,
contractual, administrative
processes.
Entity relies on private sector
partner’s or a third party’s
determination of a P3’s performance
or return on investment/equity without
performing its own verification.
#AICPAgaac
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Public-Private Partnerships
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Public-Private Partnerships
Phase 1 Disclosures (cont.):
• Disclose qualitative and quantitative information
• For example: purpose of P3, funding mix and amount,
benefits/revenues exchanged, payment terms, related
risks.
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Public-Private Partnerships
Status:
• Balloting process to begin in September 2015
• Statement to become effective FY19; effective
date subject to change.
Public-Private Partnerships
Phase 2: Measurement & Recognition Guidance:
• To include:
• Deferred revenue implications,
• in-kind payments and donated contributions,
• nonmonetary exchanges,
• balance sheet presentation,
• asset capitalization/valuation.
• Board has deferred Phase 2 pending other
priorities and to allow for consideration of Phase
1 results
32 #AICPAgaac
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REPORTING MODEL
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Reporting Model
• Which is Better?
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Reporting Model
• Objective
• Better achieve
• Users’ needs
• Reporting objectives
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Reporting Model
• Input to the Board:
• User needs surveys, focus groups, and roundtables
• FASAB Task Force on Government-wide Financial Reports (Dec 2010)
• CFO Act 20-Year Report
• Input from task forces focusing on agency level reporting on cost, budget and
•
•
•
•
performance
Statement of spending pilots
Study of other sovereign government practices
NAPA Study
Expert presentations
• Budget
• Component Level Reporting
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Reporting Model
Key Take-A-Ways
• Cost Information
• Users seek cost of programs or functions
• Budget Information
• Users expect understandable budget
• Performance Information
• Users expect to know program results
• Integration
• Users expect integrated cost, budget, and
performance information
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Reporting Model
Challenges observed
Presently…
However…
• Financial statements
• highly aggregated
• Static
• Present cost by strategic goals
• Multiple sources of information
available through websites
• GAAP
• Non-GAAP
• Multiple measurement bases
• Accrual, budget, projections
• Spending is mostly mandatory not
discretionary

Users also looking to
◦ Review functions or
programs
◦ Make comparisons
◦ Drill-down
◦ Access data
◦ Create their own reports
◦ Identify trends, patterns
◦ Analyze performance
◦ Compare budgeted to
actual
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Reporting Model
How should financial reporting…
Relate GAAP and non-GAAP sources
 Help users understand

◦ Differences between government-wide and
component financing
◦ The relationship among the different measurement
bases
◦ Mandatory vs. discretionary spending

Facilitate multi-dimensional analyses
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Reporting Model
• Project Status
• Board developing concepts statement
• Concepts should guide development of ideal
reporting model
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TAX EXPENDITURES
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Tax Expenditures
• What are they?
• Income tax code provisions that decrease tax
liabilities or direct cash (credits) to taxpayers
engaging in desirable activities or facing certain
circumstances.
• Who gets them?
• What do you think – more tax expenditures for
corporations or individuals?
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Tax Expenditures
Source: Concord Coalition
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Questions/More Information
For more information on FASAB and active projects please see:
http://www.fasab.gov/
http://www.fasab.gov/projects/
Robin Gilliam, CPA, PMP
Assistant Director – Risk Assumed Project Lead
(202) 512-7356