Risk Assumed

Project Objective:

A project on risk assumed was added to the agenda for the August meeting after all members designated it as a high priority during the agenda-setting session held in April 2011 (see the minutes from the technical agenda discussion at the April 2011 meeting).

FASAB standards on risk assumed are currently limited to insurance contracts and explicit guarantees (other than loan guarantees). In order to meet the stewardship and operating performance objectives of federal financial reporting, it is important that the federal government reports all significant risks assumed, not just risks related to insurance contracts and explicit guarantees.

Why
Why is a project on risk assumed needed?		    What
What questions / issues does the Risk Assumed Project plan to address?
  • Existing FASAB standards on risk assumed are limited to insurance contracts and explicit guarantees (other than loan guarantees)
  • The federal government has a variety of responsibilities and consequently assumes a range of risks
  • Current FASAB guidance may not result in full disclosure of the significant risk assumed by the federal government
   
  • What are the significant risks assumed by the federal government?
  • How should those risks be defined?
  • What are the appropriate recognition and measurement criteria for those risks?
  • How should those risks be reported?
  • Should current FASAB standards be revised?

The primary objective of this project is to study the significant risks assumed by the federal government and develop (a) definitions of risk assumed, (b) related recognition and measurement criteria, and (c) disclosure and/or required supplementary information (RSI) guidance that federal agencies can apply consistently in accordance with GAAP.

Note: This project will subsume and close the Application of the Liability Definition project. The objective of the Application of the Liability Definition project was to reconsider the recognition, measurement and display of liability and expense, potential new elements/statements, and all related disclosures for commitments of the federal government that could potentially result in a net outflow of resources. In September 2007, the board decided to postpone the project until additional progress could be made in developing conceptual guidance.

HISTORY OF BOARD DELIBERATIONS (reverse chronology)

August 24-25, 2011 Board Meeting
At the August 24, 2011, board meeting, members discussed a project plan proposal from staff. Members strongly supported staff’s plan so staff will begin preliminary research on the Risk Assumed Project by developing an inventory of risk assumed by the federal government, a detailed task force plan, and a list of potential task force members.

Issue Paper for August 2011 (PDF)