FASB Reporting by Federal Entities

Project Objective:

Since October 1999, the American Institute of Certified Public Accountants (AICPA) has recognized the Federal Accounting Standards Advisory Board (FASAB) as the standard-setting body for federal governmental entities; therefore, the pronouncements resulting from the FASAB process represent generally accepted accounting principles (GAAP) for the entire federal government (FASAB GAAP). Nevertheless, some federal entities follow GAAP for nongovernmental entities promulgated by the private sector Financial Accounting Standards Board (FASB GAAP). For example, federal government corporations, the US Postal Service, certain component entities of the Department of Treasury, and some smaller entities in the executive and legislative branches have historically applied FASB GAAP and continue to do so.  The primary objective of this project is to consider the appropriate source of GAAP for federal entities.

HISTORY OF BOARD DELIBERATIONS (reverse chronology)

NOTE: This project was archived in August 2011 following board deliberations at the June 2011 meeting.
June 22-23, 2011 Board Meeting

At the June 22, 2011, meeting, after discussing a draft project plan and approach, the majority view of the board members was that the project should be dropped. As a result of this decision, staff will close the project and move it from the Active Projects to the Archived Projects.  At the board’s request, no further research or outreach will be conducted with respect to this project.  If there are outstanding questions or issues remaining at the end of the Federal Entity project and the board agrees at a future agenda-setting session that the issues are a priority, the project can always be reopened.

April 27-28, 2011 Board Meeting
Staff is continuing research to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives. Staff plans to present a revised project plan to the board at the June board meeting.

February 23-24, 2011 Board Meeting
Staff is continuing research to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives. Further progress on this project will depend on workload demands of projects that have been designated as higher priority.

December 16-17, 2010 Board Meeting
Staff is continuing research to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives. Further progress on this project will depend on workload demands of projects that have been designated as higher priority.

October 27-28, 2010 Board Meeting
Staff is continuing research to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives. Further progress on this project will depend on workload demands of projects that have been designated as higher priority.

August 25-26, 2010 Board Meeting
Staff is continuing research to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives.  Further progress on this project will depend on workload demands of projects that have been designated as higher priority.

June 23-24, 2010 Board Meeting
Staff is continuing research to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives.  Further progress on this project will depend on workload demands of projects that have been designated as higher priority.

April 28-29, 2010 Board Meeting

Staff is continuing research to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives.  Further progress on this project will depend on workload demands of projects that have been designated as higher priority.

February 24-25, 2010 Board Meeting
Staff is continuing research to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives.  Further progress on this project will depend on workload demands of projects that have been designated as higher priority.

December 16-17, 2009 Board Meeting
Staff is continuing research to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives.  Further progress on this project will depend on workload demands of projects that have been designated as higher priority.

October 21-22, 2009 Board Meeting
At the October 22, 2009, meeting, the board directed staff to begin work on the proposed project approach, starting with analyzing characteristics of federal entities that primarily apply generally accepted accounting principles (GAAP) issued by the Financial Accounting Standards Board (FASB), grouping them by type, and determining the primary users’ needs of each major grouping.  The results of staff’s research will be used to determine whether additional reporting should be required for any of the entities that primarily apply FASB GAAP in order to meet users’ needs and federal financial reporting objectives.

Issue Paper for October 2009 (PDF)

August 26-27, 2009 Board Meeting
A roundtable on reporting by federal entities that primarily apply standards issued by the Financial Accounting Standards Board was held on Wednesday, September 9, 2009. Staff will summarize the roundtable discussions and present those results to board members, along with an updated project plan and recommendations for further research, at the October meeting.

Issue Paper for August 2009 (PDF)

June 17-18, 2009 Board Meeting
A roundtable with representatives from agencies that primarily apply generally accepted accounting principles (GAAP) issued by FASB will be held on Wednesday, September 9, 2009.  The purpose of the roundtable is to solicit input that will be used to help the board in determining whether certain federal entities should be permitted to continue applying FASB GAAP and, if so, whether additional reporting should be required. This project will also consider whether federal entities should be permitted to convert from FASB standards to International Financial Reporting Standards published by the International Accounting Standards Board.

April 22-23, 2009 Board Meeting
Staff plans to organize a roundtable with representatives from agencies that primarily apply generally accepted accounting principles (GAAP) issued by FASB to solicit their input that will be used to help the board in determining whether certain federal entities should be permitted to continue applying FASB GAAP and, if so, whether additional reporting should be required. This project will also consider whether federal entities should be permitted to convert from FASB standards to International Financial Reporting Standards published by the International Accounting Standards Board.

February 25-26, 2009 Board Meeting
The second phase of this project will commence after the board finishes deliberating on the comments received on the ED, The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued by the Financial Accounting Standards Board.   Comments were requested to be received by February 2, 2009.  The initial analysis of comments was discussed at the February board meeting.

December 17-18, 2008 Board Meeting
The second phase of this project will commence after the board deliberates on the comments received on the ED, The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued by the Financial Accounting Standards Board.   Comments were requested to be received by February 2, 2009.

October 22-23, 2008 Board Meeting
As reported in the August/September 2008 issue of FASAB News, the Appropriate Source of GAAP project was elevated to the number one priority by the board at its August agenda-setting session.   At the October meeting, a proposed project plan was provided to the board that contained the following five objectives for the project:

  1. Establish requirements necessary to ensure that the stand alone federal financial reports prepared pursuant to Financial Accounting Standards Board (FASB) standards meet federal financial reporting objectives
  2. Consider any issues arising from possible transition to IFRSs by U.S. non-listed reporting entities (private companies and non-profits)
  3. Address whether it is appropriate for those federal entities currently applying standards issued by the FASB to continue that practice (i.e., establish whether GAAP for a federal entity permits this practice and it is therefore generally accepted)
  4. Determine whether a newly created federal entity may apply FASB standards and, if so, under what conditions (i.e., establish criteria for new entities)
  5. Provide guidance to address the case of a federal entity consolidating information from an entity (or entities) applying FASB standards with its own FASAB based information [Note that this does not extend to providing guidance for eliminations. If needed, this can be addressed through implementation guidance or informal assistance.]

Two of those objectives (c and d) will be accomplished as part of the forthcoming ED, The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued by the Financial Accounting Standards Board.   As reported in the February/March 2008 issue of FASAB News, the board has tentatively decided that no entities will be required to convert to full FASAB GAAP at this time.  Therefore, the upcoming ED proposes to formally incorporate the newsletter provision that allows federal entities that have issued general purpose financial reports in conformance with accounting and reporting principles issued by the FASB prior to October 19, 1999, to continue to do so into a standard.  In addition, the ED proposes guidance for federal entities that begin preparing GAAP-based financial statements for the first time.

The three remaining objectives will be accomplished through ongoing research which will be used to determine if additional reporting should be required of federal entities that are currently applying FASB accounting principles.  With the completion of objectives c and d, it is anticipated that this project will be renamed to more appropriately reflect the remaining objectives.

Issue Papers for October 2008

August 20-21, 2008 Board Meeting
The Appropriate Source of GAAP project was elevated to the number one priority new project by the board at its August agenda-setting session. Staff will begin more in-depth research into the differences between FASAB and FASB GAAP as reported by federal entities. This research will be used to determine if additional reporting should be required of federal entities that are currently applying FASB accounting principles.

Issue Paper for August 2008

June 18-19, 2008 Board Meeting
Staff is currently considering the options for developing guidance that will reflect the views of the members as communicated at the February 2008 meeting.  Refer to the February-March 2008 issue of FASAB News for further information on the February 2008 meeting.

April 16-17, 2008 Board Meeting
Staff is currently considering the options for developing guidance that will reflect the views of the members as communicated at the February 2008 meeting.  Refer to the February-March 2008 issue of FASAB News for further information on the February 2008 meeting.

February 13-14, 2008 Board Meeting
At the February 14, 2008, meeting, staff presented an issue paper that contained an analysis of federal financial statement user needs; a structure developed by staff to distinguish between the different activities of the federal government (governmental-type activities, business-type activities, and fiduciary activities); three options for members to consider; and a draft survey that would be used to solicit feedback from the federal financial management community on each of the three options.  The paper is available on the Appropriate Source of GAAP [Generally Accepted Accounting Principles] project page at http://www.fasab.gov/projectsgaap.html.

Under the first two of the proposed options (separate accounting and reporting by line item and separate accounting and reporting using the modified equity method), entities that engage primarily in governmental-type activities would be required to convert to FASAB GAAP while entities that engage primarily in activities that meet all of the characteristics of business-type activities would be permitted to report under FASB GAAP.  No additional reporting would be required by component reporting entities unless they engage in a material amount of both governmental-type and business-type activities.  Consolidating entities (and component entities that engage in both types of activities) would modify the display (either on the face of the financial statements or in the notes) to present the amounts of governmental-type activities separately from business-type activities.  Under the first option (separate accounting and reporting by line item), consolidating entities would further distinguish business-type activities by the source of GAAP under which they are reported – FASB or FASAB.

Under the third proposed option (an audited note reconciliation), none of the entities would be required to convert to FASAB GAAP; however, component reporting entities would be required to present a detailed audited note that reconciles the differences between FASB GAAP and FASAB GAAP and supports the amounts submitted to Treasury for the consolidated financial report of the U.S. Government.

All three options would propose to revoke the “grandfather authority” that allowed entities to comply with FASAB GAAP by continuing to apply FASB GAAP with no additional reporting requirements.

Subsequent deliberations revealed that the sense of the Board is that no entities will be required to convert to full FASAB GAAP at this time.  The Board is also comfortable with including two sources of GAAP in the consolidated financial statements except where it affects intragovernmental eliminations.  Members did not vote to adopt the governmental-type and business-type structure developed by staff.  The Board requested that staff meet with the sponsor workgroup to determine which line items are significant in the FASB vs. FASAB intragovernmental reconciliation and develop an exposure draft that proposes a note disclosure for those significant reconciling items only.  The other options considered would be included in the basis for conclusions.  The issue of budgetary reporting for entities reporting under FASB GAAP will be deferred until the matter is resolved at the governmentwide level.

Issue Paper for February 2008

December 4-5, 2007 Board Meeting
At the December 4, 2007 meeting, staff presented an informational paper to the Board members in order to provide them with a better idea of the extent of financial reporting using a primary source of generally accepted accounting principles (GAAP) other than that developed for federal entities by FASAB (e.g., GAAP developed by the Financial Accounting Standards Board (FASB)).  It was thought that a closer look at the extent of the project would also serve to address open questions from the members about exactly what the impact might be to reporting entities in the executive, legislative, and judicial branches.

Staff’s paper contained a listing of all of the entities required to prepare financial statements under the Chief Financial Officers Act of 1990 as expanded by the Government Management and Reform Act of 1994 (CFO/GMRA), the Accountability of Tax Dollars Act (ATDA), and the Government Corporation Control Act (GCCA) with a link to each entity’s 2006 financial statements, if available, as well as the source of GAAP used to prepare the financial statements (FASAB vs. FASB GAAP) and the audit opinion received thereon.  Information was also provided for some of the legislative branch entities as well.

Staff noted that an updated project schedule was included at the back of Appendix 1 and asked the members if they had any questions or concerns about the project proceeding as outlined at the September meeting.

The majority of the Board agreed that staff should continue as directed at the last meeting, which is to determine the user needs of the entities currently reporting under FASB, develop proposed reporting requirements that would incorporate those user needs with the needs of Treasury in compiling the consolidated financial report of the U.S. Government (CFR), and then prepare a draft survey to get feedback on the potential costs, burdens, and hurdles to providing the information necessary to satisfy the proposed reporting requirements.  One member also requested that staff prepare a position paper that compares the pros and cons or strengths and weaknesses of the CFR in its current format to one that requires more consistency or homogeneity, including an analysis of the balance of governmentwide costs vs. benefits of changes as well as status quo.

Issue Paper for December 2007

September 19-20, 2007
At the September 20, 2007, FASAB meeting, staff updated the members regarding the progress on the project since it was last on the agenda in May 2007.  At that meeting, members had asked staff to meet with FASAB’s sponsors to agree on the most pressing issue to be addressed related to the appropriate source of GAAP for federal entities.  In July 2007, FASAB staff and representatives from each of the three sponsors formed a workgroup and jointly developed a recommendation that would address the issues with the governmentwide consolidation.  Staff noted that there was not widespread support for requiring full conversion to FASAB standards so the recommendation did not address primary reporting at the component entity level.

Staff noted that there are several potential options that the members have to address the issue.  Staff referred to the three options contained in the staff discussion paper:

  • Option A – Take no action
  • Option B – Implement workgroup recommendation
  • Option C – Initiate FASAB project to address specific differences

Staff briefly summarized the workgroup’s recommendation, which is to (1) permit entities currently following GAAP set by the Financial Accounting Standards Board (FASB) to continue to do so but require that they present in their individual financial statements an audited footnote reconciliation of the differences between FASB GAAP and FASAB GAAP that would support the numbers submitted to Treasury via the Governmentwide Financial Report System (GFRS) for the consolidated Financial Report of the U.S. Government (CFR); and (2) revoke the “grandfather authority” that allowed entities to comply with FASAB GAAP by continuing to directly follow the FASB hierarchy (see FASAB News, Issue 60, Jan.-Mar. 2000, pg. 2 at /fasabnews/janmar00.pdf).
The majority of the Board requested that staff further develop Option B (implement workgroup recommendation) but include additional information about financial statement user requirements for entities that are preparing FASB-based statements.   Some members also requested to see a draft survey requesting cost information about the proposed changes to component level reporting, an assessment of the indirect impact on the legislative and judicial branches, and more information on whether entities that begin preparing financial statements for the first time should be permitted to prepare FASB-based financial statements under certain conditions.

September 2007 Issue

May 23-24, 2007
At the May 24, 2007, FASAB meeting, staff provided an analysis of various characteristics of the ten entities that were profiled in the March 2007 briefing materials.  The characteristics that staff reviewed were grouped into the following eight categories: (A) General Profile of the Entities; (B) Size of the Entity; (C) Likely Users of the Financial Statements; (D) Title of General Purpose Federal Financial Report; (E) Financial Statements Presented; (F) Main Line Items; (G) Compliance with FASAB Standards and USSGL Requirements; and, (H) Primary Differences between FASAB Standards and FASB Standards.  From the population of characteristics contained in the eight areas listed above, staff selected 16 characteristics that it deemed most relevant to the determination of the appropriate source of GAAP. Using those 16 characteristics, staff provided a draft framework for determining which source of GAAP would be more appropriate for a given entity utilizing a non-weighted scoring mechanism.

At the May meeting, staff also provided feedback from various members of the federal financial management community in the form of a brief survey that was circulated to the preparers and auditors of the ten selected entities to provide information on the expected benefits and perceived costs and burdens associated with various approaches to resolving any concerns regarding the source of GAAP.  Staff summarized the sense of the comments received from the respondents, which were generally not in favor of converting from FASB GAAP to FASAB GAAP.

After discussion of the options, the Board directed FASAB staff to coordinate with GAO, OMB, and Treasury on potential solutions to the issue and, if possible, come back to the Board with a draft framework that could be used to determine the appropriate source of GAAP for federal entities.

May 2007 Issue

March 21-22, 2007
At the March 22, 2007, FASAB meeting, staff presented a project plan and background information that included entity profiles and excerpts from financial statements for the following ten federal entities that have historically followed FASB GAAP: Community Development Financial Institution, Corporation for National and Community Service, Federal Deposit Insurance Corporation, Federal Prison Industries (Unicor), Government National Mortgage Association (Ginnie Mae), Millennium Challenge Corporation, Office of Thrift Supervision, Pension Benefit Guaranty Corporation, Tennessee Valley Authority, and U.S. Mint (the Mint switched to FASAB GAAP beginning with its fiscal year 2005 financial statements).

Staff outlined a number of possible outcomes of the project and the pros and cons of each option, provided a draft project timeline, and requested Board input on the next proposed phase in the project – “Analyze and document similarities and differences that might prove helpful in developing guidance on which source of GAAP is most appropriate.”  The Board approved additional research on the project at that time.

Minutes

Deliberations prior to March 2007

This project was initiated in January 2006 after the topic was considered a top priority as a result of (1) the Board’s October 2004 agenda-setting session, and (2) subsequent consideration of comments on the July 2005 invitation to comment (ITC) on the four projects selected by the Board for consideration.  Prior to the March 2007 Board meeting, staff had completed the first two phases in the proposed project plan – “Select 10 federal entities that are following the FASB GAAP hierarchy” and “Complete profiles of the 10 federal entities with respect to each entity’s mission, structure, operations and size based on revenue, sources of financing, SFFAC 2 conclusive and indicative criteria for including components in a reporting entity, and significant accounting policies.”

Minutes