Statements_Feb28-1997_volume.txt

STATEMENTS OF FEDERAL FINANCIAL ACCOUNTING CONCEPTS AND
STANDARDS

as of February 28, 1997
SFFAC Nos. 1-2 SFFAS Nos. 1-8 Selected Materials
GAO Document #


FOREWORD
This volume is the first of a two volume set referred to as the
"Codification." It contains the original text that currently
constitutes the body of accounting concepts and standards for the
U.S. Government. Specifically, the volume incorporates the
following documents published through February 28, 1997:
-- Statements of Federal Financial Accounting Concepts 1 &
2, and -- Statements of Federal Financial Accounting Standards
1-8.1

Origins of the Statements
The concepts and standards presented in the two volume set
resulted from the joint efforts of the Department of the Treasury
(Treasury), the Office of Management and Budget (OMB), and the
General Accounting Office (GAO). These three central agencies,
referred to collectively as the "principals", established the
Federal Accounting Standards Advisory Board (FASAB) in 1990. FASAB
was created to consider and recommend accounting standards and
principles.2 The principals ultimately decide upon the principles
and standards.
The Codification includes only those principles and standards
agreed to by the principals. FASAB is publishing the Codification
as a comprehensive basis of accounting for Federal reporting
entities. It is expected that FASAB will continue to recommend
statements on specialized topics. As new statements and
interpretations are adopted, the Codification will be updated.


Purpose of the Codification
The Codification of Federal accounting concepts and standards is
a two volume set with extensive cross-referencing and indexing. The
volumes are designed to meet the needs of users for references to
original statements (Volume I) and to standards alphabetized by
topic (Volume II). Both volumes serve as authoritative references
to the standards and interpretations.
1
Statement of Federal Financial Accounting Standards No. 8,
Supplementary Stewardship Reporting, has been approved by the
Board's principals but may not be implemented until it has
undergone a 45-day review by Congress. The review was not completed
at the time this Volume was published. SFFAS No. 8 is provided
herein for your convenience and future use. An announcement will be
made in the Federal Register when the review has been completed and
SFFAS No. 8 can be implemented.
2
For a more extensive description of FASAB's role, refer to
Statement of Federal Financial Accounting Concepts No. 1,
Objectives of Federal Financial Reporting, Paras. 23-29.
Volume I
This volume, Volume 1--Federal Financial Accounting Concepts and
Standards-Original Statements, is a compilation of the documents
produced by the Federal Accounting Standards Advisory Board and
adopted by the principals: the Secretary of the Treasury, the
Director of OMB, and the Comptroller General of the United States.
Once adopted, the documents are referred to as Statements of
Federal Financial Accounting Concepts (SFFAC or Concepts) and
Statements of Federal Financial Accounting Standards (SFFAS or
Standards) respectively.
This volume presents the Concepts in their entirety. Concepts do
not establish Federal financial accounting standards; rather they
describe the concepts used by FASAB as a framework as it considers
and recommends accounting principles for the Federal government.
Concepts are meant to guide others involved in Federal financial
reporting such as preparers and auditors.
This volume extracts the authoritative portions of the Standards
originally published in individual statements as well as the
explanatory text contained in any appendices. It does not reprint
the summaries or all introductory and background material since
these sections are not always essential to applying the standards
or understanding the Board's conclusions. The Basis for the Board's
Conclusions for each standard is included since it serves to
explain the specific provisions of the standards.
The glossaries originally published with each statement have
been codified in a single glossary. This glossary is presented as
the last appendix to the volume.
Volume II
Volume II of this set, A User's Guide to Federal Financial
Accounting Standards, is a codification of the standards. Volume II
presents the standards alphabetized by topic, pulls together all
references to a particular topic in one section, and integrates
illustrative material from both the SFFASs and the original
Exposures Drafts wherever possible.


Applicability
The mission of FASAB is to recommend accounting concepts and
standards that result in federal agencies' financial reports
including understandable, relevant, and reliable information about
the financial position, activities, and results of operations of
the United States government and its component units. In addition,
the standards should foster the improvement of accounting systems
and internal controls that will help provide reasonable assurance
to users that government activities have been conducted
economically, efficiently, and effectively, and in compliance with
applicable laws and regulations. Therefore, FASAB believes that
federal financial accounting concepts and standards should be
considered in establishing systems and in maintaining day-to-day
financial records as well as being applied to general purpose
financial reports of U. S. Government reporting entities. This
belief is consistent with the requirements of the Federal Financial
Management Improvement Act of 1996 which states that "each agency
shall implement and maintain financial management systems that
comply substantially with Federal financial management systems
requirements, applicable Federal accounting standards, and the
United States Government Standard General Ledger at the transaction
level."3
The specific applicability of the standards to components of the
Federal government was considered during the development of
Statement of Federal Financial Accounting Concepts No. 2 (SFFAC No.
2), Entity and Display. SFFAC No. 2 lists criteria for including
components in Federal reporting entities (see pp. 75-77) and
provides the following guidance with regard to components required
by law or policy to issue financial statements prepared in
accordance with accounting standards other than those constituting
Federal GAAP. For example, some components are required to apply
accounting standards issued by the Financial Accounting Standards
Board or a regulatory agency. Those components should continue to
apply the standards required by law or policy for their financial
statements. The reporting entities of which the components are a
part, however, need to be sensitive to differences that may arise
from the different accounting standards. If these differences are
material, the standards constituting Federal GAAP should be applied
for purposes of including the components in entity-wide statements.
In such cases, the components may need to provide additional
disclosures or different measurements required to comply with
Federal GAAP.
The standards need not be applied to immaterial items.


Hierarchy of Federal Generally Accepted Accounting
Principles
The hierarchy of generally accepted accounting principles4
(GAAP) governs what constitutes GAAP for all U.S. government
reporting entities. OMB publishes the hierarchy in its bulletin
entitled Form and Content of Agency Financial Statements. It lists
the priority sequence of sources that an entity should look to for
accounting and reporting guidance.
3Title VIII--Federal Financial Management Improvement Act of
1996, Sec. 803(a).
4"Accounting principles" are those conventions, rules, and
procedures necessary to define acceptable accounting practice at a
particular time.
In 1996, through the joint efforts of the Treasury, OMB, and
GAO, a body of generally accepted accounting principles (GAAP)
covering most transactions was promulgated for the Federal
government. However, agencies may engage in transactions that are
not addressed by these standards. In that event, agencies should
view the hierarchy as providing sources of GAAP for the Federal
Government. While many of the standards comprising Federal GAAP
have already been made effective, three of those standards will not
be effective until fiscal year 1998. The following hierarchy5
determines GAAP for U.S. government reporting entities beginning in
fiscal year 1998:


1.
Individual standards agreed to by the Director of OMB,
the Comptroller General, and the Secretary of the Treasury and
published by OMB and the General Accounting Office.


2.
Interpretations related to the SFFASs issued by OMB in
accordance with the procedures outlined in OMB Circular A-134,
Financial Accounting Principles and Standards.


3.
Requirements contained in OMB's Form and Content Bulletin
in effect for the period covered by the financial
statements.


4.
Accounting principles published by authoritative standard
setting bodies and other authoritative sources (a) in the absence
of other guidance in the first three parts of this hierarchy, and
(b) if the use of such accounting principles improves the
meaningfulness of the financial statements.


The above hierarchy may be implemented earlier than fiscal year
1998 with approval from OMB. Until the above hierarchy is
effective, U.S. government reporting entities will continue to
follow the hierarchy established6 for an "Other Comprehensive Basis
of Accounting" (OCBOA) and presented below:


1.
Individual statements agreed to and published by the
JFMIP principals.


2.
Form and content requirements included in OMB Bulletin
93-02, dated October 22, 1992, and subsequent issuances.


3.
Accounting standards contained in agency accounting
policy, procedures manuals, and/or related guidance as of March 29,
1991, so long as they are


5The hierarchy was published in OMB Bulletin 97-01 dated October
16, 1996.
6The hierarchy was published in OMB Bulletin 94-01 dated
November 16, 1993.
prevalent practices.
4. Accounting principles published by authoritative standard
setting bodies and other authoritative sources (1) in the absence
of other guidance in the first three parts of this hierarchy, and
(2) if the use of such accounting standards improve the
meaningfulness of the financial statements.


Source for Interpretations
OMB Circular A-134 describes the policies for seeking and
providing interpretations and other advice related to the
standards. An interpretation is a document of narrow scope that
provides clarifications of original meaning, additional
definitions, or other guidance pertaining to an existing SFFAS.
Requests for interpretations should be directed to OMB's Office of
Federal Financial Management or to the Executive Director,
FASAB.
OMB and FASAB will respond to the request for guidance by
providing technical assistance unless they determine that the
response should be an Interpretation. In that event, FASAB staff
will provide written copies of the request to the Board members.
FASAB staff will examine, as appropriate, applicable literature and
consult with knowledgeable persons and draft an Interpretation of
Federal Financial Accounting Standards. FASAB will consider the
draft interpretation at an open meeting. After a majority agrees
and the representatives of the three principals (Treasury, GAO, and
OMB) approve and sign the interpretation; the interpretation will
be published by OMB and GAO.



Organization of the Codification
Volume I presents the text of the original statements as
described above. Each statement is presented as a separate chapter.
The issue date and effective date of each statement are presented
first. Next, references to relevant sections within Volume I and to
Volume II are provided. Any interpretations that relate to the
statements are also identified.
In some cases, the statements have been affected by later
statements or affect earlier statements. References direct the
reader to the affected paragraphs and indicate the source of the
change. Within the text of the statements, provisions deleted as a
result of other statements are marked with strikeouts and
provisions affected by other statements are doubleunderlined.
Double-underlined text remains as originally published. The
double-underlining is intended to alert the reader to the fact that
it has been modified or affected by a later statement.
A brief summary of the statement is presented. A table of
contents referenced to both page and paragraph numbers follows the
summary. Note that the paragraph numbers are those originally
expressed in the individual statements despite the omission of some
paragraphs. Any omitted paragraphs are indicated in the table of
contents.
Volume I also presents the following appendices:

Volume II is under development at this time and will be
organized alphabetically by topic. Topics will be specific
financial statement items. Each topical section will be identified
by an alpha-numeric code (for example, P10 for "Pensions"), with
numbers selected to allow addition of future topics.
Paragraphs within each section will be numbered consecutively.
The following numeric format has been proposed:
Paragraphs .100 - .599: Standards and Potential Note Disclosures
Paragraphs .600 - .699: Interpretations Published by OMB Paragraphs
.700 - .799: Nonauthoritative Discussion & Illustrations
Source references will be provided in paragraphs .100 - .599 to
indicate the original statement from which material was drawn. The
references will appear in brackets at the end of each paragraph or
illustration. For example, the reference [SFFAS 7, para. 81] refers
to Statement of Federal Financial Accounting Standards No. 7,
Accounting for Revenue and Other Financing Sources and Concepts for
Reconciling Budgetary and Financial Accounting, paragraph 81.
Source references will be provided in the nonauthoritative
paragraphs as footnotes to permit more descriptive identification
of the sources.
Volume II will present the following appendices and may present
others:
-- Topical Index -- FASAB Active and Future Projects -- Topics
Not Yet Addressed -- Consolidated Glossary
TABLE OF CONTENTS
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TRANSACTIONS WITH THE PUBLIC
Nonexchange transactions with the public
242. Individual income taxes, corporation income taxes, social
insurance taxes and contributions,37 excise taxes, estate and gift
taxes, and customs duties.--Taxes (including customs duties) are
levied through the exercise of the power of the Government to
compel payment. In broad terms, taxes are "the price we pay for
civilization." More specifically they finance spending of many
types to promote the general welfare, provide for the common
defense, and ensure domestic tranquillity: national defense, a
judicial system, aid to the elderly, construction of
infrastructure, education and training, and so forth. The
relationship between the tax paid and the value received is too
indirect and disproportionate to relate the revenue that is
received from any identifiable taxpayer to the cost that is
incurred for providing that identifiable taxpayer with benefits.
This is especially the case where the benefits are of a collective
or public nature, such as national defense, in which case
consumption by one taxpayer does not reduce the consumption
available for another; or where the benefits are designed to
redistribute income from one group of people to another. Therefore,
tax revenue is nonexchange revenue.
243. All excise taxes, like other taxes, are classified as
resulting in nonexchange revenue. Some excise taxes (considered to
be benefit taxes) are levied on bases that are related to the use
of publicly provided goods and services or the public provision of
other benefits, such as the gasoline tax; certain other excise
taxes are levied on bases related to a cause of some damage and are
dedicated to pay down costs, such as the tax on domestically mined
coal, which is dedicated to the black lung disability trust fund.
Even in these cases, however, the relationship between the tax and
the benefit received by an identifiable recipient is relatively
indirect and disproportionate. Moreover, these excise taxes, like
other taxes, are determined through the exercise of the power of
the Government to compel payment. Therefore, like other taxes, they
are classified as producing nonexchange revenue.
244. Board members have differing views on whether social
insurance programs result in exchange or nonexchange
transactions.38 However, they agree that social insurance tax
revenue should be reported in the same way as other tax revenue for
the purposes of financial reporting. This is because social
insurance taxes, like other taxes, are determined through the
exercise of the power of the Government to compel payment.
Furthermore, individuals and businesses subject to social insurance
taxes are subject to them as a byproduct of their decision to enter
covered employment or engage in a covered business, so especially
for the major, broad-based social insurance programs--Social
Security, Medicare (hospital insurance), and unemployment
37"Social insurance" does not include programs established
solely or primarily for Federal employees, such as pension and
other retirement plans. "Social insurance" taxes and contributions
do, however, include payments made by or on behalf of Federal
employees to social insurance plans, such as Social Security and
Medicare.
38See discussion of social insurance programs in FASAB, Exposure
Draft, Supplementary Stewardship Reporting (August 1995).
compensation--they have virtually no legal option except to
pay.
245. Tax receipts are generally collected from the public by the
IRS (Internal Revenue Service) and, to a lesser extent, by the
Customs Service and other entities acting as agents for the
recipient entities rather than on their own behalf. The collecting
entity receives the cash and then transfers it to the General Fund,
trust fund, or special fund on whose behalf it was collected. The
amount so collected should be accounted for as a custodial activity
by the collecting entity. The tax is recognized as a nonexchange
revenue by the entity that is legally entitled to the amount. This
would be a trust fund or special fund in the case of an earmarked
(i.e., dedicated) tax. If collected on behalf of the Government as
a whole, it would be recognized in the Government-wide consolidated
financial statements.
246. Social insurance taxes and contributions paid by Federal
employees.39--Federal employees may be covered by social insurance
programs such as Social Security40 and Medicare under the same
terms and conditions as the remainder of the covered population.
The payments made by Federal employees are in the nature of taxes,
compulsory payments demanded by the Government through the exercise
of its power to compel payment. Insofar as the social insurance
program applies to employees of the United States government, the
terms and conditions are generally the same as the program for
private employees. The employer and employee contributions are
generally calculated in the same way; the employee contribution is
not earned by the social insurance program; and the benefits are
generally calculated in the same way. The employee does not obtain
particular benefits under the plan from rendering service in
Federal employment, because he or she would have been similarly
covered by the program if privately employed and would have
obtained similar benefits. For these reasons, the employee
contribution should have the same classification as contributions
by non-Federal employees, which is nonexchange revenue.
247. Deposits by states for unemployment trust fund.--States
deposit the receipts from the state unemployment tax to the U.S.
Treasury for the unemployment trust fund in order to finance most
of the benefits under the unemployment compensation system. The
state unemployment tax differs from state to state in terms of the
tax rate, tax base, and certain other characteristics, and
unemployment benefits also differ from state to state.
Nevertheless, the deposit has long been construed as a Federal
budget receipt (a governmental receipt), and the unemployment trust
fund has long been included as an account in the Federal
budget.
248. This is for a combination of reasons taken together: (a)
the unemployment compensation system--including the system of
taxes, the system of benefits, and the trust fund--was established
by the Social Security Act of 1935 and has been amended by Federal
law many times; (b) deposits are held in a trust fund operated by
the U.S. Government; (c) Federal law specifies extensive
requirements for the state unemployment tax and unemployment
benefits; (d) the Federal unemployment tax finances grants to
states to cover their entire cost of administering the
unemployment
39
Social insurance" does not include programs established solely
or primarily for Federal employees, such as pension and other
retirement plans.
40
Most Federal civilian employees hired before 1984 are not
covered by Social Security.
system; and (e) Federal law effectively coerces states to
participate in the system, with participation requiring them to
levy the state unemployment tax and deposit the collections in the
U.S. Treasury. If a state does not participate (or is not certified
by the Department of Labor as meeting Federal requirements): (i)
the Federal unemployment tax is levied within the state at its
maximum rate, (ii) the system does not pay any unemployment
compensation benefits within the state, and (iii) the Federal
Government provides no grants to state governments to pay for the
costs of administration. The deposits of the state tax are
therefore nonexchange revenue of the unemployment trust fund. (The
Federal unemployment tax is levied and collected separately from
the state unemployment tax.)
249. User fees, Harbor Maintenance trust fund. --This is an
example of a tax that is termed a "user fee" by law while
classified in the budget as a governmental receipt together with
other taxes and duties. It is an ad valorem tax of 0.125 percent
imposed on commercial cargo loaded and unloaded at specified U.S.
ports open to public navigation. The receipt is earmarked to the
Harbor Maintenance trust fund. It is similar in nature to other
excise taxes that result from the Government's power to compel
payment and that are dedicated to a trust fund or special fund to
be spent for a designated purpose (for example, the gasoline excise
tax, which is dedicated to the Highway Trust Fund). It therefore
should be recognized as nonexchange revenue by the Harbor
Maintenance trust fund.
250. Customs Service fees.--The Customs Service collects revenue
primarily from duties on imported merchandise but also from two
types of fees: the merchandise processing fee and a group of fees
called "user fees."
251. The merchandise processing fee is primarily an ad valorem
charge on formal merchandise entries into the United States (at
0.19 percent) subject to a maximum and minimum charge. It also
includes flat fees on informally entered goods. The collections are
earmarked by law to a special fund from which receipts are made
available to finance Customs Service operations to the extent
provided by current appropriations.
252. The merchandise processing fee is associated with the cost
of the Customs Service's operations. The fee as originally enacted
was modified by the Customs and Trade Act of 1990 to make it
consistent with U.S. obligations under GATT (the General Agreement
on Tariffs and Trade) after a GATT panel had ruled that the
original fee (a straight ad valorem fee) exceeded the cost of
services rendered and was a tax on imports that discriminated
against imports in favor of domestic production. The maximum and
minimum fees and the flat fees were enacted to meet the U.S.
obligation.
253. However, the associated cost is primarily some of the costs
of assessing and collecting duties on imported merchandise, such as
the salaries of import specialists (who classify merchandise) and
the costs of processing paperwork. The importer pays duties that
are required by law; it does not receive anything of value from the
Government in the nature of an exchange. Furthermore, these costs
are not likely to depend significantly on the value of the
merchandise, and the fee is levied through the power of the
Government to compel payment. Therefore, for the purpose of a
classification system for financial reporting, the fee is akin to
dedicated taxes that are also related in the aggregate to
associated costs and that are classified as nonexchange revenue
(e.g., the excise tax on gasoline). The merchandise processing fee
is therefore classified as a nonexchange revenue.
254. The user fees consist of a group of flat fees charged on
passengers and conveyances entering the country.41 The collections
are dedicated by law to a special fund whose receipts are made
available by permanent indefinite appropriation to finance Customs
Service operations.
255. These fees are intended to offset certain inspection costs
that relate to the processing of passengers and conveyances
entering the country. They are levied through the power of the
Government to compel payment, and the person or entity that pays
these fees does not receive anything of value from the Government
in exchange. The inspection activities are for a variety of
purposes: to ensure that dutiable merchandise is declared, to seize
contraband (such as narcotics and illegal drugs), to detect
infringements of patent and copyright laws, and so forth. Some of
these purposes are related to the Government's powers to raise
taxes, which are nonexchange revenue, and to enforce laws. Only to
a limited extent are they like regulatory user fees, based on the
Government's power to regulate particular businesses or activities.
Therefore, like the merchandise processing fee, the user fees are
classified as nonexchange revenue.
256. Deposits of earnings, Federal Reserve System.--The Federal
Reserve System consists of the Board of Governors of the Federal
Reserve System and twelve regional Federal Reserve Banks. Under
Federal accounting concepts, it is not considered to be part of the
Government-wide reporting entity. Therefore, payments made to or
collections received from the Federal Reserve System would be
reported in the financial statements of the Federal Government and
its component reporting entities.42 The Federal Reserve earns large
amounts of interest on its portfolio of Treasury securities and
deposits to the Treasury all net income after deducting dividends
and the amount necessary to bring the surplus of the Federal
Reserve Banks to the level of capital paid-in.
257. The Federal Reserve was established by Act of Congress
pursuant to the Government's sovereign power over the nation's
money, and its investment in Treasury securities is necessary for
carrying out its monetary function. It does not receive anything of
value from the Government in exchange for its deposit of earnings,
and on occasion it has been required by law to make extra payments.
The revenue from the deposits is therefore nonexchange.
258. Donations: except types of property, plant, and equipment
that are expensed.--Donations are contributions to the Government,
i.e., voluntary gifts of resources to a Government entity by a
non-Federal entity.43 The Government does not give anything of
value to the donor, and the donor receives only personal
satisfaction. The donation
41These fees are sometimes called the "COBRA user fees." This
term comes from the Consolidated Omnibus Budget Reconciliation Act
of 1985, which established these fees.
42SFFAC No. 2, Entity and Display, para. 47.
43
The term "donations" includes wills disposing of property and
judicial proceedings other than forfeitures.
of cash, other financial resources, or nonfinancial resources
(except stewardship property, plant, and equipment) is therefore a
nonexchange revenue.
259. The exception, stewardship PP&E, consists of Federal
mission PP&E, heritage assets, and stewardship land. Such
PP&E is expensed if purchased, but no amount is recognized if
it is received as a donation.44 Correspondingly, no revenue is
recognized for such donations.
260. Fines and penalties.--Fines and penalties are monetary
requirements imposed on those who violate laws or administrative
rules. The person or other entity that pays a fine or penalty does
not receive anything of value in exchange, nor does the Government
sacrifice anything of value. The Government collects these amounts
through the exercise of its power to compel payment. Fines and
penalties are therefore a nonexchange revenue.
261. Fines from judicial proceedings are collected by the entity
acting as an agent for the Government as a whole rather than on its
own behalf. They are therefore accounted for as a custodial
activity of the collecting entity and recognized as a nonexchange
revenue in the Government-wide consolidated financial
statements.
262. Fines and penalties produced by an entity's
operations--such as inspections to ensure compliance with Federal
law and with regulations that are the responsibility of the entity
(e.g., inspections by the Office of Surface Mining) or compliance
with regulations for the conduct of a Federal program--are
recognized as nonexchange revenue by whichever entity is legally
entitled by law to the revenue. In some cases, but not all, this
would be the collecting entity. If the collecting entity transfers
the nonexchange revenue to the General Fund or another entity, the
amount is accounted for as a custodial activity by the collecting
entity. If transferred to the General Fund, the penalties are
recognized as nonexchange revenue in the Government-wide
consolidated financial statements; if transferred to another
entity, they are recognized as nonexchange revenue by the entity
that receives the transfer.
263. Penalties due to delinquent taxes in connection with
custodial activity.--The person or other private entity that pays a
penalty on delinquent taxes does not receive anything in exchange,
nor does the Government sacrifice anything of value. The Government
collects these amounts through its power to compel payment.
Penalties on delinquent taxes are therefore a nonexchange revenue.
The penalties are accounted for as a custodial activity. If
transferred to the General Fund, the penalties are recognized as
nonexchange revenue in the Government-wide consolidated financial
statements; if transferred to another entity, they are recognized
as nonexchange revenue by the entity that receives the
transfer.
264. Forfeitures.--Property may be seized as a consequence of
various laws and regulations and forfeited to the Government.
Forfeited property may be acquired through forfeiture proceedings,
be acquired to satisfy a tax liability, or consist of unclaimed and
abandoned merchandise. Forfeited property is principally managed by
the Asset Forfeiture Fund of the Justice Department and the
Treasury Forfeiture Fund of the Treasury Department. Revenue is
recognized from forfeited property unless the property is
distributed to state or local law enforcement agencies or
foreign
44SFFAS No.6, Accounting for Property, Plant, and Equipment,
para. 61 and 71.
governments or is received in satisfaction of a previously
recognized revenue (e.g., accrued tax receivables).45
265. The timing of revenue recognition depends on how the
property is forfeited and the nature of the property. In the case
of unclaimed and abandoned merchandise, revenue is recognized in
the amount of the sales proceeds at the time the property is sold.
In the case of property acquired through forfeiture proceedings,
the timing of recognition depends on the nature and disposition of
the property. For monetary instruments, the revenue is recognized
at the time of obtaining forfeiture judgment; for property that is
sold, at the time of sale; and for property that is held for
internal use or transferred to another Federal agency, at the time
of obtaining approval to use the property internally or transfer
it.46
266. The method of measuring revenue depends on the nature of
the property. The amount of revenue recognized for monetary
instruments is the market value when the forfeiture judgment is
obtained. For property that is sold, it is the sales proceeds. For
property that is held for internal use or transferred to another
Federal agency, it is the fair value of the property less a
valuation allowance for any liens or third party claims.
267. The revenue from forfeiture is nonexchange revenue, because
the Government seizes the property through the exercise of its
power. The Government does not sacrifice anything of value in
exchange and the entity that forfeits the property does not receive
anything of value. More than half of the forfeiture revenue of the
two funds mentioned above is from currency and other monetary
instruments. Although other types of forfeited property must be
sold in order to recognize revenue, or constructively sold (if
transferred to another Federal agency or placed into internal use),
this is the last step in a process that is inherently
nonexchange.
268. The disposition of the revenue from forfeiture is
determined by law. Revenue or the property itself may ultimately be
distributed to the seizing entity, state or local law enforcement
agencies, foreign governments, or the general fund. Revenue is
recognized as nonexchange revenue by the entity that is legally
entitled to use the revenue or to use the property itself. If the
property is distributed to a state or local law enforcement agency
or a foreign government, revenue is not recognized by a Federal
Government reporting entity. If the revenue is transferred to the
General Fund, it is recognized as nonexchange revenue in the
Government-wide consolidated financial statements.
269. Some entities may be involved in the management and
liquidation of forfeited property but not themselves be entitled to
the revenue or to the use of the property. For example, a central
fund created to support the seizure activities of multiple
entities
45This amends SFFAS No. 3, Accounting for Inventory and Related
Property, with respect to forfeitures related to satisfying tax
liabilities.
46
SFFAS No. 3, para. 57-78. The standard also requires deferred
revenue to be recognized when a forfeiture judgment is obtained,
but the deferred revenue is reversed when revenue is recognized.
The amount of revenue ordinarily differs from the amount of
deferred revenue. In some cases, an adjustment subsequent to the
original forfeiture judgment may be necessary when it is later
determined that a portion of the forfeiture is to be distributed to
state or local law enforcement agencies or foreign governments.
may manage forfeited property and the collection and disposition
of the revenue from that property. These entities should account
for the property as a custodial activity. Revenue is shown when it
is recognized, and it is shown as transferred to others when the
cash is disbursed or the property is delivered. The disposition of
property to an entity outside the Federal Government is also
accounted for.
Exchange transactions with the public: revenue
270. Sales of goods and services.--The cost of production for
goods and services such as electricity, mail delivery, and maps is
defrayed in whole or in part by revenue from selling the goods or
services provided. The sales may be made by a public enterprise
revolving fund (such as the Bonneville Power Administration), an
intragovernmental revolving fund (such as the Government Printing
Office), or a fund that is not a revolving fund (such as the
Geological Survey). Each party receives and sacrifices something of
value. The sale is therefore an exchange transaction, and the
revenue is exchange revenue for the entity making the sale.
271. Sales of goods and services in undercover operations.--The
cost of the Government's undercover operations is defrayed in whole
or in part from the proceeds of sales of goods that have been
purchased (as opposed to goods that have been forfeited). Each
party receives and sacrifices something of value. These
characteristics of the transaction are not affected by whether the
sale is illegal. The sale is therefore an exchange transactions,
and the revenue is exchange revenue of the entity making the
sale.
272. Interest (unless classified elsewhere), dividends, and
rents (except for mineral rights) on Government property.--Each
party receives and sacrifices something of value, so the inflow of
resources is an exchange transaction.
273. Interest is classified as exchange revenue notwithstanding
the fact that the entity may not be charged a cost of capital for
the assets that yield these inflows; or, if the entity borrowed
from Treasury to acquire the assets, it may have been charged a
below-market interest rate. The gross cost of the entity is
understated in such cases; and to recognize an exchange revenue is
to recognize a revenue without some or all of the related costs,
and hence to understate the entity's net cost of operations.
Nevertheless, in some cases the entity does pay the Treasury at
least some interest; and the Government's cost of borrowing to
acquire the assets is recognized as a cost of the Government as a
whole. Since some cost is recognized, even if not always the full
cost of the entity,47 an exchange revenue is recognized for the
entity that receives the inflow of interest.
274. Rents, royalties, and bonuses on Outer Continental Shelf
(OCS) and other petroleum and mineral rights.--Rents, royalties,
and bonuses are exchange revenues, because each party receives and
sacrifices something of value. The amounts are earned by sales in
the market and therefore are exchange revenue. They are collected
by the Minerals Management Service (MMS) of the Department of the
Interior, which
47
The partial recognition of associated cost distinguishes
interest from rents, royalties, and bonuses on the Outer
Continental Shelf and the auction of the radio spectrum. For the
latter transactions, see the subsequent paragraphs.
manages the energy and minerals resources on the OCS and
collects the amounts due the Government and Indian tribes from
minerals produced on the OCS and other Federal and Indian
lands.
275. MMS does not recognize a depletion cost for various
reasons, including the fact that under present accounting standards
natural resources are not recognized as an asset and depletion is
not recognized as a cost. As a result, this exchange revenue bears
little relationship to the recognized cost of MMS and cannot be
matched against its gross cost of operations. Therefore, although
the inflows are exchange revenue, they should not be subtracted
from MMS's gross cost in determining its net cost of
operations.
276. MMS should instead account for the exchange revenue as a
custodial activity. MMS collects rents, royalties, and bonuses
acting as an agent on behalf of the recipients designated by law:
the General Fund, certain entities within the Government to which
amounts are earmarked, the states, and Indian tribes and allottees.
The amounts of revenue should be recognized and measured under the
exchange revenue standards when they are due pursuant to the
contractual agreement.
277. The rents, royalties, and bonuses transferred to Treasury
for the General Fund, or to other Government reporting entities,
should be recognized by them as exchange revenue. However, neither
the Government as a whole nor the other recipient entities
recognize the natural resources as an asset and depletion as a
cost. Therefore, this exchange revenue should not offset their
gross cost in determining their net cost of operations. It should
instead be a financing source in determining their operating
results and change in net position.
278. Proceeds from the auction of the radio spectrum.--The
proceeds from auctioning the right to use the radio spectrum are
exchange revenues, because each party receives and sacrifices
something of value. The amount of revenue is earned by sales in the
market at auctions. It bears little relationship to the costs
recognized by the Federal Communications Commission (FCC), which
collects the revenue, or to the costs recognized by the U.S.
Government as a whole. Therefore, it should not be offset against
the costs of the FCC in determining its net cost of operations or
against the costs of the Government as a whole in Government-wide
consolidated financial statements.
279. The FCC should therefore account for this exchange revenue
as a custodial activity, acting as an agent on behalf of the
General Fund; and it should be included as exchange revenue in the
Government-wide consolidated financial statements.
280. Interest on post-199148 direct loans.49--Interest on direct
loans is an exchange transaction, because it is part of a broader
exchange transaction in which the entity makes a loan to the
borrower and the entity and borrower each receives and sacrifices
something of value. Interest on direct loans that are budgeted
according to the provisions of the Federal Credit Reform Act of
1990 consists of two components: the nominal interest (the stated
interest rate times the nominal principal) and the amortized
interest (change in present value of the loans receivable due to
the passage of time). The combined effect of these components
equals the effective interest, which is directly defined as the
present value of the loans receivable times the Treasury interest
rate applicable to the particular loans (i.e., the interest rate
used to calculate the present value of the direct loans when the
direct loans were disbursed). The effective interest causes an
equal increase in the aggregate value of the assets on the balance
sheet, and therefore the effective interest is the amount
recognized as exchange
50
revenue.
281. Interest on delinquent taxes and other receivables that
arise as the result of custodial operations.--Receivables that
arise as the result of custodial operations are custodial (or
non-entity) assets, held by the IRS or another entity as an agent
for the Government as a whole rather than on its own behalf (e.g.,
IRS tax receivables on which the delinquent taxpayer must pay
interest). The interest is an exchange revenue, because each party
receives and sacrifices something of value, but it is not related
to the costs incurred by the collecting entity. The interest is
accounted for as a custodial activity by the collecting entity. If
transferred to the General Fund, the interest is recognized as
exchange revenue in the Government-wide consolidated financial
statements because it is related to the government's cost of
borrowing; if transferred to another entity, it is recognized as
nonexchange revenue by the entity that receives the transfer.
282. Regulatory user fees such as patent and copyright fees;
immigration and consular fees; SEC registration and filing fees;
and Nuclear Regulatory Commission fees.--Regulatory user fees are
charges based on the Government's power to regulate particular
businesses or activities. The revenue is related to the cost in one
of two ways. Special benefits may be provided to identifiable
recipients who pay the fees, beyond the benefits, if any, that
accrue to the general public (e.g., passport fees); or the
Government may incur costs in order to regulate an identifiable
entity for the benefit of the general public or some other group,
in which case the user charge compensates the Government for its
regulatory costs that were caused by the activity of the party that
pays the charge (e.g., SEC and Nuclear Regulatory Commission
fees).
48
Post-1991 direct loans consist of direct loans that were
obligated after September 30, 1991, whereas pre-1992 direct loans
consist of direct loans that were obligated before October 1, 1991.
The same accounting that is used for post-1991 direct loans is also
used for pre-1992 direct loans that were modified and transferred
to financing accounts; loans receivable arising from defaulted
post-1991 guaranteed loans; and loans receivable arising from
defaulted pre-1992 guaranteed loans that were modified and
transferred to financing accounts.
49
For interest on pre-1992 direct loans, see the preceding section
on "interest (unless classified elsewhere) . . ."
50See SFFAS No. 2, Accounting for Direct Loans and Loan
Guarantees, paragraphs 30-31 and 37; for an illustrative case
study, also see Appendix B.
Because in general the revenue is closely related to the cost of
operations, these fees are classified as exchange transactions and
the revenue is an exchange revenue of the entity that charges the
fee.
283. Diversion fees, Department of Justice.--Registrants in the
Diversion Control Program (e.g., physicians) pay fees to the Drug
Enforcement Administration, in exchange for which the DEA provides
the registrants with the authority to prescribe controlled
substances. The diversion fees are intended to cover the costs of
the Diversion Control Program. Because the revenue is related to
the cost and the registrants both receive and sacrifice value, the
payment of these fees is an exchange revenue of the Diversion
Control Program.
284. Premiums for SMI (Supplementary Medical Insurance), bank
deposit insurance, pension benefit guarantees, crop insurance, life
insurance, and other insurance.--In exchange for a premium and
other considerations, the Government promises to make payments to
program participants if specified events occur. The premium offsets
the cost of the program in whole or in part. The degree to which
participation is voluntary differs from program to program. Because
the revenue is related to the cost of the providing service, it is
an exchange revenue of the insurance program.
285. Federal employee contributions to pension and other
retirement benefit plans.51--Employees of the Federal Government
provide service to their employer in exchange for compensation, of
which some is received currently (the salary) and some is deferred
(pensions, retirement health benefits, and other retirement
benefits). This is an exchange transaction, because each party
sacrifices value and receives value in return. As part of this
exchange transaction, the Government promises a pension to its
employees after they retire. The Government also promises other
retirement benefits, notably health benefits. In return, the
employee provides services and, under some plans, makes a
contribution to the retirement fund out of his or her salary. The
financing of these benefits may include contributions paid by the
employee to the retirement fund.
286. In broad terms, the employee contribution is an inflow of
resources to the retirement fund as part of this exchange
transaction. More narrowly, it is a payment by the employee as part
of an exchange of money and services for a future pension or other
retirement benefit. Therefore, it is an exchange revenue of the
entity that administers the retirement plan and thus is an offset
to that entity's gross cost in calculating its net cost of
operations.52
51Federal employee retirement plans do not include social
insurance, such as Social Security and Medicare.
52For further discussion of the accounting standards for
pensions and other retirement benefits of Federal employees, see
SFFAS No. 5, Accounting for Liabilities of the Federal Government,
para. 56-93 and 148-181. The standards do not cover accounting for
the plan per se as distinct from the administering entity. Nor do
they cover defined contribution plans, or administrative entities
that are not Federal reporting entities.
287. Federal employee contributions to health benefits plan for
current coverage.--Employees of the Federal Government provide
services to their employer in exchange for compensation, of which
some is received currently in the form of money (the salary); some
is received currently in the form of payments to a third party (the
employer entity contribution to the medical insurance plan for
current coverage of its employees); and some is deferred (pensions
and other retirement benefits). This is an exchange transaction,
because each party sacrifices value and receives value in return.
As part of this exchange transaction, the Government and its
employees both contribute to a medical insurance plan that provides
current coverage of the employees.
288. In broad terms, the employee contribution out of his or her
salary is an inflow of resources to the health benefits plan as
part of this exchange transaction. More narrowly, it is a payment
in exchange for current coverage by a health benefits plan.
Therefore, it is an exchange revenue of the entity that administers
the health benefits plan and thus is an offset to that entity's
gross cost in calculating its net cost of operations.
289. Reimbursement for collecting revenue.--The Customs Service
collects duties on goods imported by Puerto Rico and the Virgin
Islands. The Customs Service retains an amount equal to the
estimated cost of collecting these duties, including all costs of
operations in Puerto Rico and the Virgin Islands and an allocation
of overhead; it transfers the remainder to the Treasury, which, in
turn, transfers the collections to Puerto Rico or the Virgin
Islands.
290. The total amount of duties collected on these goods should
be accounted for as a custodial activity by the Customs Service.
Notwithstanding that duties are a nonexchange revenue, these
particular duties are a nonexchange revenue of an entity other than
the United States and therefore are not recognized as a nonexchange
revenue of the U.S. Government.
291. The method of disposing of these collections combines two
distinct transactions into one. The entire amount of the duties
could be transferred to Puerto Rico and the Virgin Islands, and
these governments could then pay the Customs Service to reimburse
it for its services of collecting duties. The payment to Customs
would be exchange revenue of the Customs Service. The actual
procedure for reimbursement, whereby Customs retains an amount
equal to the estimated cost, is simpler but equivalent in
substance. Hence, the custodial transfer to Treasury (for Puerto
Rico and the Virgin Islands) and the amount retained by Customs
should be shown as separate components of the disposition of the
revenue from customs duties. The amount retained by Customs to
reimburse itself for its costs is exchange revenue of the Customs
Service and is offset against its gross cost in calculating its net
cost of operations.
292. Reimbursement for cleanup costs.--The Coast Guard or other
Federal entities may incur costs to clean up environmental hazards
caused by private parties and, in some cases, require these private
parties to reimburse it for the costs incurred. Notwithstanding
that the Government demands the revenue under its power to compel
payment, the revenue arises from the action of the private parties
and is closely related to the cost of operations incurred as a
result of that action. Therefore, the revenue is an exchange
revenue of the entity that incurs the cost.
Exchange transactions with the public: gains and losses
293. Note: As explained in the introduction to this appendix,
transactions that are classified as producing gains or losses
should instead be classified as producing revenue or expense if
they are usual and recurring for a particular reporting entity.
294. Sales of Government assets: other than property, plant, and
equipment and forfeited and foreclosed property.--The sale of
Government assets (other than property, plant, and equipment and
forfeited and foreclosed property) is an exchange transaction,
because each party receives and sacrifices something of value. If
the sales price equals book value, there is no gain or loss,
because a cash inflow equal to book value is the exchange of one
asset for another of equal recorded value and therefore not a net
inflow of resources. If the sales price is more or less than the
book value of the property, a gain or loss, respectively, is
recognized to the extent of the difference. The amount of the
difference between sales price and book value is ordinarily a gain
or loss rather than a revenue or expense, because sales of property
are ordinarily an unusual or nonrecurring inflow of resources.
295. Sales of property, plant, and equipment.-- The transaction
is an exchange transaction, because each party receives and
sacrifices something of value. If the sales price53 equals book
value, there is no gain or loss, because a cash inflow equal to
book value is the exchange of one asset for another of equal
recorded value and therefore not a net inflow of resources. If the
sales price is more or less than book value, a gain or loss,
respectively, is recognized to the extent of the difference. The
amount of the difference is ordinarily a gain or loss rather than a
revenue or an expense, because sales of property, plant, and
equipment are ordinarily an unusual or nonrecurring inflow of
resources.
296. The entire sales price is a gain if the book value of the
asset is zero. The book value is zero (a) if the asset is general
property, plant, and equipment (PP&E) that is fully depreciated
or written-off or (b) if the asset is stewardship PP&E, for
which the entire cost is expensed when the asset is
purchased.54
297. Acquisition of property, plant, and equipment through
exchange.--The cost of property, plant, and equipment (PP&E)
acquired through an exchange of assets with the public is the fair
value of the PP&E surrendered at the time of exchange. If the
fair value of the PP&E acquired is more readily determinable
than that of the PP&E surrendered, the cost is the fair value
of the PP&E acquired. If neither fair value is determinable,
the cost of the PP&E acquired is the cost recorded for the
PP&E surrendered net of any accumulated depreciation or
amortization. In the event that cash consideration is included in
the exchange, the cost of PP&E acquired is increased (or
53
The sales price may include the fair value of items received in
exchange.
54SFFAS No. 6, Accounting for Property, Plant, and Equipment,
has divided property, plant, and equipment (PP&E) into two
basic categories: general PP&E and stewardship PP&E (which
consists of federal mission PP&E, heritage assets, and
stewardship land). General PP&E is capitalized and recognized
on the balance sheet; stewardship PP&E is expensed and thus has
no book value. (Stewardship PP&E is presented in a stewardship
statement.)
decreased) by the amount of the cash surrendered (or
received).
298. Any difference between the cost of the PP&E acquired
and the book value of the PP&E surrendered is recognized as a
gain or loss.55 It is a gain or loss rather than a revenue or
expense, because ordinarily the amount would be an unusual or
nonrecurring inflow of resources.
299. If the fair value of the PP&E acquired is less than the
fair value of the PP&E surrendered, the PP&E acquired is
recognized at its cost and subsequently reduced to its fair value.
The difference between the cost of the PP&E acquired and its
fair value is recognized as a loss.56
300. Sales of foreclosed property: associated with pre-1992
direct loans and loan guarantees.--Foreclosed property associated
with pre-1992 direct loans and loan guarantees is recognized as an
asset at net realizable value. The sale is an exchange transaction,
and any difference between the sales proceeds and book value is
recognized as a gain or loss.57
301. Sales of receivables: except direct loans.--The transaction
is an exchange transaction, because each party receives and
sacrifices something of value. Upon sale, any difference between
the sales proceeds and book value is recognized as a gain or loss.
If the sales price equals book value, there is no gain or loss,
because the exchange of one asset for another of equal value is not
a net inflow of resources.
302. Sales of direct loans.--The sale of a direct loan is a
modification according to the Federal Credit Reform Act of 1990,
regardless of whether the loan being sold was obligated after FY
1991 or before FY 1992. The book value loss (or gain) on a sale of
direct loans equals the book value of the loans sold (prior to
sale) minus the net proceeds of the sale. It normally differs from
the cost of modification, which is recognized as an expense.58 Any
difference between the book value loss (or gain) and the cost of
modification is recognized as a gain or loss.59
303. Retirement of debt securities prior to maturity.--Debt
securities may be retired prior to maturity if they have a call
feature or if they are eligible for redemption by the holder on
demand. Many Treasury bonds issued before 1985 are callable;
savings bonds, the Government account series, the foreign series,
and the state and local series
55See SFFAS No. 6, Accounting for Property, Plant, and
Equipment, para. 32.
56Ibid., footnote 38.
57See SFFAS No. 3, Accounting for Inventory and Related
Property, para. 79-91.
58
This difference is due to the different interest rates used to
discount future cash flows for calculating the subsidy cost (and
subsidy allowance) when the loan is made and for calculating the
cost of modification at a later time. If the sale is with recourse,
the present value of the estimated loss from the recourse is also
recognized as an expense.
59See SFFAS No. 2, Accounting for Direct Loans and Loan
Guarantees, para. 53-55 and Appendix B, Part II(B).
of Treasury securities are redeemable on demand, although
sometimes with a penalty or other adjustment or only after a
specified period of time.
304. Each party receives and sacrifices something of value in
buying and selling debt securities that may be retired prior to
maturity. The sales price reflects such features. Therefore, the
transaction is an exchange transaction. The difference, if any,
between the reacquisition price and the net carrying value of the
extinguished debt is recognized as a loss or gain.60
Other financing sources from the public
305. Seigniorage.--Seigniorage is the face value of newly minted
coins less the cost of production (which includes the cost of the
metal, manufacturing, and transportation). It results from the
sovereign power of the Government to directly create money and,
although not an inflow of resources from the public, does increase
the Government's net position in the same manner as an inflow of
resources. Because it is not demanded, earned, or donated, it is an
other financing source rather than revenue. It should be recognized
as an other financing source when coins are delivered to the
Federal Reserve Banks in return for deposits.
INTRAGOVERNMENTAL TRANSACTIONS
Nonexchange transactions--intragovernmental: revenue
306. Interest on Treasury securities held by trust funds and
special funds (except trust revolving funds).--Many trust funds and
special funds hold Treasury securities on which they receive
interest. In most cases the invested balances of these funds derive
predominantly from the funds' earmarked taxes, which are
nonexchange transactions with the public (e.g., employment taxes
and gasoline taxes), and to a lesser extent from other financing
sources received from other government entities (e.g., the General
Fund payment appropriated to the Supplementary Medical Insurance
fund). The balances are not earned in exchange transactions by the
entity's operations. Most fundamentally, they are not produced by
operations in which the entity incurs a cost.
307. Therefore, in such cases, the interest on Treasury
securities should not be deducted from the gross costs of the trust
fund (or special fund), or the organization in which it is
administered, in determining its net cost of operations. As a
result, that interest should not be classified as exchange revenue.
It should instead have the same classification as the predominant
source of the invested balances, which for most trust funds (and
special funds) is nonexchange revenue. The interest received from
invested balances of trust funds and special funds (except trust
revolving funds) is therefore normally a nonexchange revenue.
308. The source of balances for some trust funds and special
funds may not be predominantly nonexchange revenue. For example,
the main source of balances for two major trust funds, the Civil
Service Retirement and Disability fund and the Military
60SFFAS No. 5, Accounting for Liabilities of the Federal
Government, para. 54.
Retirement fund, consists of exchange revenue and other
financing sources. In such exceptional cases, as explained in the
Basis for Conclusions, the interest should be classified in the
same way as the predominant source of balances--in these cases, as
exchange revenue--rather than according to the normal rule.
309. Interest received by one fund from another.--One fund
within the Government may borrow from another. For example, in 1983
the Old-Age and Survivors Insurance trust fund borrowed from the
Disability Insurance and Hospital Insurance trust funds. When that
occurs, the lending fund sacrifices interest from Treasury
securities on its invested balances and instead receives interest
from the borrowing fund on the amount of the loan. Since the
predominant source of balances to the lending fund is the same
regardless of whether it invests in Treasury securities or lends to
another fund, the interest received from the other fund should be
classified in the same way--as nonexchange or exchange revenue--as
the interest received on Treasury securities.
310. Employer entity contributions to social insurance
programs.61--Federal employees may be covered by social insurance
programs such as Social Security62 and Medicare under the same
terms and conditions as the rest of the covered population.
Intragovernmental contributions to social insurance programs such
as Social Security and Medicare are nonexchange transactions, just
as payments made by private employers to these programs are
nonexchange transactions. Contributions by private employers are in
the nature of taxes; i.e., compulsory payments demanded by the
Government through the exercise of its power to compel payment.
Insofar as the social insurance program applies to Federal
employees, the terms and conditions are generally the same as the
program for private employees. The employer and employee
contributions are generally calculated in the same way; the
employer entity contribution is not earned by the social insurance
program; and the benefits are generally calculated in the same way.
The employee does not obtain particular benefits under the plan
from rendering service in Federal employment, because he or she
would have been similarly covered by the program if privately
employed and would have received similar benefits. For these
reasons, the employer entity contribution should have the same
classification as private employer contributions, which is
nonexchange revenue.
Nonexchange transactions--intragovernmental: gains and
losses
311. Retirement of debt securities prior to maturity: trust
funds and special funds (except trust revolving funds).--Treasury
securities held by trust funds and special funds are primarily
issued in the Government account series, which can generally be
redeemed on demand. Other Treasury securities held by these funds
may also be callable or redeemable on demand. If these debt
securities are retired before maturity, the difference, if any,
between the reacquisition price and the net carrying value of the
extinguished debt should be recognized as a gain or loss by the
fund that owned the securities. The gain or loss should be
accounted for as a nonexchange gain or loss if
61
"Social insurance" does not include programs established solely
or primarily for Federal employees, such as pension and other
retirement plans.
62
Most Federal civilian employees hired before 1984 are not
covered by Social Security.
the interest on the associated debt securities is classified as
nonexchange revenue, and it should be accounted for as an exchange
gain or loss if the interest on the associated debt securities is
classified as exchange revenue. For trust funds (except trust
revolving funds) and special funds, as explained elsewhere, the
interest is normally but not always a nonexchange revenue.
312. The difference, if any, between the reacquisition price and
the net carrying value of the extinguished debt should be
recognized as a loss or gain in accounting for interest on Treasury
debt. The amount should be equal in absolute value but with the
opposite sign to the gain or loss recognized by the trust fund or
special fund. The amount should be recognized as a gain or loss
from exchange in order to offset it against the gross interest on
Treasury debt in the Government-wide consolidated financial
statements.
313. Cancellation of debt.--The debt that an entity owes
Treasury (or other agency) may be canceled by Act of Congress. The
amount of debt that is canceled (including the amount of
capitalized interest that is canceled, if any) is a gain to the
entity whose debt is canceled and a loss to Treasury (or other
agency). The purpose of borrowing authority is generally to provide
an entity with capital rather than to finance its operations.
Therefore, the cancellation of debt is not earned by the entity's
operations and is not directly related to the entity's costs of
providing goods and services. As a result, the cancellation is a
nonexchange gain to the entity that owed the debt and a nonexchange
loss to the lender.
Exchange transactions--intragovernmental: revenue
314. Intragovernmental sales of goods and services by a
revolving fund.--The cost of providing goods or services by a
revolving fund is defrayed in whole or in part by selling the goods
or services provided. Intragovernmental sales may be made by an
organization that maintains either an intragovernmental revolving
fund (such as the Defense Business Operations Fund) or a public
enterprise revolving fund (such as the Postal Service). Each party
receives and sacrifices something of value. The proceeds are an
exchange revenue.
315. Intragovernmental sales of goods and services by a fund
other than a revolving fund.--The cost of providing goods or
services is defrayed in whole or in part by selling the goods or
services provided. Each party receives and sacrifices something of
value. The proceeds are an exchange revenue.
316. Employer entity contributions to pension and other
retirement benefit plans for Federal employees.--Employees of the
Federal Government provide service to their employer in exchange
for compensation, of which some is received currently (the salary);
and some is deferred (pensions, retirement health benefits, and
other retirement benefits). This is an exchange transaction,
because each party sacrifices value and receives value in return.
As part of this transaction, the Government promises a pension and
other retirement benefits (especially health benefits) to the
employees after they retire. The financing of these benefits may
include contributions paid by the employer entity to the retirement
fund.
317. In broad terms, the employer entity contribution is an
inflow of resources to the retirement fund as part of this exchange
transaction. More narrowly, it is a payment by the employer entity
in exchange for the future provision of a pension or other
retirement benefit to its employees. Therefore, it is an exchange
revenue of the entity that administers the retirement plan and thus
is an offset to that entity's gross cost in calculating its net
cost of operations.63
318. Employer entity contributions to health benefit plans for
current coverage of Federal employees.--Employees of the Federal
Government provide services to their employer in exchange for
compensation, of which some is received currently in the form of
money (the salary); some is received currently in the form of
payments to a third party (the employer entity contribution to the
medical insurance plan for current coverage of the employees); and
some is deferred (pensions and other retirement benefits). This is
an exchange transaction, because each party sacrifices value and
receives value in return. As part of this exchange transaction, the
Government and its employees both contribute to a medical insurance
plan that provides current coverage of its employees.
319. In broad terms, the employer entity contribution is an
inflow of resources to the health benefits plan as part of this
exchange transaction. More narrowly, it is a payment in exchange
for current coverage of the employer entity's employees by a health
benefits plan. Therefore, it is an exchange revenue of the entity
that operates the health benefits plan and thus is an offset to
that entity's gross cost in determining its net cost of
operations.
320. Employer entity payments for unemployment benefits and
workers compensation.--The employer entity recognizes a liability
and an expense for Federal employees who are laid-off or injured on
the job and are entitled under law to unemployment benefits or
workers compensation, respectively.64 The payment to the former or
current employee is made by the unemployment trust fund (Department
of Labor) in the case of unemployment benefits and by the special
benefits fund (Department of Labor) in the case of workers
compensation. Unemployment benefits are reimbursed by the former
employer entity; and workers compensation costs are mostly charged
back to the employer entity.
321. Since the costs are recognized by the employer entity and
its payment to the unemployment trust fund or the special benefits
fund reimburses these funds for the costs they incur, the amounts
these funds receive from the employer entity are exchange
revenues.
322. Interest on Treasury securities held by revolving funds.--A
revolving fund conducts a cycle of business-type operations in
which the expenses are incurred to produce goods and services that
generate revenue, and the revenue, in turn, finances expenses.
Revolving funds need capital in their operations and may invest
some of that
63For further discussion of the accounting standards for
pensions and other retirement benefits for federal employees, see
SFFAS No. 5, Accounting for Liabilities of the Federal Government,
para. 56-93 and 148-181. The standards do not cover accounting for
the plan per se as distinct from the administering entity. Nor do
they cover defined contribution plans, or administrative entities
that are not Federal reporting entities.
64See SFFAS No. 6, Accounting for Liabilities of the Federal
Government, para. 96 and para. 181, footnote 70.
capital in Treasury securities. Since their holding of invested
balances and the sale of goods and services are both integral to
the funds' operations, the interest on the funds' securities is
related to the funds' cost of operations just as is the revenue
earned from selling goods and services. Furthermore, the source of
the invested balances is predominantly revenue earned from their
sales of goods and services, for which the funds incurred costs of
operations when that revenue was earned. The interest they receive
should therefore be classified in the same way as their revenue
earned from selling goods and services and should likewise be
deducted from gross cost in determining the net cost of operations.
For this reason, interest earned by revolving funds should normally
be classified as exchange revenue.
323. The source of balances for some revolving funds may not be
predominantly exchange revenue. For such exceptions, as explained
in the Basis for Conclusions, the interest should be classified in
the same way as the predominant source of balances rather than
according to the normal rule.
324. Interest on Treasury securities held by trust revolving
funds.--A trust revolving fund is a revolving fund that is also
classified by law as a trust fund. Like other revolving funds, it
earns exchange revenue, which is an offset to its gross cost. For
example, the revenue that the Employees Health Benefit fund earns
from contributions by Federal employees, annuitants, employer
entities, and the Office of Personnel Management (OPM) is an offset
to the insurance premiums that it pays to private firms. Trust
revolving funds need capital in their operations, just like other
revolving funds, the source of which is predominantly the revenue
they have earned. When some of their capital is invested in
Treasury securities, the interest is related to their cost of
operations in the same way as the revenue earned from selling
services. Furthermore, the source of the invested balances is
predominantly revenue earned from the sales of services, for which
they incurred costs of operations when the revenue was earned. The
interest they receive should therefore be classified in the same
way as the interest received by other revolving funds, which is
exchange revenue.
325. The source of balances for some trust revolving funds may
not be predominantly exchange revenue. For such exceptions, as
explained in the Basis for Conclusions, the interest should be
classified in the same way as the predominant source of balances
rather than according to the normal rule.
326. Interest on uninvested funds received by direct loan and
guaranteed loan financing accounts.--A guaranteed loan financing
account holds uninvested balances as reserves against its loan
guarantee liabilities and earns interest on these balances that
adds to its resources to pay these liabilities. A direct loan
financing account may hold uninvested balances to bridge
transactions that are integral to its operations, such as when it
borrows from Treasury to disburse direct loans prior to the time of
disbursement; it earns interest on these balances to reflect the
time value of money and thereby finance the interest it pays on its
debt to Treasury. Thus, in both cases, the interest received by the
financing account is earned through exchange transactions with
Treasury and is an offset to the financing account's related costs
of operations. The interest is therefore an exchange revenue of the
financing account.
327. Interest received by Treasury.--Accounts or funds
(including direct loan and guaranteed loan financing accounts) may
be authorized to borrow from the Treasury or from the Federal
Financing Bank (an entity within Treasury) or other sources. The
interest that the entity pays on its borrowings is a cost to the
entity and an inflow of resources to the Treasury. The Treasury may
be deemed to have borrowed from the public to finance the outlays
for which the entity borrowed, and thus to have incurred a
corresponding interest cost of its own. The interest received by
Treasury from the entity is therefore related to Treasury's cost of
borrowing from the public and should be classified as an exchange
revenue.
Exchange transactions--intragovernmental: gains and losses
328. Note: As explained in the introduction to this appendix,
transactions that are classified as producing gains or losses
should instead be classified as producing revenue or expense if
they are usual and recurring for a particular reporting entity.
329. Retirement of debt securities prior to maturity: revolving
funds and trust revolving funds.--Treasury securities held by
revolving funds and trust revolving funds are primarily issued in
the Government account series, which can generally be redeemed on
demand. Other Treasury securities held by these funds may also be
callable or redeemable on demand. If these debt securities are
retired before maturity, the difference, if any, between the
reacquisition price and the net carrying value of the extinguished
debt should be recognized as a gain or loss by the fund that owned
the securities. The gain or loss should be accounted for as a
nonexchange gain or loss if the interest on the associated debt
securities is classified as nonexchange revenue, and it should be
accounted for as an exchange gain or loss if the interest on the
associated debt securities is classified as exchange revenue. For
revolving funds and trust revolving funds, as explained elsewhere,
the interest is normally but not always an exchange revenue.
330. The difference, if any, between the reacquisition price and
the net carrying value of the extinguished debt should be
recognized as a loss or gain in accounting for interest on Treasury
debt. The amount should be equal in absolute value but with the
opposite sign to the gain or loss recognized by the revolving fund
or trust revolving fund. The amount should be recognized as a gain
or loss from exchange in order to offset it against the gross
interest on Treasury debt in the Government-wide consolidated
financial statements.
Other financing sources--intragovernmental
331. Appropriations.--Appropriations--a form of budget
authority--permit an entity to incur obligations and make payments
and thus are a means of financing the entity's cost. They are not
otherwise related to the entity's cost and therefore are not an
offset to its gross cost in determining its net cost of operations.
They are not earned by the entity's activities, demanded by the
entity, or donated to the entity. Therefore, appropriations provide
an other financing source instead of a revenue.
332. More precisely, "appropriations used" is recognized as an
other financing source in determining the entity's operating
results when the entity receives goods and services or provides
benefits, grants, or other transfer payments. To avoid double
counting, appropriations used are not recognized for the
appropriation of earmarked revenues or other financing sources,
which are already counted in determining the entity's operating
results. Appropriations that have been made available for
apportionment but have not been used are recognized as "unexpended
appropriations" in the entity's capital.
333. Cost subsidies: difference between internal sales price
(reimbursement) and full cost.--One entity may receive goods or
services from another entity without paying the full cost of the
goods or services or without paying any cost at all. Other Federal
accounting standards may require the receiving entity to recognize
the full cost as an expense (or, if appropriate, as an asset). In
these cases the difference between full cost and the internal sales
price or reimbursement (sometimes called a "transfer price") is an
imputed cost to the receiving entity.65
334. The financing of the imputed cost is also imputed to the
receiving entity. Imputed financing is necessary so that the
imputed cost does not reduce the entity's operating results and net
position. The imputed financing equals the imputed cost and is
recognized as an other financing source. It is not a revenue,
because the receiving entity does not earn the amount imputed or
demand its payment.
335. Cost subsidies: difference between the service cost of
pensions (and other retirement benefits), less the employee
contributions, if any, and the employer entity contributions.--The
service cost of pensions (and other retirement benefits) to the
employer entity, less the employee contributions, if any, is
recognized as a cost to the employer entity. The difference between
the employer entity's cost and its contributions, if any, is
imputed to the employer entity as part of its recognized cost. For
pensions, the cost recognized by the employer entity is more than
its contribution for employees who are covered by the Civil Service
Retirement System and several minor systems (in a few of which the
employer entity does not make any contributions toward the service
cost). For retirement health care benefits, neither the employees
nor the employer entity make any contributions while the employee
is working.66 Therefore, the entire service cost is recognized as a
cost to the employer entity and imputed to it.
336. The financing of the imputed cost is also imputed to the
employer entity.67 The imputed financing is necessary so that the
imputed cost does not reduce the employer entity's operating
results and net position. The imputed financing equals the imputed
cost and is recognized as an other financing source. It is not a
revenue, because the employer entity does not earn the amount
imputed or demand its payment.68
65See SFFAS No. 4, Managerial Cost Accounting Concepts and
Standards for the Federal Government, para. 105-115.
66Retired employees do pay premiums, however, and the service
cost to the employer entity is defined net of the actuarial present
value of those future premiums.
67The employer entity's own contribution, if any, is generally
financed by an appropriation but could be financed by earned
revenue or other sources.
68For further discussion of the accounting standards for
pensions and other retirement benefits for federal employees, see
SFFAS No. 5, Accounting for Liabilities of the Federal Government,
para. 56-93 and 148-181. The standards do not cover accounting for
the plan per se as distinct from the administering entity. Nor do
they cover defined contribution plans, or administrative entities
that are not Federal reporting entities.
337. (This transaction differs from the immediately preceding
transaction, in which an entity does not pay the full cost of the
goods or services it receives from another entity. In the present
case, the employer entity acquires the services of the employees
itself, but another entity pays part of their cost.)
338. Contribution by the General Fund to the SMI trust
fund.--The General Fund makes a contribution to the SMI
(Supplementary Medical Insurance) trust fund. This appropriated
payment is separate from the transfer of earmarked premiums and is
not a transfer of earmarked taxes or other income. It does not
arise from an exchange transaction, because SMI does not sacrifice
any value to the General Fund in exchange for the payment, and the
General Fund does not receive anything of value from SMI. Instead,
the payment constitutes a General Fund subsidy of the SMI trust
fund. Since the payment is not demanded or earned, it is an other
financing source to SMI rather than a revenue.
339. Examples of other payments of a similar nature (and also
classified as other financing sources) are the payment by the
General Fund to the social security trust funds for military
service credits and for certain uninsured persons at least 72 years
old; and the payment by the General Fund to the Railroad Retirement
Board for the vested dual benefit payments received by certain
retirees under both the railroad retirement and the social security
systems. The quinquennial military service credit adjustment paid
between the General Fund and the social security trust funds is
likewise an other financing source to the social security trust
funds but one that may be either positive or negative.
340. Transfer by CCC to Federal Crop Insurance Corporation.--The
Commodity Credit Corporation (CCC) makes transfers to the Federal
Crop Insurance Corporation (FCIC), which it finances by an
appropriation. This payment does not arise from an exchange
transaction, because FCIC does not sacrifice anything of value to
CCC, and CCC does not receive anything of value from FCIC. It
differs from the contribution to SMI primarily in that it is paid
by another program entity (the CCC) rather than directly by the
General Fund. Since the payment is not demanded or earned, it is an
other financing source to FCIC rather than a revenue.
341. Interchange between the Railroad Retirement Board and the
Social Security and Hospital Insurance trust funds.--The Railroad
Retirement Board pays benefits equivalent to the amounts that would
have been paid if railroad workers had been covered under Social
Security since its inception, plus additional amounts unique to
that program. The railroad retirement program is partly financed by
an annual financial interchange that takes place between the
Railroad Social Security Equivalent Benefit Account (a trust fund)
and the trust funds for old-age and survivors insurance, disability
insurance, and hospital insurance (OASDHI). The interchange is
designed to place each of the OASDHI trust funds in the same
position as it would have been if railroad employment had been
covered under Social Security since its inception.
342. The amount of the payment reflects the difference between
(a) the benefits that the OASDHI trust funds would have paid to
railroad workers and their families if railroad employment had been
covered by OASDHI and (b) the payroll taxes that the OASDHI trust
funds would have received if railroad employment had been covered
by OASDHI. If benefits would have exceeded taxes, the OASDHI trust
funds make a payment to the Railroad Social Security Equivalent
Benefit Account; if benefits would have been less, the OASDHI trust
funds receive a payment. Currently OASI and DI make payments to
that Account, and HI receives payment. The interchange differs from
the examples in the previous cases primarily in that (a) the
payment is between two trust funds and (b) the payment may be made
in either direction.
343. The financial interchange does not arise from an exchange
transaction, because it is a reallocation of resources among funds,
all of which are financed primarily from nonexchange revenue.
Furthermore, the nature of this reallocation is such that the
transferring entity does not receive anything of value and the
recipient entity does not sacrifice anything of value. Therefore,
the recipient entity recognizes the transfer-in as an other
financing source, and the transferring entity recognizes the
transfer-out as a negative financing source.
344. Transfer of cash and other capitalized assets without
reimbursement.--Cash and other capitalized assets may be
transferred without reimbursement from one Government entity to
another. Cash may include exchange revenue that is recognized by
the transferring entity in determining its net cost of operations
but is required to be transferred to the General Fund or another
entity; other capitalized assets may include general property,
plant, and equipment. The receiving entity does not sacrifice
anything of value, and the transferring entity does not acquire
anything of value. Therefore, the transfer is not an exchange
transaction. The receiving entity recognizes the transfer-in as an
other financing source; the transferring entity recognizes the
transfer-out as a negative financing source. The amount recorded by
both entities is the transferring entity's book value of the
asset.
345. Transfer of property, plant, and equipment without
reimbursement: types that are expensed.--Property, plant, and
equipment (PP&E) of types that are expensed (i.e., stewardship
PP&E) may be transferred from one Government entity to another.
If the asset was classified as stewardship PP&E in its entirety
by both the transferring entity and the recipient entity, the
transfer does not affect the net cost of operations or net position
of either entity and therefore in such a case it is not a revenue,
a gain or loss, or other financing source.
346. However, if the asset that is transferred was classified as
general PP&E for the transferring entity but stewardship
PP&E for the recipient entity, it is recognized as a
transfer-out (a negative other financing source) of capitalized
assets by the transferring entity.
REVALUATIONS
347. Revaluation of capitalized property, plant, and
equipment.--Capitalized property, plant, and equipment (PP&E)
may be removed from the general PP&E accounts if it no longer
provides service in the operations of the entity because it has
suffered damage, become obsolete in advance of expectations, or is
identified as excess. It is recorded as an asset at its expected
net realizable value. Any difference between the book value and the
expected net realizable value is recognized as a gain or loss in
determining the net cost of operations, because the revaluation
results from the entity's operations. The expected net realizable
value is adjusted at the end of each period, and any further
revaluation is also recognized as a gain or loss in determining the
net cost of operations.69
348. Since the revaluation does not affect obligations incurred
but does affect net cost, an amount equal to the revaluation is
recognized in determining the reconciliation between obligations
incurred and net cost of operations. A reconciliation is not needed
in determining the change in net position, because the revaluation
affects net cost and net position equally.
349. Revaluation of inventory and related property.--Inventory
and related property may be revalued for such reasons as
determination that the property is excess, obsolete, or
unserviceable; that stockpile materials have decayed or been
damaged; that a loss is estimated on commodity purchase agreements;
or that a change has occurred in the net realizable value of
commodities valued at the lower of cost or net realizable value.
The amount of revaluation is recognized as a loss or a gain in
determining the net cost of operations, because it results from the
entity's operations. Assets are correspondingly reduced or
increased.70
350. Since the revaluation does not affect obligations incurred,
but does affect net cost, an amount equal to the revaluation is
recognized in determining the reconciliation between obligations
incurred and net cost of operations. A reconciliation is not needed
in determining the change in net position, because the revaluation
affects net cost and net position equally.
TRANSACTIONS NOT RECOGNIZED AS REVENUES, GAINS, OR OTHER
FINANCING SOURCES
351. Borrowing from the public.--Borrowing from the public is a
means of financing the Government's outlays. However, it is not a
net inflow of resources to the Treasury or other borrowing entity,
because the asset received (cash) is offset by an equal liability
(debt). Therefore, it is not revenue or an other financing
source.
352. Borrowing from Treasury, the Federal Financing Bank, or
other Government accounts.-- An entity may be provided the
authority to borrow from Treasury, the Federal Financing Bank, or
other Government accounts. Intragovernmental borrowing is a means
of financing the entity's outlays. However, it is not a net inflow
of resources to the entity, because the asset received (cash) is
offset by an equal liability (debt). Therefore, it is not revenue
or an other financing source.
353. Disposition of revenue to other entities: custodial
transfers.--Revenue, primarily nonexchange revenue, may be
collected by an entity acting on behalf of the General Fund or
another entity within the Government on whose behalf it was
collected. The collecting entity accounts for the disposition of
revenue as part of its custodial activity. These custodial
transfers, by definition, do not affect the collecting entity's net
cost of operations or operating results, nor are they part of the
reconciliation between its obligations and net cost of operations.
(The receiving entity
69SFFAS No. 6, Accounting for Property, Plant, and Equipment,
para. 39.
70See SFFAS No. 3, Accounting for Inventory and Related
Property, para. 29-30, 47-48, 54, 97, and 107.
recognizes the revenue as nonexchange or exchange revenue,
depending on its nature, according to the applicable revenue
standards.)
354. Sales of different types of Government assets.--The sale of
Government assets (other than forfeited property) is an exchange
transaction, because each party receives and sacrifices something
of value. As a general rule, any difference between the sales
proceeds and book value is recognized as a gain or loss when the
asset is sold. The remainder of the transaction does not provide a
net inflow of resources, so no gain, revenue, or other financing
source is recognized. If the sales proceeds equal book value, there
is no gain or loss, because the exchange of one asset for another
of equal recorded value is not a net inflow of resources.
355. This general rule applies to property, plant, and
equipment, receivables (other than direct loans), foreclosed
property associated with pre-1992 direct loans and loan guarantees,
and miscellaneous assets. It does not apply to inventory, nor does
it apply to forfeited property (as explained in the previous
section on nonexchange revenue). It also does not apply to the sale
of direct loans and the sale of foreclosed property associated with
post-1991 direct loans and loan guarantees. The latter transactions
are discussed in subsequent paragraphs.
356. Acquisition of property, plant, and equipment through
exchange.--The cost of property, plant, and equipment (PP&E)
acquired through an exchange of assets with the public is the fair
value of the PP&E surrendered at the time of exchange. If the
fair value of the PP&E acquired is more readily determinable
than that of the PP&E surrendered, the cost is the fair value
of the PP&E acquired. If neither fair value is determinable,
the cost of the PP&E acquired is the cost recorded for the
PP&E surrendered net of any accumulated depreciation or
amortization. In the event that cash consideration is included in
the exchange, the cost of PP&E acquired is increased (or
decreased) by the amount of the cash surrendered (or
received).71
357. Any difference between the cost of the PP&E acquired
and the book value of the PP&E surrendered is recognized as a
gain or loss. If the cost of the PP&E acquired equals the book
value of the PP&E surrendered, there is no gain or loss (nor a
revenue or other financing source), because the exchange of one
asset for another of equal value does not provide a net inflow of
resources. Therefore, the amount of the transaction equal to the
book value of the PP&E surrendered is not recognized as a gain,
a revenue, or an other financing source.
358. Transfer of property, plant, and equipment without
reimbursement: types that are expensed.--Property, plant, and
equipment (PP&E) of types that are expensed (i.e., stewardship
PP&E) may be transferred from one Government entity to another.
If the asset was classified as stewardship PP&E in its entirety
by both the transferring entity and the recipient entity, the
transfer does not affect the net cost of operations or net position
of either entity and therefore in such a case it is not a revenue,
a gain or loss, or other financing source.
359. However, if the asset that is transferred was classified as
general PP&E for the transferring entity but stewardship
PP&E for the recipient entity, it is recognized as a
transfer-out (a negative other financing source) of capitalized
assets by the
71See SFFAS No. 6, Accounting for Property, Plant, and
Equipment, para. 32.
transferring entity.
360. If multi-use heritage assets are transferred and some cost
was recognized for them on the books of the transferring entity,
that cost is recognized as a transfer-out (a negative other
financing source) of capitalized assets. No amount is recognized by
the entity that receives the asset.72
361. Donation of property, plant, and equipment: types that are
expensed.--The acquisition cost of stewardship property, plant, and
equipment (PP&E) is recognized as a cost when incurred. Such
PP&E consists of Federal mission PP&E, heritage assets, and
stewardship land. When such PP&E is donated to the Government,
however, no amount is recognized as a cost.73 Since the donation of
such PP&E does not affect the net cost or net position of the
recipient entity, it is not a revenue, a gain, or an other
financing source.
362. Negative subsidies on post-1991 direct loans and loan
guarantees.--A negative subsidy means that the direct loans or loan
guarantees are estimated to make a profit, apart from
administrative costs (which are excluded from the subsidy
calculation by law). The amount of the subsidy cost is recognized
as an expense when the direct loan or guaranteed loan is disbursed.
A negative subsidy is recognized as a direct reduction in expense,
not as a revenue, gain, or other financing source.74
363. Downward subsidy reestimates for post-1991 direct loans and
loan guarantees.--A downward subsidy reestimate means that the
subsidy cost of direct loans or loan guarantees is estimated to be
less than had previously been estimated. The initial subsidy cost
is recognized as an expense; a positive subsidy reestimate is
recognized as an expense; and a downward subsidy reestimate is
recognized as a direct reduction in expense, not as a revenue,
gain, or other financing source.
364. Fees on post-1991 direct loans and loan guarantees.--The
present value of estimated fees is included as an offset in
calculating the subsidy cost of direct loans and loan guarantees,
which is recognized as an expense when the loans are disbursed. The
present value of estimated fees is likewise included as one
component in calculating the value of loans receivable or loan
guarantee liabilities. When cash is received in payment of fees,
the loans receivable decrease by an equal amount (or the loan
guarantee liabilities increase by an equal amount). The increase in
one asset is offset by an equal decrease in another asset (or by an
equal increase in liabilities). Therefore, fees are not recognized
as a revenue, a gain, or an other financing source.75
365. Repayment of post-1991 direct loans.--The present value of
estimated loan
72SFFAS No. 6, Accounting for Property, Plant, and Equipment,
para. 61 and 72.
73Ibid.
74For standards on direct loans and loan guarantees, see SFFAS
No. 2, Accounting for Direct Loans and Loan Guarantees. The
accounting for negative subsidy costs is symmetrical to the
accounting for positive subsidy costs.
75
The fee component of the subsidy cost is required to be
disclosed separately.
repayments is included in the calculation of the subsidy cost of
direct loans, and this subsidy cost is recognized as an expense
when the loans are disbursed. The present value of estimated loan
repayments is likewise included in the value of the loans
receivable. When cash is received for the repayment of loans, the
loans receivable decrease by an equal amount. The increase in one
asset is offset by an equal decrease in another asset. Therefore,
cash inflow from the repayment is not recognized as a revenue, a
gain, or an other financing source.76
366. Repayment of pre-1992 direct loans.--When pre-1992 direct
loans are repaid in whole or in part, the entity exchanges one
asset (loans receivable) for another (cash) with equal value. There
is no net inflow of resources. Therefore, the amount of cash inflow
equal to book value is not recognized as a revenue, a gain, or an
other financing source.77
367. Repayment of receivables: except direct loans.--When
receivables other than direct loans are paid or repaid in whole or
in part, the entity exchanges one asset (loans receivable) for
another (cash) with equal value. There is no net inflow of
resources. Therefore, the amount of cash inflow equal to book value
is not recognized as a revenue, a gain, or an other financing
source.78
368. Sales of direct loans.--The sale of a direct loan is a
modification according to the Federal Credit Reform Act of 1990
regardless of whether the loan being sold was obligated after FY
1991 or before FY 1992. The book value loss (or gain) on a sale of
direct loans equals the book value of the loans sold (prior to
sale) minus the net proceeds of the sale. It normally differs from
the cost of modification, which is recognized as an expense.79 Any
difference between the book value loss (or gain) and the cost of
modification is recognized as a gain or loss.80 The amount of cash
inflow equal to book value is not a net inflow of resources to the
entity, because it is an exchange of one asset for another of equal
recorded value. Therefore, the amount of cash inflow equal to book
value is not recognized as a revenue, a gain, or an other financing
source.
76
If the actual repayment is different from the previous estimate,
the present value of the difference between cash inflows and
outflows over the term of the loan--calculated as of the date of
disbursement--is reestimated and is recognized as a subsidy expense
or a reduction in subsidy expense.
77
If the loan is not repaid, the unpaid amount is recognized as an
adjustment to the bad debt allowance and does not affect revenue,
gains, or other financing sources.
78
If the receivable is not repaid, the unpaid amount is recognized
as an adjustment to the bad debt allowance and does not affect
revenue, gains, or other financing sources.
79
This difference is due to the different interest rates used to
discount future cash flows for calculating the subsidy cost (and
subsidy allowance) when the loan is disbursed and for calculating
the cost of modification at a later time. If the sale is with
recourse, the present value of the estimated loss from the recourse
is also recognized as an expense.
80SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees,
para. 53-55 and Appendix B, Part II(B).
369. Sales of foreclosed property: associated with post-1991
direct loans and loan guarantees.--The net present value of the
cash flow from the estimated sales of foreclosed property is
included in calculating the subsidy cost of post-1991 direct loans
and loan guarantees. This subsidy cost is recognized as an expense
when the loans are disbursed. When property is foreclosed, the
property is recognized as an asset at the net present value of its
estimated net cash flows. When the foreclosed property is sold, any
difference between the sales proceeds and the book value (i.e., the
net present value as of the time of sale) requires a reestimate of
the subsidy expense, which is recognized as a subsidy expense or a
reduction in subsidy expense. The amount of cash flow equal to book
value is an exchange of one asset for another of equal recorded
value and therefore is not recognized as a gain, a revenue, or an
other financing source.81
370. Deposit fund transactions.--Deposit funds are accounts
outside the budget that record amounts that the Government (a)
holds temporarily until ownership is determined or (b) holds as an
agent for others. The standards and guidance in this Statement do
not apply to deposit funds except insofar as a particular deposit
fund may be classified as part of a Federal reporting entity or a
disclosure may be required due to a fiduciary relationship on the
part of a Federal reporting entity toward a deposit fund.
81 See SFFAS No. 2, Accounting for Direct Loans and Loan
Guarantees, para. 57-60 and Appendix B, Part III(E); and SFFAS No.
3, Accounting for Inventory and Related Property, para. 79-91 and
154-158.
INDEX OF TRANSACTIONS CLASSIFIED IN APPENDIX B
Acquisition of property, plant, and equipment (585) Acquisition
of property, plant, and equipment through exchange (597)
Appropriations (592) Borrowing from the public (596) Borrowing from
Treasury, the Federal Financing Bank, or other Government accounts
(596) Cancellation of debt (589) Contribution by the general fund
to the SMI trust fund (594) Cost subsidies: difference between
internal sales price (reimbursement) and full cost (593) Cost
subsidies: difference between service cost of pensions (and other
retirement benefits) less the
employee contributions, if any, and the employer entity
contributions (593) Customs Service fees (576) Deposit fund
transactions (600) Deposits by states for unemployment trust fund
(575) Deposits of earnings, Federal Reserve System (577)
Disposition of revenue to other entities: custodial transfers (596)
Diversion fees, Department of Justice (583) Donation of property,
plant, and equipment: types that are expensed (598) Donations:
except types of property, plant, and equipment that are expensed
(577) Downward subsidy reestimates for post-1991 direct loans and
loan guarantees (598) Employer entity contributions to health
benefit plans for current coverage of Federal employees (590)
Employer entity contributions to pension and other retirement
benefit plans for Federal employees (589) Employer entity
contributions to social insurance programs (588) Employer entity
payments for unemployment benefits and workers compensation (590)
Federal employee contributions to health benefits plan for current
coverage of Federal employees (584) Federal employee contributions
to pension and other retirement benefit plans (583) Fees on
post-1991 direct loans and loan guarantees (598) Fines and
penalties (578) Forfeitures (578) Individual income taxes,
corporation income taxes, social insurance taxes and contributions,
excise
taxes, estate and gift taxes, and customs duties (574)
Interchange between the Railroad Retirement Board and the Social
Security and Hospital Insurance trust
funds (594) Interest (unless classified elsewhere) (580)
Interest on delinquent taxes and other receivables that arise as a
result of custodial operations (582) Interest on post-1991 direct
loans (582) Interest on Treasury securities held by revolving funds
(590) Interest on Treasury securities held by trust funds and
special funds except trust revolving funds (587) Interest on
Treasury securities held by trust revolving funds (591) Interest on
uninvested funds held by direct loan and guaranteed loan financing
accounts (591) Interest received by one fund from another (588)
Interest received by Treasury (591) Intragovernmental sales of
goods and services by a fund other than a revolving fund (589)
Intragovernmental sales of goods and services by a revolving fund
(589) Negative subsidies on post-1991 direct laons and loan
guarantees (598) Penalties due to delinquent taxes in connection
with custodial activity (578) Premiums for SMI (Supplementary
Medical Insurance), bank deposit insurance, pension benefit
guarantees, crop insurance, and other insurance (583) Proceeds
from the auction of the radio spectrum (581)
Regulatory user fees such as patent and copyright fees;
immigration and consular fees; SEC registration and filing fees;
and Nuclear Regulatory Commission fees (582)
Reimbursement for cleanup costs (584)
Reimbursement for collecting revenue (584)
Rents, royalties, and bonuses on Outer Continental Shelf (OCS)
(580)
Repayment of post-1991 direct loans (598)
Repayment of pre-1992 direct loans (599)
Repayment of receivables: except direct loans (599)
Retirement of debt securities prior to maturity (586)
Retirement of debt securities prior to maturity: revolving funds
and trust revolving funds (592)
Retirement of debt securities prior to maturity: trust funds and
special funds except trust revolving funds (588)
Revaluation of capitalized property, plant, and equipment
(595)
Revaluation of inventory and related property (596)
Sales of different types of Government assets. (597)
Sales of direct loans (586), (599)
Sales of foreclosed property: associated with post-1991 direct
laons and loan guarantees (600)
Sales of foreclosed property: associated with pre-1992 direct
loans and loan guarantees (586)
Sales of goods and services (580)
Sales of goods and services in undercover operations (580)
Sales of government assets: other than property, plant, and
equipment (585)
Sales of property, plant, and equipment (585)
Sales of receivables: except direct loans (586)
Seigniorage (587)
Social insurance taxes and contributions paid by Federal
employees (575)
Transfer by CCC to Federal Crop Insurance Corporation (594)
Transfer of cash and other capitalized assets without
reimbursement (595)
Transfer of PP&E without reimbursement: types that are
expensed (595), (597)
User fees, Harbor Maintenance trust fund (576)
LIST OF ABBREVIATIONS
CFS--Consolidated Financial Statements DL--Direct loan
FASAB--Federal Accounting Standards Advisory Board FASB--Financial
Accounting Standards Board GAO--General Accounting Office
GASB--Governmental Accounting Standards Board GL--Guaranteed loan
GPRA--Government Performance and Results Act IRS--Internal Revenue
Service MMS--Minerals Management Service OCS--Outer Continental
Shelf OMB--Office of Management and Budget PP&E--Property,
Plant, and Equipment RSI--Required Supplementary Information
SEC--Securities and Exchange Commission SFFAC--Statement of Federal
Financial Accounting Concepts SFFAS--Statement of Federal Financial
Accounting Standards SGL--Standard General Ledger
Volume I, Version 1.0 February 28, 1997 604
STATEMENT OF FEDERAL FINANCIAL ACCOUNTING
STANDARDS NO. 8
Supplementary Stewardship Reporting
STATUS

Volume I,Version 1.0 February 28, 1997 605
SUMMARY
This Statement establishes standards for reporting on the
Federal Government's stewardship over 1) certain resources
entrusted to it, identified as stewardship property, plant, and
equipment and stewardship investments, and 2) certain
responsibilities assumed by it, identified as the current service
assessment. The resources and responsibilities do not meet the
criteria for assets and liabilities that are required to be
reported in the financial statements but are, nonetheless,
important to an understanding of the operations and financial
condition of the Federal Government at the date of the financial
statements and in subsequent periods. Because the Government has
been entrusted with, and made accountable for, these resources and
responsibilities, they should be recognized in the financial
reports of the Federal Government and of its component
entities.
Stewardship resources are investments by the Federal Government
for the benefit of the Nation. When made, they are treated as
expenses in the financial statements. These expenses, however, are
intended to provide long-term benefits to the public. Therefore,
this Statement requires that information on these resources be
reported to highlight their long-term-benefit nature and to
demonstrate accountability over them. Depending on the nature of
the resources, stewardship reporting could consist of financial and
nonfinancial data.
This Statement also establishes a standard for reporting
projections that will aid in assessing the sufficiency of future
budgetary resources to sustain public services and meet obligations
as they come due.
This Statement establishes reporting requirements based on the
categories defined below:
Stewardship Property, Plant, and Equipment (PP&E) - property
owned by the Federal Government and meeting the definition of one
of the following three categories:


•
Heritage Assets - property, plant, and equipment of
historical, natural, cultural, educational, or artistic
significance.


•
Federal Mission PP&E - property, plant, and equipment
integral to certain unique Federal missions.


•
Stewardship Land - land other than that acquired for or
in connection with general PP&E.


Stewardship Investments - items treated as expenses in
calculating net cost but meriting special treatment to highlight
their substantial investment and long-term-benefit nature. This
includes:


•
Nonfederal Physical Property - grants provided for
properties financed by the Federal Government, but owned by the
state and local governments.


•
Costs incurred for education and training programs that
are designed to increase or maintain national economic productive
capacity and research efforts to provide future benefits or
returns. These include: -Human Capital - education and training
programs financed by


the Federal Government for the benefit of the public. -Research
and Development - basic and applied research and development.
Stewardship Responsibilities - the projected financial impact on
the Government of sustaining current services that it provides.
Projections of current services provided by the Government aid in
assessing the sufficiency of future budgetary resources to sustain
public services and meet obligations as they come due. This
assessment, termed a Current Services Assessment, provides receipt
and outlay data on the basis of projections of future
activities.
All stewardship information is deemed "required supplemental
stewardship information" (RSSI). Audit requirements for RSSI will
be established in a collaborative effort by the Office of
Management and Budget (OMB) and the General Accounting Office
(GAO).
TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION AND BACKGROUND
4. Each standard is summarized briefly in a box followed by a
detailed explanation of the standard. However, the standards
comprise the summaries in the boxes and the entire text of the
explanations.
BACKGROUND AND RATIONALE


5.
The Concepts Statement, Objectives of Federal Financial
Reporting was developed on the basis of an in-depth assessment of
user needs and is used to guide the Board in developing Federal
accounting and reporting standards. The objectives cover four
areas: budgetary integrity, operating performance, stewardship, and
systems and control.


6.
This Statement of accounting standards addresses the
objective of reporting on stewardship over certain resources
entrusted to the Federal Government and responsibilities assumed by
it. The need for a report on the Federal Government's stewardship
over the resources entrusted to it and the responsibilities it has
assumed, arises because of the unique nature of the Federal
Government, as described in the following section.


STEWARDSHIP AND THE REPORTING OBJECTIVES


7.
"Financial position" is a representation of an entity's
economic resources and the claims on those resources as of a
particular date. In the private sector, the principal objective of
reporting on financial position is to assess the viability of the
entity, the business firm, and its potential
profitability.


8.
Assessing the overall performance of the Federal
Government is not exclusively a matter of comparing revenue and
expense, or its accumulated assets and liabilities.


9.
The Federal Government's viability and perpetuity are
assumed. It has unique access to financial resources and financing,
and the power to tax, to borrow, and to create money. For the
Federal Government, financial performance is a vital issue, but
traditional financial measures provide data that are appropriate
for assessing only some, not all, of the responsibilities for which
the Government should be held accountable. Since it exists not to
make a profit but to serve the needs of the citizens and to promote
the general welfare of the Nation, other measures of accountability
need to be used. Measures of accountability are to be reported for
elements that are defined as stewardship property, plant, and
equipment (PP&E); stewardship investments; and stewardship
responsibilities. These elements of stewardship exist because the
Federal Government is dissimilar to industrial and commercial
entities.


Financial Condition
10. The measures of accountability mentioned above help to
portray the Government's "financial condition." Financial condition
is a broader and more forward-looking concept than is financial
position. Financial condition allows an assessment of an entity on
the basis of additional data that could include financial and
nonfinancial information about current conditions. These additional
data provide a more complete indication of performance. In some
cases, it may be necessary to present and characterize financial
data in ways that differ from traditional financial reporting and
to supplement traditional data with nonfinancial data. In other
cases, it may be necessary to rely almost entirely on nonfinancial
data to provide a more complete presentation of entity performance.
Moreover, assessment of financial condition could include analysis
of trends, demands, commitments, events, and uncertainties.4
Stewardship PP&E
11. "Stewardship PP&E" consists of items whose physical
properties resemble those of general PP&E traditionally
capitalized in financial statements. However, the nature of these
Federal physical assets that are classified as stewardship PP&E
differ from general PP&E in that their values may be
indeterminable or may have little meaning (for example, museum
collections, monuments, assets acquired in the formation of the
nation) or that allocating the cost of such assets (for example,
military weapons systems and space exploration hardware) to
accounting periods that benefit from the ownership of such assets
is meaningless. However, the Federal Government should be able to
demonstrate accountability for stewardship PP&E by reporting on
its existence and on its condition by a reference to deferred
maintenance reported in the financial statements. Stewardship
PP&E would include stewardship land (that is, land not acquired
for or in connection with general property, plant, and equipment);
heritage assets (for example, Federal monuments and memorials and
historically or culturally significant property); and Federal
mission property, plant, and equipment (for example, space
exploration and military weapons systems).
Stewardship Investments
12. "Stewardship investments" are substantial investments made
by the Federal Government for the benefit of the nation. When
incurred, they are treated as expenses in determining the net costs
of operations. However, these items merit special treatment so that
readers of Government financial reports know the extent of these
investments that are made for long-term benefit. Such investments
will be measured in terms of expenses incurred for certain
education and training programs; federally financed research and
development; and federally financed but not federally owned
property, such as bridges and roads.
4
Chapter 7 of the Objectives of Federal Financial Reporting
provides a full discussion of financial position and financial
condition.
13. Because the Government has been entrusted with and made
accountable for these resources, they should be reported in the
financial reports of the Government and of its component entities.
This will help satisfy the stewardship objective defined in the
concepts statement, Objectives of Federal Financial Reporting,
SFFAC No. 1. The goal of the stewardship objective is that the
Federal Government "report on the broad outcomes of its actions."
Such reporting may provide information that could help report users
assess the impact of the Government's operations and investments
for the period.5
Stewardship Responsibilities


14.
A key aspect of the stewardship objective requires that
Federal reporting provide information that helps users determine
(1) whether the Government's financial condition improved or
deteriorated over the period and (2) whether future budgetary
resources will likely be sufficient to sustain public services and
to meet obligations as they come due.6


15.
Information on "stewardship responsibilities" will aid in
these determinations. It will provide an essential perspective on
the Government's commitment to discretionary and mandatory
programs.


16.
Reporting on this stewardship responsibility may be
accomplished in a stewardship section in the consolidated financial
report of the Federal Government.


STEWARDSHIP CATEGORIES OR ELEMENTS
17. In defining the specific categories of items, or elements,
that would appear as stewardship information, the Board decided on
the following:
• Property owned by the Federal Government and meeting the
definition of one of the following three categories:
-Property, plant, and equipment of historical, natural,
cultural, educational or artistic significance, referred to as
heritage assets, for example, the Washington Monument and the
Lincoln Memorial;
5
See SFFAC No. 1, pp. 41-42.
6
Ibid., pp. 42-44.
-Property, plant, and equipment that are integral to meeting a
unique Federal mission, referred to as Federal mission7 property,
plant, and equipment (PP&E), and
-Investments in stewardship land,8 that is, land not acquired
for or in connection with general property, plant, and equipment,
for example, national forests, parks, and historic sites. Some
investments in stewardship land, for example national parks, will
be reported by both 1) the number of acres used as a park or an
historic site in the stewardship land category, and 2) by the
number of physical units identified as national parks in the
heritage assets category. Such reporting would not be considered
duplication, as the type of information reported on an item would
be different for each category of stewardship asset.


•
Properties financed by the Federal Government but owned
by state and local governments, referred to as nonfederal physical
property, for example, highways and bridges.


•
Expenses that are incurred for education and training
that are intended to increase national economic productive capacity
or for research and development that are intended to provide future
benefits or returns. This includes:


-Investments in human capital, that is, education and training
programs provided by the Federal Government, for example, job
training programs, and grants for higher education.
-Investments in research and development, for example, research
on the effects of early medical intervention in delaying the onset
of AIDs symptoms in HIV-positive individuals, and Federal
investment in genetic code research to advance national medical
research.
• Information on the projected financial impact on the
Government of providing current services, assuming a continuation
of current programs. This information will be in the form of a
current services assessment providing future receipt and outlay
data on the basis of projections of future activities
7
The term "Federal mission" refers to activities that are
typically Federal, such as National defense. In addition, Federal
mission PP&E is limited to PP&E that would not typically be
used by non-federal entities. Clearly, any functions performed by a
Federal entity could be broadly labeled "Federal mission." The
definition of this category, however, clarifies the characteristics
of PP&E appropriately included in this category--a much
narrower group than inferred by the category's title.
8
The Board is including only surface land as supplementary
stewardship information because the issues associated with other
than surface land, i.e., the natural resources on and under that
land, are complex. The Board is researching these complex issues
and will publish a separate exposure draft on a proposed accounting
standard for natural resources at a later date.
for the Government as a whole and will include both
discretionary and mandatory programs and interest on debt.
18. The previous categories of items or elements result from or
exist largely because of the Federal Government's role as a
sovereign power. The components that they include are defined and
discussed in detail in their respective chapters of this
standard.
The Nature of Stewardship Reporting


19.
The Board, recognizing the Federal Government's size,
complexity, diversity, and impact on others, has determined that
the aforementioned information is needed in addition to that
included in financial statements.


20.
Such information may not link directly with the basic
financial statements because the data to be reported may be other
than financial, for example, physical units or projections. It will
supplement the basic financial statements.


21.
This information, as indicated in each of the standards,
will be designated as required supplementary stewardship
information (RSSI) for the consolidated financial statements of the
Federal Government and of the entities who have stewardship
responsibilities over resources identified earlier in this
document. The Board has chosen to call this RSSI to distinguish it
from "required supplementary information" (RSI), for which audit
responsibilities are prescribed in existing professional
literature. The Board believes that OMB and GAO should establish
and cause the implementation of the audit responsibilities for
RSSI.


STEWARDSHIP INFORMATION


22.
Stewardship information may be presented in varying
formats depending on the nature of the Federal investments or
claims to Federal resources controlled by an entity. Such
information is required for those entities (1) that control
stewardship resources and (2) whose financial statements purport to
be in accordance with Federal accounting principles as recommended
by FASAB, and approved by the Secretary of the Treasury, the
Director of OMB and the Comptroller General.


23.
Examples of selected portions of stewardship report
sections are included at Appendix B.


MEASUREMENT


24.
The separate standards for each stewardship element
contain specific guidance for that element. In general, however,
stewardship investments shall be measured on the same basis of
accounting as used for financial statements, including appropriate
accrual adjustments, general and administrative overhead, and a
share of the cost of facilities (for example,
depreciation).9


25.
For investments that are intended to maintain or increase
the economic productive capacity of the Nation, that is,
investments in human capital, research and development, and
nonfederal physical property, trend data shall be presented. Trend
data should reflect the full cost (including allocation of facility
and administrative costs) of the investment.


26.
For stewardship land and heritage assets, measurement
will be done on other than a financial basis. For example,
measurement may be on the basis of physical units, such as acres of
land. Specific data requirements are addressed in the individual
stewardship standards.


27.
Generally, amounts shall be reported in nominal dollars.
If trend data that span many years are reported and the entity
believes that constant dollar information would be meaningful for
data interpretation, constant dollar data may be provided in
addition to nominal dollar data.


28.
Split Grants. Frequently, stewardship elements are
financed by grants. In some cases, the grants may have more than
one purpose.10 For such grants, the investment shall be allocated
among stewardship elements on the basis of an estimate of the
proportionate funding of the various grant objectives. If
allocation is not feasible, the investment shall be reported on the
basis of the predominant use of the grant.


29.
Performance Indicators. For some stewardship elements,
categorization of these elements as investments is predicated on
producing outputs and outcomes. The specific procedures, including
a phasing-in process for requiring such justification, is contained
in the individual respective standards.


30.
Reporting Program Expenses. Trend data reported on
stewardship investment elements should reflect the full cost11 of
the investment for the year being reported upon and the preceding 4
years. Additional years' data also may be reported if such data
would better indicate the investment nature of an item.


9See Managerial Cost Accounting Concepts and Standards, SFFAS
No. 4, for a discussion of Federal cost accounting principles and
standards.
10
An example of a grant with a split purpose is a grant issued to
a teaching hospital to perform both medical education and medical
research.
11See Managerial Cost Accounting Concepts and Standards, SFFAS
No. 4, for a discussion of Federal cost accounting principles and
standards.


31.
In some cases, before the issuance of Federal accounting
standards, entities have maintained records on the basis of outlays
rather than expenses. It may be impracticable for such entities to
reconstruct their accounts on the basis of expense. In such cases,
entities may report data on an outlay basis for any years for which
expense data are not available. At the end of 5 years, entities
should have sufficient expense data to be able to report expenses
rather than outlays.


32.
Reporting Deferred Maintenance. Many state and local
governments, members of Congressional oversight committees, and
national groups, have raised the issue of the deteriorating
condition of federally-owned PP&E because of deferred
maintenance associated with these assets. The issue was addressed
in association with PP&E. As a result, a deferred maintenance
standard in Accounting for Property, Plant, and Equipment, SFFAS
No. 6, establishes reporting requirements related to the condition
and future maintenance requirements for PP&E.


33.
These requirements are flexible since different
conditions may be considered acceptable by different entities, as
well as for different items of PP&E held by the same entity.
The deferred maintenance standard is applicable to all PP&E
whether the PP&E is reported as general PP&E or stewardship
PP&E.


REPORTING REQUIREMENTS


34.
Within each of the standards, minimum required and, in
some cases, recommended reporting is described. These requirements
and recommendations, including a phasing-in process for entities
who may not have required data available at the implementation of
the standards, are contained in the individual standards. These
requirements describe the nature of items to be reported by Federal
entities; guidance on the form and content of agency financial
reports, including the specific guidance on the format in which
items addressed in this Statement will be reported, will be
prescribed by OMB.


35.
Reporting should be at the major program or category
level; individual transactions need not be reported unless
significant. Additional reporting is encouraged when preparers
believe such information would make the financial report more
meaningful or understandable.


SOCIAL INSURANCE


36.
The Board first considered accounting and reporting for
social insurance programs while considering SFFAS No. 5, Accounting
for Liabilities of the Federal Government. The Board concluded, at
that time, that the topic should be made part of the Supplementary
Stewardship Reporting project.


37.
Research and deliberations regarding social insurance
have continued as part of the Supplementary Stewardship Reporting
project. However, the Board, recognizing the magnitude and
complexity of these programs, the strength of the views on the
accounting and reporting issues, the significant attention being
focused on these programs at the present time, and the potential
for change to the programs, has again


concluded that additional consideration is appropriate before
issuing final guidance. Accordingly, the Board has not included
guidance on social insurance in this Statement and has added a
Social Insurance Accounting project to its agenda.
APPLICABILITY
38. This standard requires that the consolidated financial
reports12 of the Federal Government and the financial reports12 of
its component units contain RSSI relating to:


•
amounts invested in human capital, research and
development, and nonfederal physical property; and


•
quantities (stated in terms of physical units or dollars)
of land, heritage assets, and Federal mission property.


Although FASAB's sponsors do not set accounting standards for
the legislative or judicial branches, Federal accounting standards
would be appropriate for them.


39.
Because the financial reports of the Federal Government
present the aggregation of information about stewardship
investments and assets related to varied agencies and programs,
further deliberations by the Board are needed to reach a decision
on the amount and nature of information to be required under this
standard for reporting in the consolidated financial report.
Accordingly, except for the standard described in Chapter 8,
"Current Service Assessment," the effective date of the stewardship
standards as they apply to the consolidated financial report, is
deferred pending that decision. The effective date of the standard
in Chapter 8 is for fiscal periods beginning after September 30,
1997. In the interim, the consolidated financial reports should
include such summary or selected information as is feasible.
Experimentation is encouraged, as is the reporting of such
additional information as will enhance the financial
report.


40.
Some Federal entities, including those government
corporations listed in the Government Corporation Control Act and
certain others, such as the US Postal Service, are required by law
or policy to publish financial statements pursuant to the standards
issued by the Financial Accounting Standards Board (FASB). (Some
entities also may be required to prepare statements pursuant to
standards set by a regulatory agency. That practice would not be
affected by this statement of standards.) For such entities, this
standard provides the following general principles:


12
The terms "financial statements" and "consolidated financial
statements" are used throughout this document to refer to the basic
financial statements of a reporting entity; the basic financial
statements normally include: the balance sheet, the statements of
net cost, changes in financial position, financing, budgetary
resources, and custodial activities and the notes to the financial
statements. The terms "financial reports" and "consolidated
financial reports" are used to refer to a document which would
include the financial statements but which would also include items
such as: a management discussion and analysis section, a statement
of program performance measures, required supplemental information
or required supplementary stewardship information not included in
the financial statements or other supplemental financial and
management information.


•
Applying Applicable Accounting Principles - Separately
issued (stand-alone) general-purpose financial statements on such
entities should apply applicable accounting principles that will
best meet user needs and comply with any relevant statutory
requirements. This principle would continue to be true for
separately issued statements even if, pursuant to the provisions
below, other information about these entities might need to be
presented when their financial statements are included within
reports of a larger Federal entity.


•
Reporting Additional or Supplementary Information - When
financial information on such entities is included in
general-purpose financial reports of a larger Federal reporting
entity (including Treasury's consolidated financial report), any
applicable standards recommended by the FASAB and issued by OMB and
the General Accounting Office (GAO) that call for additional
reporting or supplementary information should be
applied.


•
Applying Applicable Standards When Differences Arise -
When financial information on such entities is included in general
purpose financial reports of a larger Federal reporting entity
(including Treasury's consolidated financial report), standards
recommended by FASAB and issued by OMB and GAO should be used if
the difference arising from differences between Federal accounting
standards and FASB's would be material to users of the report of
the larger entity.


CHAPTER 2: HERITAGE ASSETS
Heritage Assets
Heritage assets shall be reported as required supplementary
stewardship information accompanying the financial statements of
the Federal Government and the component units of the Federal
Government responsible for such assets. Heritage assets shall be
reported in terms of physical units rather than cost, fair value,
or other monetary values.
DEFINITION
43. "Heritage assets" are PP&E that are unique for one or
more of the following reasons:


•
historical or natural significance;


•
cultural, educational or artistic (for example,
aesthetic) importance; or


•
significant architectural characteristics.




44.
Heritage assets are generally expected to be preserved
indefinitely. One example of evidence that a particular asset is
heritage in nature is that it is listed on the National Register of
Historic Places.


45.
Some investments in heritage assets, for example national
parks, will be reported by both 1) the number of physical units
identified as national parks in the heritage assets category, and
by 2) the number of acres used as a park or an historic site in the
stewardship land category (see Chapter 4 of this document). Such
reporting would not be considered duplication, as the type of
information reported on an item would be different for each
category of stewardship asset.


MEASUREMENT


46.
Heritage assets shall be quantified in terms of physical
units (for example, number of items in collections or the number of
national parks). No asset amount shall be shown on the balance
sheet of the Federal financial statements for heritage
assets.


47.
The costs of acquiring, constructing, improving,
reconstructing, or renovating heritage assets shall be considered
an expense in the period incurred when determining


the net cost of operations.13 The cost shall include all costs
incurred to bring the heritage asset to its current condition and
location.
MULTI-USE HERITAGE ASSETS


48.
Not all heritage assets are used solely for heritage
purposes--some serve two purposes by providing reminders of our
heritage and by being used in day-to-day government operations
unrelated to the assets themselves. The cost of renovating,
improving, or reconstructing operating components of heritage
assets used in Government operations shall be included in general
PP&E. The renovation, improvement, or reconstruction costs to
facilitate Government operations (for example, installation of
communication wiring or redesign of office space) would be
capitalized and depreciated over its expected useful life. The cost
should not be depreciated over an unrealistically long
life.


49.
Costs of renovating or reconstructing the heritage asset
that cannot be associated directly with operations shall be
considered heritage asset costs and included as expense in
calculating net costs.


MINIMUM REPORTING
50. The determination of the most relevant information to be
presented should be made by the preparer; however, reporting at the
entity level shall be more specific than at the governmentwide
level. The following are examples of information that should be
considered for presentation:


•
Description of each major category of heritage
asset.


•
The number of physical units added and withdrawn from the
heritage asset records during the year and the end-of-year number
of physical units for each type of heritage asset. Heritage assets
consist of (1) collection-type heritage assets, such as objects
gathered and maintained for exhibition, for example, museum
collections, art collections, and library collections; and (2)
noncollection-type heritage assets, such as, parks, memorials,
monuments, and buildings.


•
Description of the methods of acquisition and withdrawal
of heritage assets.


13For guidance in measuring and reporting the cost of heritage
assets transferred from other federal entities, and heritage assets
acquired through donation or devise, see the general PP&E
standard contained in Accounting for Property, Plant, and
Equipment, SFFAS No. 6.


•
Condition14 of the assets unless it is already reported
in a note to the financial statements in which case a reference to
the note will suffice.


•
A reference to a note to the financial statements if
deferred maintenance is reported for the assets.15


IMPLEMENTATION GUIDANCE


51.
For guidance on heritage assets that were previously
recognized as assets for balance sheet reporting, see Statement of
Federal Financial Accounting Standards (SFFAS) No. 6, Accounting
for Property, Plant and Equipment, paragraphs 63, 64,
and


65.


14Examples of condition information include, among others, (1)
averages of standardized condition rating codes; (2) percentage of
assets above, at, or below acceptable condition; or (3) narrative
information.
15For guidance relating to deferred maintenance reporting, see
the Deferred Maintenance standard in Accounting for Property,
Plant, and Equipment, SFFAS No. 6.
CHAPTER 3: FEDERAL MISSION PP&E
Federal Mission Property, Plant, and Equipment
Federal mission property, plant, and equipment (PP&E) shall
be reported as required supplementary stewardship information
accompanying the financial statements of the Federal Government and
the component units of the Federal Government responsible for such
PP&E. Federal mission PP&E shall be valued and reported
using either the total cost or the latest acquisition cost
valuation method.
DEFINITION


52.
Federal mission PP&E includes items used to meet a
Federal Government mission in which the specific PP&E used is
an integral part of the output of the mission.16 PP&E should be
considered Federal mission PP&E if it possesses at least one of
each of the two types of characteristics presented below. One type
of characteristic relates to the use of Federal mission PP&E,
and the other relates to its useful life.


53.
Characteristics related to the use of the Federal mission
PP&E are that it




•
has no expected nongovernmental alternative uses;
or


•
is held for use in the event of emergency, war or natural
disaster; or


•
is specifically designed for use in a program for which
there is no other program or entity (Federal or nonfederal) using
similar PP&E with which to compare costs.


54. Characteristics related to the useful life are that it


•
has an indeterminate or an unpredictable useful life17
because of the unusual manner in which it is used, improved,
retired, modified or maintained, or


•
is at a very high risk of being destroyed during use or
of premature obsolescence.


16
The name "Federal mission PP&E" may cause readers to
erroneously assume that this category should include any PP&E
supporting a Federal mission. Federal mission PP&E is limited
to those items specifically identified herein as well as any other
items exhibiting at least one characteristic from each of the two
groups listed.
17
This may be evidenced by the ability (1) to retire the PP&E
and later return it to service or (2) to continually upgrade the
PP&E to maintain its usefulness.


55.
Federal mission PP&E excludes land whether the land
is general PP&E land or stewardship land.


56.
Federal mission PP&E, however, specifically includes
(1) weapons systems PP&E (for example, fighter or attack
aircraft, submarines, and tracked combat vehicles) and (2) space
exploration equipment (for example, space hardware and launch,
tracking, and recovery facilities). Weapons systems and space
exploration equipment are defined in the following
paragraphs.


57.
Weapons Systems. Weapons systems are a combination of one
or more weapons18 with all related equipment, materials, services,
personnel, and means of delivery and deployment required for
self-sufficiency.19 This standard addresses only the PP&E
component of weapons systems. PP&E included in weapons systems
are distinguished from general property, plant, and equipment held
by defense agencies and defense support agencies in that they are
intended to be used directly by the armed forces to carry out
combat missions, when necessary, and to train in
peacetime.


58.
Weapons systems include only those assets owned by
defense agencies and defense support agencies that would otherwise
meet the property, plant, and equipment definition. Items meeting
other than the PP&E asset category definitions are excluded
from Federal mission PP&E, such as items of inventory or
operating materials and supplies.


59.
Space Exploration Equipment. Space exploration equipment
includes




•
items that are intended to operate above the atmosphere
for space exploration purposes, and


•
any specially designed equipment to aid, service, or
operate other equipment engaged in exploring space.


MEASUREMENT


60.
Federal mission PP&E shall be valued using either the
total cost or the latest acquisition cost valuation
method.


61.
There is a presumption that the valuation method
previously used by the entity was appropriate for the circumstances
and, therefore, should be applied on a consistent basis.
Accordingly, the preparer shall justify any changes in the use of a
valuation method.


18Weapons are instruments of combat used to destroy, injure,
defeat or threaten an enemy. (adapted from Dictionary of Weapons
and Military Terms)
19Joint Chiefs of Staff, Department of Defense Dictionary of
Military and Associated Terms, Joint Publication 1-02, March 23,
1994.


62.
For purposes of this standard, the "total cost method" is
defined to include the actual acquisition cost of each item held
plus the costs of any additions, improvements, alterations,
rehabilitations, or replacements that extend the useful life of the
Federal mission PP&E.


63.
Under the latest acquisition cost method, all like units
that are held are valued at the invoice price of the most recent
like item purchased, less any discounts, plus additional costs
described in the following paragraphs.


64.
Using either cost valuation method, the cost assigned to
an item of PP&E shall include all costs incurred to bring the
Federal mission PP&E to a form and location suitable for its
intended use. For example, the cost of acquiring Federal mission
PP&E may include:




•
amounts paid to vendors;


•
transportation charges to the point of initial
use;


•
handling and storage costs;


•
labor and other direct or indirect production costs (for
assets produced or constructed);


•
engineering, architectural, and other outside services
for designs, plans, specifications, and surveys;


•
acquisition and preparation costs of buildings and other
facilities;


•
an appropriate share of the cost of the equipment and the
facilities used in construction work;


•
fixed equipment and related installation costs required
for activities in a building or a facility;


•
direct costs of inspection, supervision, and
administration of construction contracts and construction
work;


•
legal and recording fees and damage claims;


•
fair value of facilities and equipment donated to the
government; and


•

material amounts of interest costs paid.20


65. No asset amount shall be shown on the balance sheet for
Federal mission PP&E.
20
"Interest costs" include any reimbursable interest paid by the
reporting entity directly to providers of goods or services related
to the acquisition or construction of Federal mission PP&E. It
excludes any interest costs paid by a reporting entity in financing
its own debt.


66.
The acquisition cost of Federal mission PP&E shall be
considered an expense in determining the net costs of operations in
the period acquired. The cost of constructing, improving,
reconstructing, or renovating Federal mission PP&E also shall
be considered an expense in determining net costs in the period
incurred.


67.
For acquisitions of Federal mission PP&E where costs
are incurred over a number of years, the portion of the cost
incurred during the reporting period shall be considered an expense
in the period incurred in determining the net cost of operations
and the total cost to date considered an acquisition-in-process
cost in the required supplementary stewardship
information.


MINIMUM REPORTING
68. Federal Mission PP&E shall be reported as required
supplementary stewardship information. Reporting at the entity
level for Federal mission PP&E shall be more specific than at
the governmentwide level. At a minimum, the following information
shall be reported:


•
A description of major types of Federal mission PP&E
by the holding entity and the values assigned under the valuation
method used.


•
The value of Federal mission PP&E added and withdrawn
during the year, the increase or the decrease in value resulting
from revaluations of assets held to latest acquisition cost, and
the end-of-year value for each major type of property using the
entity's valuation method.


•
A description of the methods of acquisition and
withdrawal of Federal mission PP&E. This should be reported at
the major program or category level; individual transactions,
unless significant, need not be reported.


•
Condition21 of the assets unless it is already reported
in a note to the financial statements in which case a reference to
the note will suffice.


•
A reference to the applicable note to the financial
statements if deferred maintenance is reported for the
assets.


IMPLEMENTATION GUIDANCE


69.
For guidance on Federal mission PP&E previously
recognized as assets for balance sheet reporting, see SFFAS No. 6,
Accounting for Property, Plant, and Equipment, paragraphs 55 and
56.


70.
For guidance on deferred maintenance reporting, see SFFAS
No. 6, Accounting for Property, Plant, and Equipment, paragraphs 77
through 84.


21
Examples of condition information include, among others, (1)
averages of standardized condition rating codes; (2) percentage of
assets above, at, or below acceptable condition; or (3) narrative
information.
CHAPTER 4: STEWARDSHIP LAND
Stewardship Land
Land not acquired for or in connection with22 items of general
PP&E, that is, stewardship land, shall be reported as required
supplementary stewardship information accompanying the financial
statements of the Federal Government and the separate reports of
component units of the Federal Government responsible for such
land. Stewardship land shall be reported in terms of physical units
rather than cost, fair value, or other monetary values.
DEFINITION


71.
"Land" is defined as the solid part of the surface of the
earth. Excluded from the definition are the natural resources (that
is, depletable resources, such as mineral deposits and petroleum;
renewable resources, such as timber; and the outer-continental
shelf resources) related to land.


72.
Although the Federal Government holds vast amounts of
"proven" and "inferred" natural resources, the major reasons for
addressing only surface land in this project were (1) the allotted
time frame within which to complete this standard; (2) existing
studies that point out the difficulties and the complexities of
accurately estimating and valuing natural resources; and (3)
disputes regarding the boundaries of the outer-continental
shelf.23


73.
Land and land rights24 owned by the Federal Government
and acquired for or in connection with items of general PP&E
shall be accounted for and reported as general PP&E.


74.
Land and land rights owned by the Federal Government and
not acquired for or in connection with items of general PP&E
will be reported as stewardship land. Examples of stewardship land
include land used as forests and parks, and land used for wildlife
and grazing.


22
"Acquired for or in connection with" is defined as including
land acquired with the intent to construct general PP&E and
land acquired in combination with general PP&E, including not
only land used as the foundation, but also adjacent land considered
to be the general PP&E's common grounds.
23
The Board presently has an active project to address standards
for natural resources.
24
"Land rights" are interests and privileges held by the entity in
land owned by others, such as leaseholds, easements, water and
water power rights, diversion rights, submersion rights,
rights-of-way, mineral rights, and other like interests in
land.
MEASUREMENT


75.
Stewardship land shall be quantified in terms of physical
units (for example, acres) rather than in monetary
terms.


76.
No asset amount shall be shown on the balance sheet of
the Federal financial statements for stewardship land.


77.
The acquisition cost of stewardship land shall be
considered an expense in the period acquired when determining the
net cost of operations.


78.
In some cases, land may be acquired along with existing
structures. The following treatments may apply:




•
if the structure, which would be deemed a heritage asset,
is significant in and of itself, the entity shall use its judgement
as to whether the acquisition cost shall be treated as the cost of
stewardship land, heritage asset, or both;


•
if the structure is to be used in operations (for
example, as general PP&E) but 1) the value of the structure is
insignificant, or 2) its acquisition is merely a byproduct of the
acquisition of the land, the cost in its entirety shall be treated
as an acquisition of stewardship land; or


• only significant structures that have an operating use (such
as, a recently constructed hotel or employee housing block) shall
be treated as general PP&E by identifying the cost attributable
to general PP&E and segregating it from the cost of the
stewardship land acquired.


79.
However, no amounts for stewardship land acquired through
donation or devise25 shall be recognized as a cost in calculating
net cost. The fair value of the property, if known and material,
shall be disclosed in notes to the financial statements. If fair
value is not estimable, information related to the type and
quantity of assets received shall be disclosed in the year
received.


80.
Any costs to prepare stewardship land for its intended
use (for example, razing a building) shall be expensed as a part of
the cost of stewardship land.



MINIMUM REPORTING
81. Reporting at the entity level for stewardship land shall be
more specific than at the governmentwide level. Minimum reporting
shall include the following:


•
The number of physical units of stewardship land by
category of major use, broken down within that category by
principal holding agency.


•
Where parcels of stewardship land have more than one use,
the predominant use of the land shall be considered the major use.
Examples of major uses of stewardship land include forests and
wildlife, grazing, parks, recreation, and historic sites. In cases
where land has multiple uses, none of which is predominant, a
description of the multiple uses shall be presented.


•
Acquisitions, withdrawals, and ending balance should be
shown by major categories of use, and methods of acquisition and
withdrawal identified. Reporting should be at the major category
level; individual transactions, unless significant, need not be
reported.


•
The condition26 of the stewardship land, unless it is
already reported in a note to the financial statement, in which
case a reference to the note will suffice.


•
A reference to the note to the financial statements if
deferred maintenance is reported for the assets.27


25
A will or clause of a will disposing of property.
IMPLEMENTATION GUIDANCE
82. For guidance relating to stewardship land that was
previously recognized as assets for balance sheet reporting, see
SFFAS No. 6, Accounting for Property, Plant and Equipment,
paragraphs 75 and 76.
26Examples of condition information include, among others, (1)
averages of standardized condition rating codes; (2) percentage of
assets above, at, or below acceptable condition; or (3) narrative
information.
27For guidance on deferred maintenance reporting, see the
Deferred Maintenance standard Accounting for Property, Plant, and
Equipment, SFFAS No. 6.
CHAPTER 5: NONFEDERAL PHYSICAL PROPERTY STANDARD
Nonfederal Physical Property
Expenses included in calculating net cost for nonfederal
physical property programs shall be reported as investments in
required supplementary stewardship information accompanying the
financial statements of the Federal Government and the separate
reports of component units of the Federal Government responsible
for such investments. Reporting will include data, in nominal
dollars, on investment for the year being reported upon and the
preceding 4 years. Additional years' data also may be reported if
such data would provide a better indication of the nature of the
investment.
DEFINITION
83. "Investment in nonfederal physical property" refers to those
expenses incurred by the Federal Government for the purchase, the
construction, or the major renovation of physical property owned by
state and local governments, including major additions,
alterations, and replacements; the purchase of major equipment; and
the purchase or improvement of other physical assets. Grants for
maintenance and operations are not considered investments.
MEASUREMENT


84.
"Expenses incurred" - The financial investment shall be
measured on the same basis of accounting as used for financial
statement purposes, including appropriate accrual adjustments,
general and administrative overhead, and costs of facilities.28
Amounts shall be reported in nominal dollars.


85.
Cash grants related to nonfederal physical property
programs are recognized and reported as expenses in arriving at the
net cost of operations.


86.
Expenses incurred for program costs, contracts, or grants
with split purposes29 shall be reported on the basis of an
allocation of the expenses. If allocation is not feasible, the
investment shall be reported on the basis of the predominant
application of the expense or transfer.


28See Managerial Cost Accounting Concepts and Standards, SFFAS
No. 4, for a full discussion of Federal cost accounting principles
and standards.
29
An example of an investment with a split purpose is a grant
issued to a state to construct segments of the National Highway
System and to conduct highway research.
MINIMUM REPORTING
87. Minimum reporting shall include the following:


•
Annual investment30 shall be reported, including a
description of Federallyowned physical property transferred to
state and local governments. This information will be provided for
the year ended on the balance sheet date as well as for each of the
4 years preceding that year. If data for additional years would
provide a better indication of investment, reporting of the
additional years' data is encouraged. In those unusual instances
when entities have no historical data, only current reporting year
data need be reported.


•
Reporting shall be at a meaningful category or level, for
example, a major program or department. Reporting of major
investments at the entity level shall be more specific than at the
governmentwide level.


•
In some cases, the information called for above is not
available because entities have maintained records on the basis of
outlays rather than expenses. For such entities to reconstruct
their accounts on the basis of expense data may be impracticable.
Agencies in this situation will continue to report historical data
on an outlay basis for any years for which reporting is required
and for which expense data are not available. If neither historical
expense nor outlay data are available for each of the 5 years,
entities need report only expense data for the current reporting
year and such other years as available. At the end of 5 years,
however, the agency will be able to report the expenses to be
categorized as investments for nonfederal physical property rather
than the outlays for each of the preceding 5 years.


•
Reporting shall include a description of major programs
involving Federal investments in nonfederal physical property
including a description of programs or policies under which
non-cash assets are transferred to state and local
governments.


RECOMMENDED REPORTING
88. Reporting of the amount of significant state and local total
contributions to shared or joint programs is encouraged but is not
required. If it is known, however, that other contributions in a
significant amount were made, that fact (for example, expressed as
a percentage of the total program) shall be reported even if the
exact amount of the contribution is not known.
30As defined in this standard, "annual investment" includes more
than the annual expenditure reported by character class for budget
execution. "Annual investment" is the full cost of the investment.
Full cost shall be measured and accounted for in accordance with
Managerial Cost Accounting Concepts and Standards, SFFAS No. 4.
CHAPTER 6: HUMAN CAPITAL
Human Capital
Expenses included in calculating net cost for education and
training programs that are intended to increase or maintain
national economic productive capacity shall be reported as
investments in human capital as required supplementary stewardship
information accompanying the financial statements of the Federal
Government and its component units. Continued categorization of
expenses as investments for stewardship purposes is predicated on
demonstrated outputs and outcomes consistent with the intent of the
program. Reporting will ordinarily include data in nominal dollars
on investment for the year being reported upon and the preceding 4
years. Additional years' data also may be reported if such data
would provide a better indication of the investment.
DEFINITION


89.
"Investment in human capital" refers to those expenses
incurred for programs for education and training of the public that
are intended to maintain or increase national productive capacity
and that produce outputs and outcomes that provide evidence of
maintaining or increasing national productive capacity.


90.
The definition excludes education and training expenses
for Federal civilian and military personnel. It also excludes
education and training expenses whose purpose is not maintaining or
enhancing national productive capacity.


MEASUREMENT


91.
"Expenses incurred" - The investment shall be measured on
the same basis of accounting as used for financial statements,
including appropriate accrual adjustments, general and
administrative overhead, and costs of facilities.31 Amounts shall
be reported in nominal dollars.


92.
Expenses incurred for programs, contracts, or grants with
split purposes32 shall be reported on the basis of an allocation of
the investment expenses. If allocation is not feasible, the
investment shall be reported on the basis of the predominant
application of the expenses incurred.


93.
By no later than the third year after the effective date
of this standard, managers of the investment program should be able
to provide information on the


31See Managerial Cost Accounting Concepts and Standards, SFFAS
No. 4, for a full discussion of Federal cost accounting principles
and standards.
32
An example of an investment with a split purpose is a grant
issued to a teaching hospital to perform both medical education and
medical research.
outcomes for the programs for which the investments are
reported. If outcome data are not available (for example, the
agency has not agreed on outcome measures for the program, the
agency is unable to collect reliable outcome data or the outcomes
will not occur for several years), output data that best provide
indications of the intended program outcomes shall be used to
justify continued treatment of expenses as investments until
outcome data are available. Definitions and characteristics of
outputs and outcomes are provided in the paragraphs that
follow.33


•
"Output" - A tabulation, calculation, or recording of
activity or effort that can be expressed in a quantitative or
qualitative manner. Outputs shall have two key characteristics: (1)
they shall be systematically or periodically captured through an
accounting or management information system, and (2) there shall be
a logical connection between the reported measures and the
program's purpose. Examples of human capital output are high school
and college graduates as a percentage of population over
25.


•
"Outcome" - An assessment of the results of a program
compared to its intended purpose. Outcomes shall: (1) be capable of
being described in financial, economic, or quantitative terms and
(2) provide a plausible basis for concluding that the program has
had or will have its intended effect. Examples of human capital
outcomes are program graduates obtaining jobs within 2 months of
program completion or program graduates obtaining jobs making more
money than they previously received on Federal aid.


MINIMUM REPORTING
94. Minimum reporting shall consist of:
• The annual investment34 made in the year ended on the balance
sheet date as well as in each of the 4 years preceding that year
shall be reported. If data for additional years would provide a
better indication of investment, reporting of the additional years'
data is encouraged. In those unusual instances when entities have
no historical data, only current reporting year data need be
reported. Reporting shall be at a meaningful category or level, for
example, a major program or department. Reporting of major efforts
at the entity level shall be more specific than at the
governmentwide level.
33
The human capital outputs and outcomes should be the same as
those measured for the Government Performance and Results Act
(GPRA) and the budget and could be reported in a Statement of
Program Performance Measures as described in Appendix 1-F to the
concepts statement entitled, Entity and Display, SFFAC No. 2.
34As defined in this standard, "annual investment" includes more
than the annual expenditure reported by character class for budget
execution. "Annual investment" is the full cost of the investment.
Full cost shall be measured and accounted for in accordance with
Managerial Cost Accounting Concepts and Standards, SFFAS No. 4.


•
In some cases, the information called for above will not
be available because entities have maintained records on the basis
of outlays rather than expenses. For such entities to reconstruct
their accounts on the basis of expense data may be impracticable.
Agencies in this situation will continue to report historical data
on an outlay basis for any years for which reporting is required
and for which expense data are not available. If neither historical
expense nor outlay data are available for each of the 5 years,
entities need report expense data for only the current reporting
year and such other years as available. At the end of 5 years,
however, the agency will be able to report the expenses to be
categorized as investments for human capital rather than the
outlays for each of the preceding 5 years.


•
A narrative description of major education and training
programs considered Federal investments in human capital shall be
included.


RECOMMENDED REPORTING
95. Reporting of the amount of significant state, local,
private, or foreign total contributions to shared or joint programs
is encouraged, but is not required. If it is known, however, that
other contributions in a significant amount were made, that fact
(for example, expressed as a percentage of the total program) may
be reported even if the exact amount of the contribution is not
known.
CHAPTER 7: RESEARCH & DEVELOPMENT
Research and Development
Expenses included in calculating net cost for research and
development programs that are intended to increase or maintain
national economic productive capacity or yield other future
benefits shall be reported as investments in research and
development in required supplementary stewardship information
accompanying the financial statements of the Federal Government and
its component units. Continued categorization of program expenses
as investment is predicated on output and outcome data consistent
with the program's intent. Reporting ordinarily will include data
in nominal dollars on investment for the year being reported upon
and the preceding 4 years. Additional years' data also may be
reported if such data would provide a better indication of the
investment.
DEFINITION
96. "Investment in research and development" refers to those
expenses incurred to support the search for new or refined
knowledge and ideas and for the application or use of such
knowledge and ideas for the development of new or improved products
and processes with the expectation of maintaining or increasing
national economic productive capacity or yielding other future
benefits. Research and development is composed of




•
Basic research: systematic study to gain knowledge or
understanding of the fundamental aspects of phenomena and of
observable facts without specific applications toward processes or
products in mind;


•
Applied research: systematic study to gain knowledge or
understanding necessary for determining the means by which a
recognized and specific need may be met; and


•
Development: systematic use of the knowledge and
understanding gained from research for the production of useful
materials, devices, systems, or methods, including the design and
development of prototypes and processes.35


35See OMB Circular A-11, section 44.
MEASUREMENT


97.
"Expenses incurred" - The investment shall be measured on
the same basis of accounting as used for financial statements,
including appropriate accrual adjustments, general and
administrative overhead, and costs of facilities.36 Amounts shall
be reported in nominal dollars.


98.
Expenses incurred for programs, contracts, or grants with
split purposes37 shall be reported on the basis of an allocation of
the investment expenses. If allocation is not feasible, the
investment shall be reported on the basis of the predominant
application of the expenses incurred.


99.
By no later than the third year after the effective date
of this standard, managers of the investment program should be able
to provide information on the outcomes for the programs for which
the investments are reported.38 If outcome data are not available
(for example, the agency has not agreed on outcome measures for the
program, the agency is unable to collect reliable outcome data, or
the outcomes will not occur for several years), the outputs that
best provide indications of the intended program outcomes shall be
used to justify continued treatment of expenses as investments
until outcome data are available. Definitions and characteristics
of outputs and outcomes follow.


• "Output" - A tabulation, calculation, or recording of activity
or effort that can be expressed in a quantitative or qualitative
manner. They shall have two key characteristics: (1) they shall be
systematically or periodically captured through an accounting or
management information system, and (2) there shall be a logical
connection between the reported measures and the program's purpose.
In research and development programs, this might consist of data
for the year concerning the number of new projects initiated, the
number continued from the prior year, the number completed and the
number terminated. It also might consist of such quantitative
measures as bibliometrics (for example, publication counts,
citation counts and analysis, and peer evaluation); patent counts
and analysis; and science "indicators" that assess the ongoing
vitality of the research (for example, statistics on scientific and
engineering personnel, graduate students and degree recipients by
field and sector).39
36See Managerial Cost Accounting Concepts and Standards, SFFAS
No. 4, for a full discussion of Federal cost accounting principles
and standards.
37An example of an investment with a split purpose is a grant
issued to a teaching hospital to perform both medical education and
medical research.
38The research and development outputs and outcomes should be
the same as those measured for the Government Performance and
Results Act (GPRA) and the budget and will be reported in a
Statement of Program Performance Measures as described in Appendix
1-F to Entity and Display, SFFAC No. 2.
39
Research Funding as an Investment: Can We Measure the Returns?,
A Technical Memorandum, Congress of the United States, Office of
Technology Assessment (Apr. 1986).
• "Outcome" - An assessment of the results of a program compared
to its intended purpose. Because of the difficulty of measuring
such results for research and development programs in financial,
economic, or quantitative terms, outcome data for such programs are
expected to consist typically of a narrative discussion of the
major results achieved by the program during the year, along the
following lines:
-Basic Research - an identification of any major new discoveries
that were made during the year;
-Applied Research - an identification of any major new
applications that were developed during the year; or
-Development - the progress of major developmental projects
including the results with respect to projects completed or
otherwise terminated during the year and the status of projects
that will continue.
The information provided concerning outcomes should be chosen to
provide, in concise form, a plausible basis for judging the extent
to which the program is achieving its purpose.
MINIMUM REPORTING
100. Minimum reporting shall consist of the following:


•
The annual investment40 made in the year ended on the
balance sheet date as well as in each of the 4 years preceding that
year shall be reported. If data for additional years would provide
a better indication of investment, reporting of the additional
years' data is encouraged. In those unusual instances when entities
have no historical data, only current reporting year data need be
reported. Reporting shall be at a meaningful category or level, for
example, a major program or department. Reporting of major
investments at the entity level shall be more specific than at the
governmentwide level.


•
In some cases, the information called for above will not
be available because certain entities have maintained records on
the basis of outlays rather than expenses. For such entities to
reconstruct their accounts on the basis of expense data may be
impracticable. Agencies in this situation will continue to report
historical data on an outlay basis for any years for which
reporting is required and for which expense data are not available.
If neither historical expense nor outlay data are available for
each of the 5 years, entities need report expense data for only the
current reporting year and such other years as


40As defined in this standard, "annual investment" includes more
than the annual expenditure reported by character class for budget
execution. "Annual investment" is the full cost of the investment.
Full cost shall be measured and accounted for in accordance with
Managerial Cost Accounting Concepts and Standards, SFFAS No. 4.
available. At the end of 5 years, however, the agency will be
able to report the expenses to be categorized as research and
development rather than the outlays for each of the preceding 5
years.
• A narrative description of major research and development
programs shall be included.
RECOMMENDED REPORTING
101. Reporting of the amount of significant state, local,
private, or foreign total contributions to shared or joint programs
is encouraged, but is not required. If it is known, however, that
other contributions in a significant amount were made, that fact
(for example, expressed as a percentage of the total program) may
be reported even if the exact amount of the contribution is not
known.
CHAPTER 8: CURRENT SERVICES ASSESSMENT
Current Services Assessment
A Current Services Assessment (CSA) on the basis of receipt and
outlay data as published in the President's Budget will be reported
for all programs for the base year and 6 years subsequent to the
base year. "Base year" data will be actual receipt and outlay data
for the last completed fiscal year; projected data will be receipt
and outlay data that are included in the current services estimates
in the President's Budget published after the close of the base
year. The data would be presented as required supplementary
stewardship information accompanying the consolidated financial
statements of the Federal Government but not in individual reports
of its component units. Reporting of projected data for additional
years is encouraged where it would be useful and relevant.
102. "A Current Services Assessment" provides receipt and outlay
data on the basis of projections of future activities. It is
relevant for assessing the sustainability of programs established
by current law, that is, the sufficiency of future resources to
sustain public services and to meet obligations as they come due.
The CSA focuses on the totality of government operations rather
than on individual programs. It provides an analytical perspective
on the Government because it shows the short- and long-term
direction of current programs.
MEASUREMENT
103. CSA will present receipt and outlay data published in the
President's Budget. Data will be presented for all programs for the
base year and at least 6 years subsequent to the base year,
summarized in sufficient detail to identify, at least, (1) receipts
by major source (e.g., individual income taxes, social insurance
taxes, etc.);
(2) outlays for the defense, Social Security, Medicare, and net
interest functions; (3) allother receipts and outlays; and (4) the
deficit or surplus. The "base year" is the year for which the
financial statements are being prepared. Reporting of projected
data for additional years is encouraged where it would be useful
and relevant.
104. CSA data for the 6-year projection will be identical to
projected data published in the President's Budget for the same
period. "Base year" data will be actual receipt and outlay data for
the last completed fiscal year; projected data will be the current
services estimates of receipt and outlay data that are included in
the President's Budget published after the close of the base
year.
MINIMUM REPORTING Governmentwide Report of the Federal
Government
105. The CSA shall present flow data as described in the two
preceding paragraphs for inclusion in the consolidated financial
report of the US Government.
106. Preparers of financial reports are encouraged to experiment
with the presentation of the CSA data in order to make it more
understandable.
107. In some cases, summary data will be more effective than
detailed data. There may be situations, too, where graphic
presentations will be more effective than tabular
presentations.
Reporting Entities of the Federal Government
108. None.
APPENDIX A: BASIS FOR CONCLUSIONS
109. This appendix provides a discussion of the more significant
comments that the Board received from respondents to the exposure
draft, Supplementary Stewardship Reporting, dated August 1995 and
from testimony at a public hearing on the exposure draft that was
held December 5, 1995.
110. Responses overall were generally favorable to the concept
of reporting stewardship information. In some cases, respondents
had questions about the specific reporting requirements or
requested clarification on particular items. Where feasible, these
areas were addressed or clarified in the final standards in this
Statement. In the case of issues raised by the respondents, this
appendix explains the basis of the Board's conclusions.
THE NATURE OF STEWARDSHIP REPORTING
111. The exposure draft presented the Board's approach to
reporting in a manner other than is done in the basic financial
statements for those items that it has categorized as stewardship
items. As the Board stated in the Introduction and Background
chapter of this Statement, it believes that these stewardship items
warrant specialized reporting to highlight their importance and to
portray them in additional ways than provided by financial
accounting. The Board designated a new category of reporting to
highlight the unique nature of stewardship reporting, Required
Supplemental Stewardship Information (RSSI).
112. Some respondents believed that, although reporting on
stewardship items might be warranted, a separate manner of
reporting might not. They believed that stewardship reporting could
be accommodated either within the basic financial statements, for
example, as a note, or as Required Supplemental Information (RSI).
They did not see the need for the separate category of RSSI.
113. The Board, however, believes that a new category for
reporting on stewardship items is more appropriate. If stewardship
information were required to be reported in a note to the basic
financial statements, it would be subject to the same level of
audit scrutiny as that of the basic financial statements. Since
some of the stewardship information is non-financial, for example,
physical units, and other data is based on projections or
assumptions, the same degree of audit coverage as that of the basic
financial statements for these items may not be appropriate. Such
data is not drawn directly from the financial records. Thus
reliance on financial records for audit backup would not be
feasible.
114. On the other hand, the Board believes that certain
stewardship information should receive more audit scrutiny than it
would if it were RSI. For RSI, the auditor reviews the data for
overall compliance with associated guidance and for consonance with
the basic financial statements. The auditor usually provides
in-depth review of the RSI only if there appears to be some problem
with the data. If he or she believes that the data is not fairly
presented, the auditor still may issue a clean opinion on the basic
financial statements while noting that there are problems with the
RSI.
115. Therefore, the Board has proposed that a new category,
RSSI, be designated to cover stewardship reporting. By developing
this new category, it is anticipated that audit standards will be
developed to address the specific items in that category. Although
the Board does not have authority to set audit standards, it
established RSSI with the expectation that OMB and GAO will, in
collaboration, determine appropriate audit procedures for this
information.
SOCIAL INSURANCE
116. Consideration of guidance for the recognition, measurement
and display of obligations for social insurance programs has
continued to present the Board with significant, vexing theoretical
and practical problems. The Board notes the strength of feelings of
respondents and commentators, some of whom believe a liability
should be recognized for amounts that will be paid in future
periods to or on behalf of current or future program beneficiaries
and others who believe that there is no obligation associated with
these programs that meets the definition of a liability, other than
amounts due and payable at the end of an accounting period;
additionally, some favor disclosure of projected data relating to
the magnitude of the present value of future net benefit payments
at a particular date while others favor cash flow information for a
long period of time. The Board notes too the magnitude and
complexity of these programs and the extreme sensitivity of
projections relating to the programs to assumptions whose range of
possibilities is large. More importantly, the Board notes that
social insurance programs are presently being studied and discussed
frequently and seriously within government and by the public; a
report and recommendations are expected shortly from the 1994-95
Quadrennial Advisory Council on Social Security. The prospects of
significant changes to the programs are reasonably high.
117. After deliberating the issue, the Board has concluded that
additional investigation and further deliberation is required and
has directed the FASAB staff to continue to research social
insurance issues focusing especially on: identifying the
characteristics of programs which should cause them to be subject
to the guidance provided in a Statement on Social Insurance; the
appropriate display of information in the financial statements; the
identification of additional information, if any, which should be
required for social insurance programs; the means for measurement
of financial data included in such additional information; and, the
desirability of nonfinancial indicators (ratios of data to GDP or
"covered payroll") to describe the status of programs or the
implications of potential changes to or needs of the programs.The
Board has instructed the staff to be mindful of all current
developments in structuring its research and its
recommendations.
EXPENSING STEWARDSHIP PP&E
118. Echoing their earlier comments to the Board's Exposure
Draft, Accounting for Property, Plant, and Equipment, some
respondents expressed concern that expensing rather than
capitalizing costs associated with stewardship PP&E would
lessen the value of the operating statement as a tool for
performance measurement since it would overstate the cost in the
year an asset is acquired.
119. The Board, however, believes that capitalizing and
depreciating stewardship PP&E provides information that is of
little usefulness. Stewardship PP&E includes heritage assets,
Federal mission PP&E, and stewardship land. Period costs
related to stewardship PP&E are of diminished usefulness
because of uncertain useful life (e.g., heritage assets, Federal
mission PP&E), uncertain historical cost basis (e.g.,
stewardship land), or probability of being destroyed in use (e.g.,
Federal mission PP&E). Therefore, the Board believes that
attempting to capitalize and depreciate stewardship PP&E is not
warranted. It believes that reporting on information related to the
existence and the condition of the stewardship PP&E has more
relevance to decision-makers and other users of the financial
report.
COSTING OF FEDERAL MISSION PP&E
120. Respondents to the Board's question on whether the
alternatives of presenting costs of Federal mission PP&E in
terms of either total (historical) or latest acquisition cost
generally believed that both options should not be allowed. Some
believed that use of alternative methods would not ensure
consistency in reporting. Others believed that only total
(historical) costs should be used. Still others believed that total
(historical) cost should be the long-term goal, with the use of
latest acquisition cost allowed only until such historical cost
data would be available.
121. The Board, however, recognizes that significant practical
problems may arise if an agency is compelled to adopt a specified
costing approach for reporting stewardship assets, and that such
cost approach would not be used for computing the net cost of
operations. Therefore, it believes that its decision to accept
either the historical cost or latest acquisition cost method is
appropriate. However, it also emphasizes that once a method is
chosen, an entity should switch to the other method only with
appropriate justification.
REPORTING EXPENSE OR OUTLAY DATA
122. The standards require that expense data be reported for
investments in human capital, research and development, and
nonfederal physical property. The standards also provide for a
period of 5 years to transition to reporting expense data for those
agencies that currently maintain only outlay data. Some Board
members suggested that since some agencies currently maintain only
outlay data, requiring that only outlay data be reported might be
more practical. However, the responses reflected a clear consensus
for reporting expenses, with little or no support for reporting
outlays only, and a minority preferring to report both expenses and
outlays. Therefore, the standards, as proposed, remain
unchanged.
REQUEST FOR MORE SPECIFICITY IN REPORTING REQUIREMENTS
123. When the Board developed the standards for stewardship
reporting, its intention was to provide overall guidance on
definitions, recognition, measurement, and minimum and recommended
reporting. This broad guidance was intended to provide the basic
reporting requirements while allowing each entity maximum
flexibility in such areas as determining what constitutes the
individual stewardship items for that entity, which costs are
directly attributable to the stewardship item, and how best to
report on multi-use items so that users will gain the best picture
of the entity's financial and performance information.
124. The Board believes that the desire for more specific
guidance expressed by several respondents stems from the belief
that without such guidance, an entity's determination of how to
apply the standards could be questioned. Nevertheless, the Board
reiterates its position that entities should be provided maximum
flexibility when applying the stewardship standards. However,
entities should make the determination of how best to apply the
stewardship standards based on a thorough analysis of their
individual entity, including its mission, financial practices, and
the impact of its mission and operation on financial report users
and on the Nation. Finally, all entity determinations of the
applicability of stewardship standards should be thoroughly
documented.
ISSUES FOR WHICH CHANGES WERE MADE TO THE PROPOSED STANDARDS
125. Multiple Category Reporting. Some respondents were
concerned that there would be double counting if, as proposed by
the standards, some stewardship items would be reported in two
separate categories; for example, Yellowstone National Park would
be reported as a heritage asset and as stewardship land.
126. Reporting supplementary stewardship information in two
categories will not be deemed double counting. This is because
where multiple reporting is required, the units of measure are
different for each of the stewardship categories. In the example
above, Yellowstone National Park would be reported under a
category, such as "National Parks," as one of the total number of
heritage assets under the auspices of the Department of the
Interior; it also would be reported by the number of acres that it
occupies under the stewardship land category for the Department. To
clarify this point, the discussion of the process of multiple
reporting was expanded in the statement to explain that the Board
does not consider this reporting as double counting.
127. Reporting the Fair Value for Stewardship PP&E
Transferred to State or Local Governments. Many respondents
questioned the need for, and the cost/benefit of, requiring that
the fair value of stewardship PP&E transferred to state and
local governments be reported. They stated that monetary values for
stewardship PP&E are not required to be reported because such
values are either difficult to obtain (e.g., lack of historical
cost data on land acquired at the birth of the Nation) or not
meaningful (e.g., the historical cost to build the Washington
Monument). Therefore, they questioned the cost/benefit of requiring
that the fair value of stewardship property transferred to state
and local governments be determined and reported.
128. The Board agreed that the fair value of stewardship
property transferred to state and local governments need not be
determined and reported. The standards have been revised to require
a description of the property transfer transaction; if the fair
value is known, nothing would preclude reporting it.
EFFECTIVE DATE FOR CONSOLIDATED FINANCIAL STATEMENTS
129. In considering required reporting of stewardship
information, the Board became increasingly aware of the need to be
highly selective in proposing requirements for the consolidated
financial report of the Federal Government. It recognized the
potential for implementation problems in the first few years after
the effective date of this statement. In addition to the normal
problems associated with adapting to new standards, several of
these standards provide for a transition period during which
agencies may or, in some cases, may not report investments in human
capital, research and development and nonfederal physical property;
if investments are reported for each of five years as called for in
this statement, they may be reported for earlier years during the
transition period on the basis of either outlays or expense. The
merit of reporting the aggregate of information prepared on
different bases is questionable.
130. Further, the information required to be reported by these
standards goes beyond that customarily accompanying financial
reports of governments or commercial enterprises. Standards related
to heritage assets and stewardship land call for reporting in terms
of physical units (e.g., number of parks or acres of land) rather
than in terms of historical cost. Implementation problems are
foreseen at the consolidated statement level because of differing
measures. Also, the Board is concerned with the possibility of
establishing requirements so detailed as to render the consolidated
financial report unwieldy, unfriendly to the potential user and
obfuscating of important information.
131. Because of these possible implementation problems and the
need to consider other disclosures or presentations, the Board
expressed a desire for further deliberations relative to the
consolidated financial report of the Federal Government.
132. Accordingly, the effective date of this statement will be
for fiscal years beginning after September 30, 1997 as it relates
to financial statements of component units of the Federal
Government; this same effective date applies to chapter 8 as it
relates to the consolidated financial statements of the Federal
Government. The effective date of the statement as it applies to
the consolidated financial statements, except for chapter 8, is
deferred pending further deliberations of the Board. In the
interim, the consolidated financial reports should include such
summary or selected information as is feasible. Experimentation is
encouraged, as is the reporting of such additional information as
will enhance the financial report.
REPORTING OF INFORMATION NOT SPECIFICALLY ADDRESSED IN THE
STANDARDS
133. Some respondents requested that the standards provide for
reporting additional information, such as transfers of stewardship
property to foreign governments, stewardship land sold to the
private sector, the Federal Government's interest in such things as
property held by nonfederal entities or patents generated through
Federal research and development funds, and foreign contributions
to Federal programs.
134. In developing the standards for stewardship reporting, the
Board concentrated on providing guidance in the principal areas of
stewardship resources that have materiality for the majority of
Federal entities and for the consolidated financial reporting for
the Nation. The Board's intent was to ensure that these significant
areas, if material for an entity, would be reported regularly and
in a consistent manner.
135. In some cases, an entity may have other resources or
obligations that were not specifically addressed in the stewardship
standards, but that the entity believes may be material to the
presentation of its stewardship information. In such cases, if the
reporting of such additional data would be useful and relevant to
readers, and would provide a better indication of the resources and
obligations of the entity, the Board encourages such reporting.
APPENDIX B: SAMPLE REPORTS
NOTE
The sample report sections in Appendix B are intended to
illustrate the type of reporting contemplated by the Board. Certain
data are taken from various reports for one or more recent years
and are "actual data." Other data have been estimated by
judgmentally extrapolating from "actual data." Still other data and
program references have been fabricated and are hypothetical.
Therefore, readers should not rely on the validity of the data in
the sample reports.
Specific form and content guidance on financial reports will be
provided by OMB.
HERITAGE ASSETS ANNUAL STEWARDSHIP INFORMATION
Heritage assets are PP&E that possess one or more of the
following characteristics: historical or natural significance;
cultural, educational or aesthetic value; or significant
architectural characteristics. The cost of heritage assets is not
often relevant or determinable. In addition, the useful life of
heritage assets is generally not reasonably estimable for
depreciation purposes. The most relevant information about heritage
assets is their existence and condition. Therefore, heritage assets
are reported in terms of physical units.
Various agencies operate and maintain heritage assets. During
the period, maintenance expense is recognized as incurred. However,
certain maintenance was deferred over the past several years. Below
is information on deferred maintenance on stewardship assets.
Summary of Deferred Maintenance as of September 30, 199Z (in
Millions of Dollars):

aCondition Assessment Survey (CAS).

bSee accompanying notes to the financial statement for the
reporting of condition of Heritage Assets. cMany paintings were
refurbished at a cost of $5 million. Refurbishment was required
because of deficient climate-control equipment. dDuring the fiscal
year, three complete collections of manuscripts and historical
papers with an estimated value of $17 million were donated to
the
library collection. eThe number of deletions was negligible.
FEDERAL MISSION PROPERTY,
PLANT, AND EQUIPMENT ANNUAL STEWARDSHIP INFORMATION
Federal mission property, plant, and equipment (PP&E)
comprise certain PP&E that possess at least one of each of the
two types of the following characteristics relating to the use of
the property and its useful life. Characteristics related to use
are that it: has no expected nongovernmental alternative use; is
held for use in the event of an emergency, a war, or a natural
disaster; or, is used in a program for which there is no other
comparable program (Federal or nonfederal) using similar PP&E.
Characteristics related to useful life are that it: has an
indeterminate or an unpredictable useful life because of the
unusual manner in which it is used, improved, retired, modified, or
maintained or is at a very high risk of being destroyed during use
or of premature obsolescence. Generally accepted government
accounting standards specifically recognize weapons systems and
space exploration facilities and equipment as Federal mission
PP&E.
At this time, only weapons systems and space exploration
equipment have been identified as Federal mission PP&E for this
entity.
In the display that follows, items included under the caption
"weapons systems" are valued at the most recent acquisition cost of
a comparable item. Those under the caption "space exploration" are
valued using the specific identification method, that is, the
specific cost of each unit of PP&E is attributed to that unit.
In each category, cost includes all costs to put the item in usable
condition for its intended purpose including, among others,
transportation, assembly, and inspection costs.
The value of land associated with the facilities included among
Federal mission PP&E is not included in the display that
follows. Land data are included in a separate section of this
information entitled "Stewardship Land."
Virtually all items of Federal mission PP&E are useable for
their intended purposes at September 30, 199Z. In some cases,
however, scheduled maintenance has been deferred. On the basis of
engineering estimates, the estimated cost of deferred maintenance
ranges from $ 200 to $ 300 million in 199Z and $175 to $275 million
in 199Y. Costs to complete critical maintenance, that is,
maintenance that, if not performed, could lead to irreparable
damage to the PP&E or to its unusability, range from $ 120 to $
150 million.
On the following page is a summary of changes in Federal mission
PP&E for the fiscal years ended September 30, 199Z.
FEDERAL MISSION PROPERTY, PLANT, AND EQUIPMENT SUMMARYf Annual
Stewardship Informationg For the Fiscal Year Ended September
30, 199Z

fSee accompanying notes to the financial statements for the
reporting of condition of these items.
gThis display summarizes information from a variety of sources,
including a prototype consolidated financial statement for the US
and annual reports that contained information covering the
categories of Federal mission PP&E (columns 1 and 5); and
hypothetical amounts for revaluation adjustments (column 2); and
deletions and additions (columns 3 and 4).
hIncluded as expense in calculating net cost.
iFacilities include tracking, launching, and training
facilities.
STEWARDSHIP LAND ANNUAL STEWARDSHIP INFORMATION
"Land" is defined as the solid part of the surface of the earth.
Excluded from the definition of land for reporting purposes here
are materials beneath the surface (that is, depletable resources
such as mineral deposits and petroleum), the space above the
surface (that is, renewable resources such as timber), and the
outer-continental shelf resources. These materials will be
addressed in a future standard.
The Federal Government holds approximately 650 million acres of
land. Land that is acquired for or in connection with items of
general PP&E are reported on the balance sheet. Land that is
not acquired for or in connection with items of general PP&E is
considered stewardship land. Of the total amount of land held by
the Federal Government, about 617 million acres are considered
stewardship land.
The cost or value of stewardship land is often not determinable.
The most relevant information about stewardship land is its
existence, condition, and use. Therefore, stewardship land is
reported in terms of physical units rather than cost, fair value,
or other monetary values.
The major uses of stewardship land are for forests, wildlife,
grazing, parks, recreation, and historic sites. Where parcels of
stewardship land have more than one use, the predominant use of the
land is considered the major use. Two Federal agencies are
responsible for maintaining virtually all stewardship land held by
the Federal Government: the Departments of the Interior and
Agriculture.
Virtually all stewardship land is useable for its purposes at
September 30, 1994. In some cases, however, scheduled maintenance
has been deferred. Estimates of costs to complete critical
maintenance range from $ 40 to $ 50 million. "Critical maintenance"
refers to maintenance that, if not performed, could lead to
irreparable damage to the assets or to unusability. On the basis of
engineering estimates, the estimated cost of deferred maintenance
ranges from $ 75 to $ 100 million in 199Z.
On the following page is a summary of the stewardship land by
category of major use, broken down within each category by
principal holding agency, at September 30, 199Z.

jSee accompanying notes to the financial statements for the
condition of stewardship land.
kFigures are based on information from the Summary Report of
Real Property Owned by the United States Throughout the World as of
September 30, 1991, December 1993.
PERCENT OF FEDERALLY OWNED LAND IN EACH STATEl
lSummary of Real Property Owned by the United States Throughout
the World as of September 30, 1991, US General Services
Administration (Dec. 1993).
NONFEDERAL PHYSICAL PROPERTY ANNUAL STEWARDSHIP INFORMATION For
the Fiscal Year Ended September
30, 199Z
Annually, the Federal Government provides funding to state and
local governments for the purchase, the construction, or the major
renovation of physical property owned by state and local
governments; additionally, from time to time, the Federal
Government transfers PP&E to these governments in exchange for
less than fair value. These grants and transfers relate to roads
and transportation systems, clean water and environmental projects,
and other projects for the common good.
The investments in nonfederal physical property in the 5 years
from 199V to 199Z were as follows: (in billions of dollars)
199V199W199X199Y199Zm
Transportation$ 19.0$ 20.0$ 20.0$ 22.0$ 23.0
Natural Resources and Environment3.74.03.93.74.2
Community and Regional Development4.94.34.55.66.3
Administrationn 2.2 2.3 2.4 2.5 2.7
Total$ 29.8$ 30.6$ 30.8$ 33.8$ 36.2
In addition to the transfers shown above in the "Community and
Regional Development" category, the fair value of land and
facilities associated with former military installations that were
transferred to local governments approximated $40 million in 199Y
and $52 million in 199Z.
Certain transportation and environmental programs involving
Federal investments of $22 billion and $4 billion, respectively, in
199Z required matching support by local governments of about 20
percent and 80 percent of the Federal grants.
mIncluded as expenses in calculating net cost. nExpenses of
administration include an appropriate allocation of agency overhead
costs.
HUMAN CAPITAL ANNUAL STEWARDSHIP INFORMATION
For the Fiscal Year Ended September 30, 199Z
Federal investment in human capital comprises those expenses for
education and training programs for the general public that are
intended to increase or maintain national economic productive
capacity. It does not include expenses for internal Federal
education and training. Expense data are expressed in nominal
dollars for the fiscal year being reported upon and the preceding 4
fiscal years.
Following is a summary of stewardship data for the program
entitled, Transition Training for Former Navy Contractor
Personnelo, for the 5 fiscal years ending September 30, 199V
through 199Z:
Program: Transition Training for Former Navy Contractor
Personnel

oThis hypothetical program is for illustration only. pIncluded
as expenses in calculating net cost. qExpenses are reported on an
accrual basis, including contractual amounts due for counseling
services
delivered and educational costs incurred by participants.
rExpenses of administration include an appropriate allocation of
agency overhead costs.
HUMAN CAPITAL SAMPLE REPORT (continued)
Program Outcomes
Preliminary data appear to confirm that the services provided by
the program accelerate the transition of participants into
alternative employment; some savings are realized in the
Unemployment Insurance Fund. A follow-up survey of the 415
participants in the year 199W showed that 80% were earning at least
as much as they were earning in their Navy contractor positions. A
more extensive evaluation, including an assessment of effects on
long-term earnings, is currently planned for completion in
1999.
Narrative Discussion
This program was authorized in 19XX (by P.L. XX-XXX) to ease the
transition into other civilian positions of skilled technical,
administrative, and managerial personnel who are no longer needed
in certain shipyards because of declining orders for Navy ship
construction.
Eligibility is limited to those who have been employed at
designated shipyards for at least 5 years, but who are not yet
eligible for retirement benefits. Participants receive intensive
counseling to help them develop individual transition plans. This
counseling is provided by a private job placement service under
contract. Participants are then reimbursed up to $5,000 per year
for up to 2 years, not to exceed 80 percent of the cost of the cost
of tuition, fees, books, and other student materials required for
attendance at approved educational institutions.
An additional increment of education or technical training is
expected to reduce the period of transitional unemployment and
increase the subsequent earnings of participants.
RESEARCH AND DEVELOPMENT ANNUAL STEWARDSHIP INFORMATION For the
Fiscal Year Ended September
30, 199Z
Federal investment in research and development comprises those
expenses for basic research, applied research, and development that
are intended to increase or maintain national economic productive
capacity or yield other benefits. Expense data are expressed in
nominal dollars for the fiscal year being reported upon and the
preceding 4 FYs.
Following is a summary of stewardship data for the Ceramic
Materials Research Programs for the 5 fiscal years ending September
30, 199V through 199Z:
Program: Ceramic Materials Research Program

sThis hypothetical program is for illustration only. tIncluded
as expenses in calculating net cost. uExpenses are reported on an
accrual basis and include an allocation of overhead costs.
vDevelopment grants are for a fixed amount, not to exceed 50
percent of the cost of the project. wIndicates inventions financed
with Federal funds to which the government has patent rights, in
accordance
with the Bayh-Dole Act.
RESEARCH AND DEVELOPMENT SAMPLE REPORT (continued)
Programs Outcomes:
The increasing number of articles published on the basis of
funded research, including announcements of several newly
discovered properties of certain composite ceramics, is evidence of
the utility of this part of the program. The number of patents
emerging from the program is also increasing, primarily from the
development component of the program.
Narrative Discussion:
This program was authorized in 19XX (by P.L. XX-XXX) to
accelerate the development of this industry in the United States.
The research element of the program operates through interagency
agreements with the Federal laboratories and grants to university
researchers. The researchers are selected through peer review
procedures. The development component provides grants to private
firms to develop improved manufacturing procedures for ceramic
materials-based products and to accelerate the development of
marketable products incorporating advanced ceramic materials.
CURRENT SERVICES ASSESSMENT ANNUAL STEWARDSHIP INFORMATION
A Current Services Assessment (CSA) provides receipt and outlay
data on the basis of projections of future activities. It is
relevant for assessing the sustainability of programs established
by current law. CSA focuses on the totality of government
operations rather than on individual programs. It provides an
analytical perspective on the Government because it shows the
short- and long-term directions of current programs.
The following display presents CSA data for all programs for 6
years subsequent to the base year. The data are identical to
projected data prepared for the President's Budget for the same
period; the economic and program assumptions are the same as used
in that document.
See display on next page.

Volume I,Version 1.0 February 28, 1997 660
APPENDIX A INDEX
This index provides references to the topic in (1) this Volume,
(2) the original statements, and (3) Volume 2. References to the
original statements are organized as follows: The first character
indicates that it is a Concepts Statement (C) or a Standards
Statement (S). This letter is followed by a number to indicate
which statement it refers to. The number is followed by a "P" for
paragraph which is followed by the paragraph number(s).
In addition to accounting topics, the index lists certain
agencies or programs that have been used in illustrations or that
have unique provisions within the standards.
VOLUME 1: SFFAS/C #: VOLUME 2: TOPIC:
-A-
ACCOMPLISHMENTS. . . . . . . . . . . . . . . . . . . . . . . .
33 . . . . . . . . C1P128-129 ACCOUNTABILITY. . . . . . . . . . . .
. . . . . . . . . . . . . . 24 . . . . . . . . . . C1P73-74
ACCOUNTS RECEIVABLE
Accounting for. . . . . . . . . . . . . . . . . . . . . . . . .
. . . 210 . . . . . . . . . . S1P40-52 Assessments. . . . . . . . .
. . . . . . . . . . . . . . . . . . . 524 . . . . . . . . . .
S7P53-55 Basis for Conclusions. . . . . . . . . . . . . . . . . . .
. . . . 222 . . . . . . . . S1P116-133 Interest on Receivables. . .
. . . . . . . . . . . . . . . . . . . 212 . . . . . . . . . .
S1P53-55 Sales of receivables. . . . . . . . . . . . . . . . . . .
. . . . . 586 . . . . . . . . . . . . S7P301
ACCOUNTS PAYABLE Accounting for. . . . . . . . . . . . . . . . .
. . . . . . . . . . . 215 . . . . . . . . . . S1P74-80 Basis for
Conclusions. . . . . . . . . . . . . . . . . . . . . . . 227 . . .
. . . . . S1P151-156
ACCRUAL ACCOUNTING. . . . . . . . . . . . . . . . . . . . 551 .
. . . . . . . S7P168-169
ACQUISITION COST General PP&E. . . . . . . . . . . . . . . .
. . . . . . . . . . . 461 . . . . . . . . . . . . S6P26 Heritage
Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 618 .
. . . . . . . . . . . S8P47 Federal Mission PP&E. . . . . . . .
. . . . . . . . . . . . . 623 . . . . . . . . . . . . S8P62
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 624 . . . . . . . . . . . . S8P66 Stewardship Land. . .
. . . . . . . . . . . . . . . . . . . . . . 626 . . . . . . . . . .
S8P77-78
ADVANCES (see also "Other Current Liabilities") Accounting for.
. . . . . . . . . . . . . . . . . . . . . . . . . . . 212 . . . . .
. . . . . S1P57-61 Basis for Conclusions. . . . . . . . . . . . . .
. . . . . . . . . 225 . . . . . . . . S1P137-139
AGRICULTURE, DEPARTMENT OF Inter-entity costs. . . . . . . . . .
. . . . . . . . . . . . . . . . . 385 . . . . . . . . . . . .
S4P225
AMORTIZATION Investments in Treasury Securities. . . . . . . . .
. . . . . 214 . . . . . . . . . . S1P70-71 Basis for Conclusions. .
. . . . . . . . . . . . . . . . . . . . 226 . . . . . . . . . . . .
S1P147 Direct Loans . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 240 . . . . . . . . . . S2P30-32
APPROPRIATIONS (see also "Other Financing Sources") . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530
. . . . . . . . . . S7P71-72 . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 592 . . . . . . . .
S7P331-332
ASSESSMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .
524 . . . . . . . . . . S7P53-55
AUTHORITY TO BORROW Definition. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 209 . . . . . . . . . . S1P34-35 Basis
for Conclusions. . . . . . . . . . . . . . . . . . . . . . . 221 .
. . . . . . . S1P112-113
Volume I,Version 1.0 February 28, 1997 661
-B-
BAD DEBT (see also "Uncollectibles") Accounts Receivable
........................226 .......... S1P44-51
Loans...................................243 ............ S2P47
.......................................247 .......... S2P71-72
BAILOUT ENTITIES (see also "Entity")........... 78 ............
C2P50 BALANCE SHEET (see also "Display") ........... 89 ..........
C2P84-85 BANK DEPOSIT INSURANCE ................ 583
............S7P284 BUDGET ACCOUNTS ....................... 69
.......... C2P13-21 BUDGETARY INFORMATION............... 531
.......... S7P77-82 BUDGETARY INTEGRITY
....................................... 17 ............ C1P42
....................................... 18 ............ C1P46
........................................27 .......... C1P89-91
........................................30 ........... C1P110
........................................31 ........ C1P112-121
........................................67 ............. C2P6
........................................80 ............ C2P56
........................................82 .......... C2P63-64
BUDGETARY RESOURCES Statement of Budgetary Resources
...............94 ........ C2P104-105 Budgetary Resources
....................... 517 ............ S7P24 Budgetary Resources
..................... 531 .......... S7P77-82 Financial &
budgetary accounting ............. 562 ........ S7P203-225
BUSINESS-TYPE ACTIVITIES .................460 ..........
S6P23-24
-C-
CANCELLATION OF DEBT .................. 589 ............S7P313
CAPITALIZATION THRESHOLD Basis for Conclusions
.......................484 ........ S6P148-149
CAPITAL LEASES Liability .................................408
.......... S5P43-46 Property, Plant, and Equipment
................458 ............ S6P20
CASH Accounting for ............................208 ..........
S1P27-30 Basis for Conclusions .......................220 ........
S1P103-105
CASH BASIS OF ACCOUNTING ......................................
518 .......... S7P25-26 ...................................... 553
............S7P174
CIVIL SERVICE RETIREMENT SYSTEM .........415 ............ S5P61
CLASSIFICATION OF TRANSACTIONS (Illustrations) 569 ........
S7P235-370 CLEANUP COST
Accounting for ............................474 .........
S6P85-111 Basis for Conclusions .......................490 ........
S6P182-199 Reimbursement for ........................ 584
............S7P292
COAST GUARD Federal Mission PP&E Illustration .............
494 ........ S6P202-203 Cleanup Cost Reimbursement ................
584 ............S7P292
COMMERCE, DEPARTMENT OF Inter-entity
costs..........................385 ............S4P225
COMMODITIES ...........................318 ......... S3P92-109
(see also "Goods Held Under Price Support and Stabilization
Programs")
COMMODITY CREDIT CORPORATION Commodities
.............................318 ............ S3P94 Crop insurance
........................... 583 ............S7P284 Transfers by CCC
to FCIC .................. 594 ............S7P340

CONTINGENCIES ......................... 405 .......... S5P35-42
CONTRACT AUTHORITY .................. 209 ............ S1P34
CONTRACTOR-DEVELOPED SOFTWARE....... 483 ............S6P145 COST
ACCOUNTING
(see "Managerial Cost Accounting") COST-BENEFIT
.............................38 ........ C1P151-155 COST FINDING
TECHNIQUES ................215 .......... S1P74-76

DIRECT LOANS ...........................239 ............ S2P22
(see also "Federal Credit Reform Act of 1990")
DIRECTED FLOWS OF RESOURCES Accounting for
........................... 529 ............ S7P69 Basis for
Conclusions ...................... 561 ........ S7P198-202
DISCOUNT ON BONDS ......................214 ............
S1P69
DISPLAY ..................................80 ......... C2P54-112
Balance Sheet..............................89 .......... C2P84-85
Financial Reporting......................... 85 .......... C2P74-83
Flow Statements ........................... 81 .......... C2P58-62
Other Information ...........................84 .......... C2P68-73
Required Supplementary Stewardship Information .. 613 ............
S8P21 Statement of Budgetary Resources ...............94 ........
C2P104-105 Statement of Changes in Net Position .............92
........... C2P100 Statement of Custodial Activities
................93 ........ C2P101-103 Statement of Financing
..................... 536 ......... S7P95-102 Statement of Net
Costs .......................90 .......... C2P86-99 Statement of
Program Performance Measures .......96 ........ C2P106-111 Stock
Statements ...........................80 ............ C2P57
DONATIONS Donations............................... 577
............S7P258 Revenue................................ 527
............ S7P62 General PP&E ........................... 462
............ S6P30 Heritage Assets........................... 468
............ S6P61 PP&E ................................. 461
............ S6P26 Stewardship Land ......................... 470
............ S6P71
-E-
EFFORTS..................................49 ...........
C1P201
EMPLOYEE BENEFITS Contributions to health benefit plans
............590 ........ S7P318-319 Contributions to pension &
other
retirement benefit plans.....................589 ........
S7P316-317 Unemployment benefits and workers comp.........590
........ S7P320-321 ENTITY .................................. 68
........... C2P9-53 Bailout Entities.............................78
............ C2P50 Including Components........................75
.......... C2P39-40 Conclusive Criteria .........................75
.......... C2P41-42 Indicative Criteria..........................75
.......... C2P43-46 Federal Reserve System.......................77
............ C2P47 Government Sponsored
Enterprises...............77 .......... C2P48-49 Reporting Entity
............................72 .......... C2P29-38
ENTITY ASSETS Accounting for ............................206
.......... S1P25-26 Basis for Conclusions
.......................219 ........ S1P100-102
ENVIRONMENTAL LIABILITIES (see also "Cleanup Cost")
Government-related events................... 402 ............ S6P28
Contingencies ............................ 405 ..........
S5P35-42
EXCHANGE REVENUE (see also "Revenue") ......519 ..........
S7P33-47

FEDERAL MISSION PROPERTY, PLANT, AND EQUIPMENT




MODIFIED CASH BASIS
Taxes & Duties............................552 ........
S7P172-173 MORE LIKELY THAN NOT ...................211 ............
S1P44 MULTI-USE HERITAGE ASSETS (see also "Property, Plant, and
Equipment")
Category ................................467 ............ S6P59
Accounting...............................619 .......... S8P48-49
Basis for Conclusions .......................485 ........
S6P157-158
-N-
NATIONAL FLOOD INSURANCE Illustration
...............................432 ............S5P110 NATIONAL
SCIENCE FOUNDATION Inter-entity costs
...........................385 ............S4P225
NET COSTS Display ..................................92
........... C2P100 Exchange Revenue .........................521
.......... S7P43-44
NET POSITION .............................89 ............ C2P84
NON-ENTITY ASSETS.......................207 ............ S1P26
NONFEDERAL PHYSICAL PROPERTY ..........628 .......... S8P83-88
NONEXCHANGE REVENUE (see also "Revenue") ..523 .......... S7P48-69
NONRECOURSE
LOANS (not subject to Credit Reform Act provisions) Accounting
for ............................318 ......... S3P93-102 Basis for
Conclusions .......................329 ........ S3P159-160
NUCLEAR REGULATORY COMMISSION
Fees....................................582 ............S7P282
-O-
OBLIGATIONS INCURRED ...................536 ............ S7P96
OFFICE OF PERSONNEL MANAGEMENT Retirement costs
............................79 ............ C2P51
OPERATING MATERIALS AND SUPPLIES Accounting for
............................305 .......... S3P36-50 Basis for
Conclusions .......................325 ............S3P134
OTHER CURRENT LIABILITIES ...............228 ........
S1P158-160
OTHER FINANCING SOURCES ................530 .......... S7P70-75
Appropriations ............................530 .......... S7P71-72
General .................................530 ............ S7P70
Financing Imputed for Cost Subsidies............531 ............
S7P73 Transfers of Assets .........................531 ..........
S7P74-75
OTHER RETIREMENT BENEFITS ..............423 .......... S5P79-93
OTHER POSTEMPLOYMENT BENEFITS .........428 .......... S5P94-96
OUTCOME
........................................50 ........ C1P206-208
.......................................630 ............ S8P93
.......................................634 ............ S8P99 OUTER
CONTINENTAL SHELF................580 ............S7P274
OUTPUT ........................................50 ...........
C1P205 .......................................630 ............
S8P93 .......................................634 ............
S8P99
OVERSEAS INVESTMENT INSURANCE Illustration
...............................432 ............S5P110
-P-
PENALTIES (see also "Fines and Penalties") .......527
............ S7P61
PENSION BENEFIT GUARANTEE CORPORATION Insurance
................................429 ............S5P101 Illustration
...............................432 ............S5P110 Premiums
................................583 ............S7P284
PENSIONS ................................415 ..........
S5P61-78
PERFORMANCE MEASURES ........................................83
............ C2P65 .......................................338
.......... S4P34-36
PREMIUM ON BONDS ......................214 ............ S1P69
PREPAYMENTS (see also "Other Current Liabilities") 212 ..........
S1P57-59 PRIOR PERIOD ADJUSTMENTS ...............531 ............
S7P76 PROBABLE ...............................404 ............
S5P33 PROGRESS PAYMENTS
Advances & Prepayments ....................212 ............
S1P58 Accounts Payable ..........................215 ..........
S1P78-79
PROPERTY, PLANT, AND EQUIPMENT (PP&E) Acquisition cost
...........................461 ............ S6P26 Definition of
PP&E.........................458 .......... S6P17-20
Depreciation ..............................463 .......... S6P35-39
Exchange ................................585 ........ S7P297-299
Federal Mission PP&E ......................465 ..........
S6P46-56
(see also "Federal Mission PP&E") General PP&E
............................460 .......... S6P23-45 Heritage
Assets............................467 .......... S6P57-65
(see also "Heritage Assets") Multi-use Heritage Assets
....................467 ............ S6P59
(see also "Multi-use Heritage Assets")
Revaluations..............................595 ......... S7P37-348
Stewardship Land ..........................469 ..........
S6P66-76
(see also "Stewardship Land")
Stewardship PP&E .........................479 ........
S6P123-137 ......................................610 ............
S8P11 PURCHASE AGREEMENTS ...................318 .........
S3P94-109
-Q--R-
RAILROAD RETIREMENT BOARD .............594 ........ S7P341-343
RECOGNITION ............................401 ............ S5P19
RECONCILIATION STATEMENT...............535 .......... S7P91-94
REFUNDS
Exchange Revenue .........................521 ............
S7P41
Nonexchange Revenue ......................525 ..........
S7P57-58 RELEVANCE ...............................40 ...........
C1P161 RELIABILITY
........................................39 ...........
C1P160
........................................96 ........... C2P109
RENTS AND ROYALTIES ....................580 ........ S7P274-277
REPAIR ALLOWANCE ......................303 .......... S3P32-33
REPORTING ENTITY (see also "Entity") ...........72 ..........
C2P29-53 REPORTING OBJECTIVES ....................30 ........
C1P105-150 REQUIREMENT FOR COST ACCOUNTING.......347 .........
S4P67-76
(see also "Managerial Cost Accounting") RESEARCH AND DEVELOPMENT
.............633 ......... S8P96-101 RESPONSIBILITY SEGMENTS
................351 .......... S4P77-88
..........................................86 ............ C2P75
.........................................542 ............S7P122
(see also "Managerial Cost Accounting")
RESTRICTED AMOUNTS Cash ...................................208
............ S1P30 Basis for Conclusions .......................220
........ S1P103-105 Fund Balance with Treasury
..................209 ............ S1P38 Basis for Conclusions
.......................222 ............S1P115
RESULTS OF OPERATIONS
Reporting Objectives.........................18 ............
C1P47 ........................................45 ........... C1P181
........................................47 ........... C1P191
........................................54 ........ C1P231-232
Display ..................................85 ............ C2P73
........................................89 ............ C2P84
Revenue.................................516 ............ S7P17
Taxes & Duties............................526 ............
S7P60 Other Financing Sources .....................530 ............
S7P70 Appropriations ............................530 ............
S7P72 Prior Period Adjustments .....................562
............S7P203 Transfers In & Out
.........................565 ............S7P220 The Term "Results
of Operations" ..............566 ........ S7P224-225
RETIREMENT OF DEBT SECURITIES PRIOR TO MATURITY
.......................................586 ........ S7P303-304
Revolving funds & trust revolving funds..........592 ........
S7P329-330 Trust and special funds ......................588
........ S7P311-312
REVENUE ................................519 ............ S7P30
Classification of Transactions .................569 ........
S7P235-370 Exchange Revenue .........................519 ..........
S7P33-47 Nonexchange Revenue ......................523 ..........
S7P48-69

STEWARDSHIP REPORTING..................613 ..........
S8P19-21
STOCKPILE MATERIALS Accounting for
............................308 .......... S3P51-56 Basis for
Conclusions .......................325 ........ S3P135-138
SUPPLEMENTARY MEDICAL INSURANCE
.......................................583 ............S7P284
.......................................594 ........ S7P338-339
SYSTEMS AND CONTROL ....................37 ........
C1P146-150
-T-
TAX BURDEN .............................529 ............
S7P69
TAX EXPENDITURES .......................................529
............ S7P69 .......................................560
........ S7P192-197
TAXES AND DUTIES .......................523 ..........
S7P49-60
TAX GAP .......................................529 ............
S7P69 .......................................558 ........
S7P188-191
TIMELINESS ........................................40
........... C1P162 ........................................96
........... C2P109
TRANSFERS OF ASSETS
.......................................531 .......... S7P74-75
Cash and other assets .......................595 ............S7P344
Stewardship PP&E .........................595 ........
S7P345-346
TREASURY, DEPARTMENT OF Forfeitures
...............................578 ........ S7P264-269
TREASURY SECURITIES Accounting for
............................213 .......... S1P62-73 Basis for
Conclusions .......................225 ........ S1P140-150
TRUST FUND Disclosures...............................529
............ S7P68 Entity ...................................70
.......... C2P19-20 Excise Taxes .............................526
............ S7P60 Over- & Under-funding
......................553 ............S7P177 Social Security Taxes
.......................526 ............ S7P60
-U-
UNCOLLECTIBLE AMOUNTS Accounts Receivable
........................211 .......... S1P44-48 Bad Debts
...............................520 .......... S7P39-40 Nonexchange
revenue .......................525 ............ S7P56 Basis for
Conclusions .......................542 ........ S7P126-131
UNDERSTANDABILITY OF INFORMATION .......39 ........ C1P157-159
UNEARNED REVENUE ......................520 ............ S7P37
UNEMPLOYMENT TRUST FUND
Deposits by States..........................575
............S7P247 UNFUNDED LIABILITY .....................439
............S5P133
UNUSED CAPACITY COSTS ..................392 ........
S4P258-263
USERS ........................................25 ..........
C1P75-87 .......................................335 ..........
S4P18-21
USERS' NEEDS .............................27 .........
C1P88-104
-V-
VETERANS AFFAIRS, DEPARTMENT OF Responsibility Segments
.....................378 ............S4P188 Life Insurance
............................432 ............S5P110 Medical Care
Cost .........................449 ........ S5P182-184 Whole Life
Policies ........................435 ............S5P115 Whole Life,
Basis for Conclusions ..............451 ........ S5P191-193
-W-
WEAPONS SYSTEM Federal Mission PP&E
......................466 .......... S7P50-51 Stewardship Reporting
......................622 .......... S8P57-58
-X-
-Y-
-Z-
Effective for Fiscal Periods Statement:
Ending After:
1 -Accounting for Selected Assets and Liabilities
9/30/93 2 -Accounting for Direct Loans and Loan Guarantees
9/30/93 3 -Accounting for Inventory and Related Property
9/30/93 4 -Managerial Cost Accounting Standards
9/30/96 5 -Accounting for Liabilities of the Federal Government
9/30/96 6 -Accounting for Property, Plant, and Equipment 9/30/97 7
-Accounting for Revenue and Other Financing Sources and
Concepts for Reconciling Budgetary and Financial Accounting
9/30/97 8 -Supplementary Stewardship Reporting 9/30/97
Volume I,Version 1.0 February 28, 1997 675
Volume I,Version 1.0 February 28, 1997 676

Volume I,Version 1.0 February 28, 1997 677
Volume I,Version 1.0 February 28, 1997 678
This listing is intended to highlight for
users those major topics that have not yet been addressed
specifically in Statements of Federal Financial Accounting
Standards (SFFAS). In addition, other resources within the
hierarchy of accounting literature are identified to aid users in
accounting for these items. This is not intended to imply that the
Board will choose to address each of these topics or that these are
the only topics that could be addressed.
The resource titles listed below are abbreviated. A list of
abbreviations follows the resource list. References to "Title 2"
are to the General Accounting Office's (GAO) Policy and Procedures
Manual for Guidance of Federal Agencies, Title 2, Appendix I,
Accounting Principles and Standards dated August 1987. While GAO
has not yet updated Title 2 to incorporate SFFASs, However, it
remains a useful resource in areas not yet addressed in SFFASs.

Asset definition . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . FASAB Consolidated Glossary (Appendix E)
Capital leases (where government is the lessor) . . . . . . . . . .
. . Title 2, L10; FAS No. 13; OMB Form & Content Capital
leases, disclosure requirements . . . . . . . . . . . . . . . . . .
FAS No. 13; OMB Form
& Content Compensated absences . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . Title 2, C30; FAS No. 43 Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . .
Title 2, C40; ARB 51 Deposit funds . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . Title 2, F40 Debt, disclosure
requirements . . . . . . . . . . . . . . . . . . . . . . . . OMB
Form & Content Excess or unused capacity cost . . . . . . . . .
. . . . . . . . . . . . . . FAS 121 Fiduciary funds . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . Title 2, F40
Foreign currency translation . . . . . . . . . . . . . . . . . . .
. . . . . . Title 2, F30; FAS 52 Grants & cooperative
agreements . . . . . . . . . . . . . . . . . . . . . Title 2, G10
Imputed interest (cost of capital) . . . . . . . . . . . . . . . .
. . . . . . Title 2, I10; APB 21; NAA
Statements on Management Accounting Nos. 4A & 4H; FASAB
Invitation for Views (July 1996)
Internal controls (reporting on...) . . . . . . . . . . . . . .
. . . . . . . . Title 2, Appendix 2; OMB Circ A-123; COSO Report -
"Internal Control -Integrated Framework"
Volume I,Version 1.0 February 28, 1997 679

Abbreviations
AICPA American Institute of Certified Public Accountants APB
Accounting Principles Board ARB Accounting Research Bulletin COSO
Committee of Sponsoring Organizations of the Treadway Commission
FAS Financial Accounting Standard FASB Financial Accounting
Standards Board FASAB Federal Accounting Standards Advisory Board
FIN FASB Interpertation Form & Content OMB Bulletin 97-01,
issued October 16, 1996 GAO General Accounting Office NAA National
Association of Accountants OMB Office of Management and Budget SEC
Securities and Exchange Commission SFFAC Statement of Federal
Financial Accounting Concepts SFFAS Statement of Federal Financial
Accounting Standards SOP Statement of Position
Volume I,Version 1.0 February 28, 1997 682
This glossary is a compilation of all
terms presented in Statements of Federal Financial Accounting
Standards. Some terms are designated as "Special Term from SFFAS #"
and are terms defined specifically for the standard indicated.
These terms are not intended for general application to other
federal financial transactions.
ABATEMENT - A reduction or cancellation of an assessed tax.
(Cooper W, Ijiri Y, Kohler's Dictionary for Accountants, 6th ed.,
Englewood Cliffs, NJ: Prentice-Hall, 1983; hereinafter referred to
as Kohler's Dictionary for Accountants)
ACTIVITY - The actual work task or step performed in producing
and delivering products and services. An aggregation of actions
performed within an organization that is useful for purposes of
activity-based costing.
ACTIVITY ANALYSIS - The identification and description of
activities in an organization. Activity analysis involves
determining what activities are done within a department, how many
people perform the activities, how much time they spend performing
the activities, what resources are required to perform the
activities, what operational data best reflect the performance of
the activities, and what customer value the activity has for the
organization. Activity analysis is accomplished with interviews,
questionnaires, observation, and review of physical records of
work. It is the foundation for agency process value analysis, which
is key to overall review of program delivery.
ACTIVITY-BASED COSTING - A cost accounting method that measures
the cost and performance of process related activities and cost
objects. It assigns cost to cost objects, such as products or
customers, based on their use of activities. It recognizes the
causal relationship of cost drivers to activities.
ACTUAL COST - An amount determined on the basis of cost incurred
including standard cost properly adjusted for applicable
variance.
ACTUARIAL COST METHODS - A recognized actuarial technique used
for establishing the amount and the incidence of employer
contributions or accounting charges for pension costs under a
pension plan.
ACTUARIAL LIABILITY - A liability based on statistical
calculations and actuarial assumptions (actuarial assumptions are
conditions used to resolve uncertainties in the absence of
information concerning future events affecting insurance, pension
expenses, etc.). (Adapted from Webster's Ninth New Collegiate
Dictionary and Kohler's Dictionary for Accountants)
ACTUARIAL PRESENT VALUE - The value of an amount or series of
amounts payable or receivable at various times, determined as of a
given date by the application of a particular set of actuarial
assumptions. (Actuarial Standards of Practice No. 4)
AGGREGATE ENTRY AGE NORMAL - A system of applying the entry age
normal actuarial cost methodology using aggregate population models
or groups instead of applying it individual by individual.
ALLOCATIONS - The amount of obligational authority transferred
from one agency, bureau, or account that is set aside in a transfer
appropriation account to carry out the purpose of the parent
appropriation or fund. (JFMIP, Project on Standardization of Basic
Financial Information Requirements of Central Agencies, dated
October 1991, hereafter cited as JFMIP Standardization Project)
AMORTIZATION -The gradual extinguishment of any amount over a
period of time through a systematic allocation of the amount over a
number of consecutive accounting periods such as the retirement of
a debt by serial payments to a sinking fund. (Kohler's Dictionary
for Accountants).
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APPLIED RESEARCH - Systematic study to gain knowledge or
understanding necessary for determining the means by which a
recognized and specific need may be met.
APPORTIONMENT - A distribution made by OMB of amounts available
for obligation in an appropriation or fund account into amounts
available for specified time periods, programs, activities,
projects, objects, or combinations thereof. The apportioned amount
limits the obligations that may be incurred. (OMB Circular
A-34)
APPROPRIATION -In most cases, appropriations are a form of
budget authority provided by law that permits federal agencies to
incur obligations and make payments out of the Treasury for
specified purposes. An appropriation usually follows enactment of
authorizing legislation. An appropriation act is the most common
means of providing budget authority, but in some cases the
authorizing legislation itself provides the budget authority.
ASSESSMENTS - Enforceable claims for nonexchange revenue for
which specific amounts due have been determined and the person from
whom the tax or duty is due has been identified. They include both
selfassessments made by persons filing tax returns and assessments
made by the collecting entities as a result of audits,
investigations, and litigation. Although the term is normally used
in connection with taxes, as used in this Statement assessments
also include determinations of amounts due for any other kind of
nonexchange revenue. Specifically excluded from the definition of
assessments, as used in this Statement, are compliance assessments.
Compliance assessments, as defined by IRS and Customs, do not
represent financial receivables.
ASSETS -Tangible or intangible items owned by the federal
government which would have probable economic benefits that can be
obtained or controlled by a federal government entity. (Adapted
from Financial Accounting Standards Board, Statement of Concepts
No. 6, Elements of Financial Statements, and Kohler's Dictionary
for Accountants.)
ATTRIBUTION - The process of assigning pension benefits or costs
to periods of employee service. [Financial Accounting Standard
Board, Statement of Financial Accounting Standard No. 87,
Employers' Accounting for Pensions ]
AUTHORITY TO BORROW - Authority to borrow is a subset of budget
authority. (See budget authority.)
AVOIDABLE COST -A cost associated with an activity that would
not be incurred if the activity were not performed.
BASIC FINANCIAL STATEMENTS - As used in SFFAS 7, the basic
financial statements are those on which an auditor would normally
be engaged to express an opinion. The term "basic" does not
necessarily mean that other financial information not covered by
the auditor's opinion is less important to users than that
contained in the basic statements; it merely connotes the expected
nature of the auditor's review of, and association with, the
information. The basic financial statements in financial reports
prepared pursuant to the Chief Financial Officers Act, as amended,
are called the "principal financial statements." The Form and
Content of these statements are determined by OMB.
BASIC RESEARCH - Systematic study to gain knowledge or
understanding of the fundamental aspects of phenomena and of
observable facts without specific applications toward processes or
products in mind.
BOOK VALUE - The net amount at which an asset or liability is
carried on the books of account (also referred to as carrying value
or amount). It equals the gross or nominal amount of any asset or
liability minus any allowance or valuation amount.
BUDGET AUTHORITY - The authority provided by Federal law to
incur financial obligations that will result in immediate or future
outlays. Specific forms of budget authority include:


•
appropriations, which may be provided in appropriations
acts or other laws and which permit obligations tobe incurred and
payments to be made;


•
borrowing authority, which permits obligations to be
incurred but requires funds to be borrowed to liquidatethe
obligation;


•
contract authority, which permits obligations to be
incurred but requires a subsequent appropriation oroffsetting
collections to liquidate the obligations; and


•
spending authority from offsetting collections, which
permits offsetting collections to be credited to anexpenditure
account and permits obligations and payments to be made using the
offsetting collections (the offsetting collections credited to an
account are deducted from gross budget authority of the
account.)


Budget authority may be classified by period of availability
(one year, multiple-year, or no year), by nature of the authority
(current or permanent), by the manner of determining the amount
available (definite or indefinite), or as gross (without reduction
of offsetting collections) and net (with reductions of offsetting
collections). (OMB Circular A-11, Preparation and Submission of
Budget Estimates, Executive Office of the President, Office of
Management and Budget, hereafter cited as OMB Circular A-11; OMB,
The Budget System and Concepts; and GAO, A Glossary of Terms Used
in the Federal Budget Process, Exposure Draft, January 1993;
hereafter referred to as GAO Budget Glossary.)
BUDGETARY ACCOUNTING - Budgetary accounting is the system that
measures and controls the use of resources according to the
purposes for which budget authority was enacted; and that records
receipts and other collections by source. It tracks the use of each
appropriation for specified purposes in separate budget accounts
through the various stages of budget execution from appropriation
to apportionment and allotment to obligation and eventual outlay.
This system is used by the Congress and the Executive Branch to set
priorities, to allocate resources among alternative uses, to
finance these resources, and to assess the economic implications of
federal financial activity at an aggregate level. Budgetary
accounting is used to comply with the Constitutional requirement
that "No Money shall be drawn from the Treasury, but in Consequence
of Appropriations Made by Law; and a regular Statement and Account
of the Receipts and Expenditures of all public Money shall be
published from time to time." (See Statement of Federal Financial
Accounting Concepts No. 1, Objectives of Federal Financial
Reporting, September 1993, Paragraphs 45-46, 112-114, and
186-191.)
BUDGETARY RESOURCES - The forms of authority given to an agency
allowing it to incur obligations. Budgetary resources include the
following: new budget authority, unobligated balances, direct
spending authority, and obligation limitations. (GAO Budget
Glossary)
BUSINESS TYPE ACTIVITY - Significantly self-sustaining activity
which finances its continuing cycle of operations through
collection of exchange revenue.
CAPITAL LEASES - Leases that transfer substantially all the
benefits and risks of ownership to the lessee.
CAPITALIZE - To record and carry forward into one or more future
periods any expenditure the benefits or process from which will
then be realized. (Kohler's Dictionary for Accountants)
CLEANUP COSTS - The costs of removing, containing, and/or
disposing of (1) hazardous waste from property, or (2) material
and/or property that consists of hazardous waste at permanent or
temporary closure or shutdown of associated PP&E.
COHORT -Those direct loans obligated or loan guarantees
committed by a program in the same year even if disbursements occur
in subsequent years. Post-1991 direct loans or loan guarantees will
remain with their original cohort throughout the life of the loan,
even if the loan is modified. Pre-1992 loans and loan guarantees
that are modified shall each, respectively, constitute a single
cohort. (OMB Circular A-11)
COLLATERAL -Real or personal property pledged as part or full
security on a debt. (Kohler's Dictionary for
Accountants)
COLLECTIONS - Amounts received by the federal government during
the fiscal year. Collections are classified as follows:-- Budget
receipts or off-budget receipts are collections from the public
based on the government's exercise of its sovereign powers,
including collections from participants in compulsory social
insurance programs. -- Offsetting collections are collections from
government accounts (intragovernmental transactions) or from the
public that are offset against budget authority and outlays rather
than reflected as receipts in computing the budget and off-budget
totals. They are classified as (a) offsetting receipts (i.e.,
amounts deposited to receipt accounts), and (b) collections
credited to appropriation or fund accounts. The distinction between
these two major categories is that collections credited to
appropriation or fund accounts are offset within the account that
contains the associated disbursements (outlays), whereas offsetting
receipts are in accounts separate from the associated
disbursements. Offsetting collections are deducted from gross
disbursements in calculating net outlays. (Based on A Glossary Of
Terms Used in the Federal Budget Process; and Related Accounting,
Economic, and Tax Terms, Third Edition, General Accounting Office,
March 1981.)
COMMON COST - The cost of resources employed jointly in the
production of two or more outputs and the cost cannot be directly
traced to any one of those outputs.
COMMON DATA SOURCE - All of the financial and programmatic
information available for the budgetary, cost, and financial
accounting processes. It includes all financial and much
non-financial data, such as environmental data, that are necessary
for budgeting and financial reporting as well as evaluation and
decision information developed as a result of prior reporting and
feedback.
CONDITION -The physical state of an asset. The condition of an
asset is based on an evaluation of the physical status/state of an
asset, its ability to perform as planned, and its continued
usefulness. Evaluating an asset's condition requires knowledge of
the asset, its performance capacity and its actual ability to
perform, and expectations for its continued performance. The
condition of a long-lived asset is affected by its durability, the
quality of its design and construction, its use, the adequacy of
maintenance that has been performed, and many other factors,
including: accidents (an unforeseen and unplanned or unexpected
event or circumstance), catastrophes (a tragic event), disasters (a
sudden calamitous event bringing great damage, loss, or
destruction), and obsolescence.
CONDITION ASSESSMENT SURVEYS - Periodic inspections of PP&E
to determine their current condition and estimated cost to correct
any deficiencies.
CONSTANT DOLLAR -A dollar value adjusted for changes in the
average price level. A constant dollar is derived by dividing a
current dollar amount by a price index. The resulting constant
dollar value is that which would exist if prices had remained at
the same average level as in the base period. Any changes in such
constant dollar values would therefore reflect only changes in the
real volume of goods and services, not changes in the price level.
Constant dollar figures are commonly used to compute the real value
of the gross domestic product and its components and to estimate
the real level of Federal receipts and outlays. (GAO Budget
Glossary)
CONSUMPTION METHOD - A method of accounting for goods, such as
materials and supplies, where the goods are recognized as assets
upon acquisition and are expensed as they are consumed.
CONTINGENCY - An existing condition, situation, or set of
circumstances involving uncertainty as to possible gain or loss to
an entity that will ultimately be resolved when one or more future
events occur or fail to occur. CONTRA ACCOUNT - One of two or more
accounts which partially or wholly offset another or other
accounts; on financial statements, they may be either merged or
appear together. (Kohler's Dictionary for Accountants) CONTRACT
AUTHORITY - Contract authority is a subset of budget authority.
(See budget authority.)
CONTROLLABLE COST - A cost that can be influenced by the action
of the responsible manager. The term always refers to a specified
manager since all costs are controllable by someone.
COST - Defined in SFFAC No. 1, Objectives of Federal Financial
Reporting as the monetary value of resources used (para. 195).
Defined more specifically in SFFAS No. 4, Managerial Cost
Accounting Concepts and Standards for the Federal Government, as
the monetary value of resources used or sacrificed or liabilities
incurred to achieve an objective, such as to acquire or produce a
good or to perform an activity or service (page 105). Depending on
the nature of the transaction, cost may be charged to operations
immediately, i.e., recognized as an expense of the period, or to an
asset account for recognition as an expense of subsequent periods.
In most contexts within Accounting for Revenue and Other Financing
Sources, "cost" is used synonymously with expense. See also "Full
Cost."
COST ALLOCATION - A method of assigning costs to activities,
outputs, or other cost objects. The allocation base used to assign
a cost to objects is not necessarily the cause of the cost. For
example, assigning the cost of power to machine activities by
machine hours is an allocation because machine hours are an
indirect measure of power consumption.
COST ASSIGNMENT - A process that identifies costs with
activities, outputs, or other cost objects. In a broad sense, costs
can be assigned to processes, activities, organizational divisions,
products, and services. There are three methods of cost assignment:
(a) directly tracing costs wherever economically feasible, (b)
cause-and-effect, and (c) allocating costs on a reasonable and
consistent basis.
COST-BENEFIT ANALYSIS -The weighing of benefits against costs
usually expressed as a ratio of dollar benefits to dollar costs for
each of a variety of alternatives to provide a comparable basis of
choice among them. (Kohler's Dictionary for Accountants)
COST DRIVER - Any factor that causes a change in the cost of an
activity or output. For example, the quality of parts received by
an activity, or the degree of complexity of tax returns to be
reviewed by the IRS.
COST FINDING - Cost finding techniques produce cost data by
analytical or sampling methods. Cost finding techniques are
appropriate for certain kinds of costs, such as indirect costs,
items with costs below set thresholds within programs, or for some
programs in their entirety. Cost finding techniques support the
overall managerial cost accounting process and can represent
non-recurring analysis of specific costs.
COST OBJECT (ALSO REFERRED TO AS COST OBJECTIVE) - An activity,
output, or item whose cost is to be measured. In a broad sense, a
cost object can be an organizational division, a function, task,
product, service, or a customer.
CREDIT PROGRAM -For the purpose of this Statement, a federal
program that makes loans and/or loan guarantees to nonfederal
borrowers.
CURRENT DISCOUNT RATE - With respect to the modification of
direct loans or loan guarantees, it is the discount rate used to
measure the cost of a modification. It is the interest rate
applicable at the time of modification on marketable Treasury
securities with a similar maturity to the remaining maturity of the
direct or guaranteed loans, under either pre-modification terms, or
post-modification terms, whichever is appropriate.
[Special Term from SFFAS 2]
CURRENT LIABILITIES -Amounts owed by a federal entity for which
the financial statements are prepared, and which need to be paid
within the fiscal year following the reporting date.
CURRENT SERVICES ASSESSMENT -Projections of future receipts and
outlays from future activities based on the programs established by
current law. The CSA focuses on the totality of Government
operations rather than on individual programs, and shows the short-
and long-term direction of current programs.
CUSTODIAL AGENCY - An agency which takes possession of seized
and/or forfeited property.
DEDICATED COLLECTIONS (OR TAXES) - See "earmarked taxes."
DEFAULT - The failure to meet any obligation or term of a credit
agreement, grant, or contract. Often used to refer to accounts more
than 90 days delinquent. (Treasury Financial Manual Supplement)
DEFERRED MAINTENANCE - Maintenance that was not performed when
it should have been or was scheduled to be and which, therefore, is
put off or delayed for a future period.
DEPRECIATION ACCOUNTING - The systematic and rational allocation
of the acquisition cost of an asset, less its estimated salvage or
residual value, over its estimated useful life.
DEVELOPMENT -Systematic use of the knowledge and understanding
gained from research for the production of useful materials,
devices, systems, or methods, including the design and development
of prototypes and processes.
DIFFERENTIAL COST - The cost difference expected if one course
of action is adopted instead of others.
DIRECT COST -The cost of resources directly consumed by an
activity. Direct costs are assigned to activities by direct tracing
of units of resources consumed by individual activities. A cost
that is specifically identified with a single cost object.
DIRECT LOAN -A disbursement of funds by the government to a
nonfederal borrower under a contract that requires the repayment of
such funds within a certain time with or without interest. The term
includes the purchase of, or participation in, a loan made by
another lender. (Adapted from OMB Circular A-11)
DIRECTED FLOWS OF RESOURCES -Expenses to nonfederal entities
imposed by federal laws or regulations without providing federal
financing. In the case of state and local governments, directed
flows are known as "unfunded mandates." The costs and financing of
federal regulations do not flow through the Government, but their
effects are similar to direct federal expenditures and revenue.
DISCLOSURE -Reporting information in notes or narrative regarded
as an integral part of the basic financial statement.
DISCOUNT - The difference between the estimated worth of a
future benefit and its present value; a compensation for waiting or
an allowance for returns from using the present value of these
returns in other ways. (Kohler's Dictionary for Accountants)
DISCOUNT RATE -An interest rate that is used in present value
calculations to equate amounts that will be received or paid in the
future to their present value.
DIVIDEND FUND INTEREST RATE - The interest rate determined at
policy issuance used to determine the amount of the dividend fund.
It is the rate used to credit interest to the dividend fund, and
against which experience is measured to determine the amount of the
interest portion of dividends paid to individual policyholders.
(AICPA Statement of Position 95-1, Glossary, p. 33]
DONATED CAPITAL - The amount of nonreciprocal transfers of
assets or services from State, local, and foreign governments;
individuals; or others not considered parties related to the
Government. (JFMIP Standardization Project)
DRAWBACKS - Refunds of all or part of duties on imported goods
that are subsequently exported or destroyed. Typically these arise
when imported materials are used to manufacture a product that is
later exported. In such cases, most of the duties originally paid
are refundable when the finished product is exported.
EARMARKED TAXES - Taxes levied by the Government that are
dedicated by law to finance a specific federal program.
ECONOMETRIC MODEL -An equation or a set of related equations
used to analyze economic data through mathematical and statistical
techniques. Such models may be devised in order to depict the
essential quantitative impact of alternative assumptions or
government policies. (Dictionary of Banking and Finance, Jerry M.
Rosenberg, Ph.D., Wiley & Sons, New York, 1982, hereafter cited
as Rosenberg's Dictionary.)
ECONOMIC LIFE - The period during which a fixed asset is capable
of yielding services of value to its owner. (See "useful
life".)
END USER -Any component of a reporting entity that obtains goods
for direct use in its normal operations. The component may also be
a contractor.
ENTITLEMENT PERIOD - The period (such as, monthly) for which
benefits become due.
ENTITLEMENT PROGRAM - A program in which the federal government
becomes automatically obligated to provide benefits to members of a
specific group who meet the requirements established by law.
ENTITY - A unit within the federal government, such as a
department, agency, bureau, or program, for which a set of
financial statements would be prepared. Entity also encompasses a
group of related or unrelated commercial functions, revolving
funds, trust funds, and/or other accounts for which financial
statements will be prepared in accordance with OMB annual guidance
on Form and Content of Financial Statements.
ENTRY AGE NORMAL ACTUARIAL METHOD - A method under which the
actuarial present value of projected benefits of each employee is
allocated on a level basis over the earnings or the service of the
employee between entry age and assumed exit age. The portion of
this actuarial present value allocated to a valuation year is
called the normal cost. The portion of this present value not
provided for at a valuation date by the present value of future
normal cost is called the actuarial accrued liability. The
assumption is made under this method that every employee entered
the plan (entry age) at the time of initial employment or at the
earliest eligibility date, if the plan had been in existence, and
that contributions have been made from the entry age to the date of
the actuarial valuation. The term "aggregate entry age normal"
refers to an approach whereby costs are determined for the group as
a whole rather than for each individual participant separately.
ESTIMATED COST -The process of projecting a future result in
terms of cost, based on information available at the time.
Estimated costs, rather than actual costs, are sometimes the basis
for credits to work-in-process accounts and debits to finished
goods inventory.
EVENT - A happening of consequence to an entity. It may be an
internal event that occurs within an entity, such as the
transforming of raw materials into a product. Or it may be an
external event that involves interaction between an entity and its
environment, such as a transaction with another entity, an act of
nature, theft, vandalism, a tort caused by negligence, or an
accident. (Adapted from Financial Accounting Standards Board,
Statement of Financial Accounting Concepts No. 6, Elements of
Financial Statements)
EXCHANGE REVENUE - Inflows of resources to a governmental entity
that the entity has earned. They arise from exchange transactions,
which occur when each party to the transaction sacrifices value and
receives value in return.
EXCHANGE TRANSACTION - A transaction that arises when each party
to the transaction sacrifices value and receives value in
return.
EXECUTORY CONTRACT - A contract which has not been performed by
all parties to it. (Trascona, Joseph L., Business Law, William C.
Brown C. Publishers, 1981)
EXECUTORY COST - Those costs such as insurance, maintenance, and
taxes incurred for leased property, whether paid by the lessor or
lessee. (Financial Accounting Standards Board, Statement of
Financial Accounting Standards No. 13, Accounting for Leases)
EXPECTED VALUE - A statistical measurement attribute that is the
sum of the products of each potential outcome multiplied by the
probability of that potential outcome.
EXPENDED APPROPRIATIONS - The dollar amount of appropriations
used to fund goods and services received or benefits or grants
provided.
EXPENDITURE -With respect to provisions of the Antideficiency
Act (31 U.S.C. 1513-1514) and the Congressional Budget and
Impoundment Control Act of 1974 (2 U.S.C.622(i)), a term that has
the same definition as outlay. (GAO Budget Glossary)
EXPENSE -Outflows or other using up of assets or incurrences of
liabilities (or a combination of both) during a period from
providing goods, rendering services, or carrying out other
activities related to an entity's programs and missions, the
benefits from which do not extend beyond the present operating
period.
EXPIRED APPROPRIATIONS (ACCOUNTS) - Appropriation accounts in
which the balances are no longer available for incurring new
obligations because the time available for incurring such
obligations has expired. (JFMIP Standardization Project)
FEDERAL MISSION PROPERTY, PLANT, & EQUIPMENT (PP&E)
-Items used to meet a Federal Government mission in which the
specific PP&E used is an integral part of the output of the
mission. (See SFFAS 6 and 8 for more complete definition and
discussion of Federal Mission PP&E.)
FEDERAL ENTITIES (UNITS, COMPONENTS) - See entity.
FINANCING ACCOUNT -A non-budget account associated with each
credit program account. The financing account holds fund balances,
receives the subsidy cost payment from the credit program account,
and includes all other cash flows to and from the government
resulting from post-1991 direct loans or loan guarantees. (OMB
Circular A-11, and OMB Circular A-34, Instructions on Budget
Execution, Credit Apportionment and Budget Execution, hereafter
cited as OMB Circular A-34.)
FIRST-IN, FIRST-OUT (FIFO) - A cost flow assumption; the first
goods purchased or produced are assumed to be the first goods
sold.
FIXED COST - A cost that does not vary in the short term with
the volume of activity. Fixed cost information is useful for cost
savings by adjusting existing capacity, or by eliminating idle
facilities. Also called Non-Variable Cost or Constant Cost.
FIXED VALUE SECURITIES - Securities that have a known maturity
or redemption value at the time of issue.
FORECLOSURE - A method of enforcing payment of a debt secured by
a mortgage by seizing the mortgaged property. Foreclosure
terminates all rights that the mortgagor has in the mortgaged
property upon completion of due process through the courts.
(Treasury Financial Manual Supplement)
FULL-ABSORPTION COSTING - A method of costing that assigns
(absorbs) all labor, material, and service/manufacturing facilities
and support costs to products or other cost objects. The costs
assigned include those that do and do not vary with the level of
activity performed.
FULL COST - The total amount of resources used to produce the
output. More specifically, the full cost of an output produced by a
responsibility segment is the sum of (1) the costs of resources
consumed by the responsibility segment that directly or indirectly
contribute to the output, and (2) the costs of identifiable
supporting services provided by other responsibility segments
within the reporting entity and by other reporting entities. (SFFAS
No. 4, Managerial Cost Accounting Concepts and Standards for the
Federal Government, para. 89) All direct and indirect costs to any
part of the Federal Government of providing goods, resources, or
services. (OMB Circular A-25).
GENERAL FUND - Accounts for receipts not earmarked by law for a
specific purposes, the proceeds of general borrowing, and the
expenditure of these moneys. (OMB, The Budget System and
Concepts)
GENERAL PP&E LAND -Land and land rights owned by the Federal
Government that are acquired for or in connection with items of
general PP&E.
GENERAL PURPOSE FINANCIAL REPORTS -Reports intended to meet the
common needs of diverse users who typically do not have the ability
to specify the basis, form, and content of the reports they
receive.
GOOD - A tangible product produced to provide to a customer.
GOVERNMENT-ACKNOWLEDGED EVENTS - Events that are not a liability
in themselves, but are those events that are "of financial
consequence" to the federal government because it chooses to
respond to the event.
GOVERNMENTAL RECEIPTS - Collections from the public that result
primarily from the exercise of the Government's sovereign or
governmental powers. Governmental receipts consist mostly of
individual and corporation income taxes and social insurance taxes
but also include excise taxes, compulsory user charges, customs
duties, court fines, certain license fees, gifts and donations, and
deposits of earnings by the Federal Reserve System. They are
compared to outlays in calculating a surplus or deficit. (OMB, The
Budget System and Concepts)
GOVERNMENT-RELATED EVENTS - Nontransaction-based events that
involve interaction between federal entities and their
environment.
HAZARDOUS WASTE - A solid, liquid, or gaseous waste, or
combination of these wastes, which because of its quantity,
concentration, or physical, chemical, or infectious characteristics
may cause or significantly contribute to an increase in mortality
or an increase in serious irreversible, or incapacitating
reversible, illness or pose a substantial present or potential
hazard to human health or the environment when improperly treated,
stored, transported, disposed of, or otherwise managed.
HERITAGE ASSETS -Property, plant, and equipment that are unique
for one or more of the following reasons: historical or natural
significance; cultural, educational or artistic (e.g., aesthetic)
importance; or, significant architectural characteristics.
HISTORICAL COST - Initially, the amount of cash (or its
equivalent) paid to acquire an asset; subsequent to acquisition,
the historical amount may be adjusted for amortization. (Kohler's
Dictionary for Accountants) HUMAN CAPITAL -Expenses incurred for
education and training programs financed by the Federal Government
for the benefit of the public and designed to increase or maintain
national economic productive capacity.
INCREMENTAL COST - The increase or decrease in total costs that
would result from a decision to increase or decrease output level,
to add a service or task, or to change any portion of operations.
This information helps in making decisions such as to contract work
out, undertake a project, or increase, decrease, modify, or
eliminate an activity or product.
INDIRECT COST - A cost that cannot be identified specifically
with or traced to a given cost object in an economically feasible
way.
INSURANCE AND GUARANTEE PROGRAMS - Federal government programs
that provide protection to individuals or entities against
specified risks. Because the federal government frequently
commingles aspects of insurance and guarantees within the same
program, this Statement treats the terms as a single type of
activity. (Also see separate definition of social insurance).
INTER-ENTITY - A term meaning between or among different federal
reporting entities. It commonly refers to activities or costs
between two or more agencies, departments, or bureaus.
INTEREST - The service charge for the use of money or capital,
paid at agreed intervals by the user, commonly expressed as an
annual percentage of outstanding principal. (Kohler's Dictionary
for Accountants)
INTEREST METHOD - (1) Under the interest method of amortization,
an amount of interest equal to the carrying amount of the
investment times the effective interest rate is calculated for each
accounting period. This calculated interest is the effective
interest of the investment (referred to as "effective yield" in
some literature). The effective interest is compared with the
stated interest of the investment. (The stated interest is the
interest that is payable to the investor according to the stated
interest rate.) The difference between the effective interest and
the stated interest is the amount by which the discount or the
premium should be amortized (i.e., reduced) for the accounting
period. (2) A method used to amortize the premium or discount of an
investment in bonds, or, as used in SFFAS 2, to amortize the
subsidy cost allowance of direct loans. Under this method, the
amortization amount of the subsidy cost allowance equals the
effective interest minus the nominal interest of the direct loans
times the effective interest rate (the discount rate). The nominal
interest equals the nominal amount (face amount) of the direct
loans times the stated interest rate (the rate stated in the loan
agreements). [Special Term from SFFAS 2]
INTEREST RATE - The price charged per unit of money borrowed per
year, or other unit of time, usually expressed as a percentage.
(Kohler's Dictionary for Accountants)
JOB ORDER COSTING - A method of cost accounting that accumulates
costs for individual jobs or lots. A job may be a service or
manufactured item, such as the repair of equipment or the treatment
of a patient in a hospital.
LAND -Land is the solid part of the surface of the earth.
Excluded from the definition of land are the natural resources
(that is, depletable resources such as mineral deposits and
petroleum; renewable resources such as timber, and the
outer-continental shelf resources) related to land.
LAST-IN, FIRST-OUT (LIFO) - A cost flow assumption; the last
goods purchased are assumed to be the first goods sold.
LATEST ACQUISITION COST (LAC) METHOD -A method that provides
that all like units that are held be valued at the invoice price of
the most recent like item purchased, less any discounts, plus any
additional costs incurred to bring the item to a form and location
suitable for its intended use.
LATEST ACQUISITION COST - Includes all amounts, except interest,
paid to a vendor to acquire an item.
LIABILITY - For Federal accounting purposes, a probable future
outflow or other sacrifice of resources as a result of past
transactions or events.
LIFE-CYCLE COSTING - An acquisition or procurement technique
which considers operating, maintenance, and other costs in addition
to the acquisition cost of assets.
LIQUIDATING ACCOUNT - The budget account that includes all cash
flows to and from the government resulting from pre-1992 direct
loans or loan guarantees (those originally obligated or committed
before Oct. 1, 1991), except those pre-1992 direct loans and loan
guarantees that have been directly modified and transferred to a
financing account. (See OMB Circular A-11)
LOAN GUARANTEE -Any guarantee, insurance, or other pledge with
respect to the payment of all or part of the principal or interest
on any debt obligation of a nonfederal borrower to a nonfederal
lender but does not include the insurance of deposits, shares, or
other withdrawable accounts in financial institutions. (OMB
Circular A-11)
LOAN GUARANTEE COMMITMENT - A binding agreement by a federal
agency to make a loan guarantee when specified conditions are
fulfilled by the borrower, the lender, or any other party to the
guarantee agreement. (OMB Circular A-11)
LOSS -Any expense or irrecoverable cost, often referred to as a
form of nonrecurring charge, an expenditure from which no present
or future benefit may be expected. (Kohler's Dictionary for
Accountants)
LOWER OF COST OR MARKET - A valuation rule that recognizes
impairment of asset values but avoids anticipated gains. The rule
is typically applied to individual items or groups of like items,
such as inventory or marketable securities. In this rule, "cost"
refers to historical cost and "market" refers to the current
replacement cost by purchase or production. (Kohler's Dictionary
for Accountants)
MAINTENANCE - The act of keeping fixed assets in useable
condition. It includes preventive maintenance, normal repairs,
replacement of parts and structural components, and other
activities needed to preserve the asset so that it continues to
provide acceptable services and achieves its expected life.
Maintenance excludes activities aimed at expanding the capacity of
an asset or otherwise upgrading it to serve needs different from,
or significantly greater than, those originally intended.
MANAGERIAL COST ACCOUNTING SYSTEM - The organization and
procedures, whether automated or not, and whether part of the
general ledger or stand-alone, that accumulates and reports
consistent and reliable cost information and performance data from
various agency feeder systems. The accumulated and reported data
enable management and other interested parties to measure and make
decisions about the agency's/segment's ability to improve
operations, safeguard assets, control its resources, and determine
if mission objectives are being met.
MARKETABLE TREASURY SECURITIES - Debt securities, including
Treasury bills, notes, and bonds, that the U.S. Treasury offers to
the public and are traded in the marketplace. Their bid and ask
prices are quoted on securities exchange markets.
MARKET-BASED TREASURY SECURITIES -Treasury securities issued to
governmental accounts that are not traded on any securities
exchange but mirror the prices of marketable securities with
similar terms. (See Treasury Financial Manual 2-4100, Federal
Agencies' Financial Reports, Exhibit No. 3.)
MARKET VALUE - (1) The estimated amount that can be realized by
disposing of an item through arm's length transactions in the
marketplace; the price (usually representative) at which bona fide
sales have been consummated for products of like kind, quality, and
quantity in a particular market at any moment of time. (2) For
investments in marketable securities, the term refers to the value
of such securities determined by prices quoted on securities
exchange markets multiplied by the number of bonds or shares held
in an investment portfolio.
MEASURABLE - Can be determined with reasonable certainty or is
reasonably estimable.
MODIFICATION -A federal government action, including new
legislation or administrative action, that directly or indirectly
alters the estimated subsidy cost and the present value of
outstanding direct loans (or direct loan obligations), or the
liability of loan guarantees (or loan guarantee commitments).
Direct modifications are actions that change the subsidy cost by
altering the terms of existing contracts or by selling loan assets.
Indirect modifications are actions that change the subsidy cost by
legislation that alters the way in which an outstanding portfolio
of direct loans or loan guarantees is administered. The term
modification does not include subsidy cost reestimates, the routine
administrative workouts of troubled loans, and actions that are
permitted within the existing contract terms.
MODIFICATION ADJUSTMENT TRANSFER - A non-expenditure transfer
from a financing account to the Treasury, or vice versa, to offset
the difference between the cost of modification of direct loans (or
loan guarantees) and the change in the book value of direct loans
(or loan guarantee liabilities). (See also OMB Circular A-11)
MOVING AVERAGE -An inventory costing method used in conjunction
with a perpetual inventory system. A weighted average cost per unit
is recomputed after every purchase. Goods sold are costed at the
most recent moving average cost.
NET LEVEL PREMIUM RESERVE - The excess, if any, of the present
value of future guaranteed death endowment benefits over the
present value of future net premiums. The net level premium reserve
should be calculated based on the dividend fund interest rate, if
determinable, and mortality rates guaranteed in calculating the
cash surrender values described in the contracts. (AICPA Statement
of Position 95-1)
NET REALIZABLE VALUE - The estimated amount that can be
recovered from selling, or any other method of disposing of an item
less estimated costs of completion, holding and disposal. (Kohler's
Dictionary for Accountants)
NOMINAL DOLLAR -The dollar value assigned to a good or service
in terms of prices current at the time of the good or service is
required. This contrasts with the value assigned to a good or
service measured in constant dollars.
NOMINAL (OR FACE OR PAR) VALUE OR AMOUNT -The amount of a bond,
note, mortgage, or other security as stated in the instrument
itself, exclusive of interest or dividend accumulations. The
nominal amount may or may not coincide with the price at which the
instrument was first sold, its present market value, or its
redemption price. Often referred to as the stated value. (Adapted
from Kohler's Dictionary for Accountants)
NONEXCHANGE REVENUE - Inflows of resources to the Government
that the Government demands or that it receives by donations. The
inflows that it demands include taxes, duties, fines, and
penalties.
NONEXCHANGE TRANSACTION - A transaction that arises when one
party to a transaction receives value without giving or promising
value in return or one party to a transaction gives or promises
value without receiving value in return.
NONFEDERAL PHYSICAL PROPERTY -Physical properties financed by
grants from the Federal Government, but owned by state and local
governments.
NORMAL COST - That portion of the actuarial present value of
pension plan benefits and expenses that is allocated to a valuation
year by the actuarial cost method. (From Actuarial Standard of
Practice No. 4)
OBLIGATED BALANCES -The net amount of obligations in a given
account for which payment has not yet been made. (JFMIP
Standardization Project)
OBLIGATIONS - Amounts of orders placed, contracts awarded,
services received, and other transactions occurring during a given
period that would require payments during the same or a future
period. (JFMIP Standardization Project)
OFFSETTING COLLECTIONS - Collections from the public that result
from business-type or marketoriented activities and collections
from other Government accounts. These collections are deducted from
gross disbursements in calculating outlays, rather than counted in
governmental receipts. Some offsetting collections are credited
directly to appropriation or fund accounts; others, called
offsetting receipts, are credited to receipt accounts. The
authority to spend offsetting collections is a form of budget
authority. (OMB, The Budget System and Concepts)
OFFSETTING RECEIPTS -Offsetting receipts are a subset of
offsetting collections. (See collections.)
OPERATING LEASE - An agreement conveying the right to use
property for a limited time in exchange for periodic rental
payments.
OPPORTUNITY COST - The value of the alternatives foregone by
adopting a particular strategy or employing resources in a specific
manner. Also called Alternative Cost or Economic Cost.
ORIGINAL DISCOUNT RATE -The discount rate originally used to
calculate the present value of direct loans or loan guarantee
liabilities, when the direct or guaranteed loans were disbursed.
[Special Term from SFFAS 2]
OTHER POSTEMPLOYMENT BENEFITS (OPEB) - Forms of benefits
provided to former or inactive employees, their beneficiaries, and
covered dependents outside pension or ORB plans.
OTHER FINANCING SOURCES - Inflows of resources that increase net
position of a reporting entity but that are not revenues or gains.
Borrowing is not included as other financing sources, since it does
not increase the net resources of the reporting entities.
OTHER RETIREMENT BENEFITS (ORB) - Forms of benefits, other than
retirement income, provided by an employer to retirees. Those
benefits may be defined in terms of specified benefits, such as
health care, tuition assistance, or legal services, which are
provided to retirees as the need for those benefits arises, such as
certain health care benefits. Or they may be defined in terms of
monetary amounts that become payable on the occurrence of a
specified event, such as life insurance benefits. (Financial
Accounting Standards Board, Statement of Financial Accounting
Standard No. 106, Employers' Accounting for Postretirement Benefits
Other than Pensions)
OUTCOME - (1) Defined in broad terms in SFFAC No. 1 (para.
204-208) as accomplishments or results that occur (at least
partially) because of the service efforts of Government entities.
Some authorities use terms like "impact," "effect," or "results" to
distinguish the change in outcomes specifically caused by the
Government activity from the total change in conditions that can be
caused by many factors. (2) Defined in SFFAS No. 8 as an assessment
of the results of a program compared to its intended purpose. They
shall: 1) be capable of being described in financial, economic, or
quantitative terms; and 2) provide a plausible basis for concluding
that the program has had or will have this intended effect. For
measuring outcomes for research and development programs, results
may be reported by a narrative discussion of the major results
achieved by the program during the year. (See SFFAS No. 8,
Supplementary Stewardship Reporting, para. 93 & 99, and SFFAC
No. 1, Objectives of Federal Financial Reporting, paras. 204-208,
for further discussion of outcome.)
OUTLAY -The issuance of checks, disbursement of cash, or
electronic transfer of funds made to liquidate a Federal
obligation. Outlays also occur when interest on the Treasury debt
held by the public accrues and when the Government issues bonds,
notes, debentures, monetary credits, or other cash-equivalent
instruments in order to liquidate obligations. Also, under credit
reform, the credit subsidy cost is recorded as an outlay when a
direct or guaranteed loan is disbursed. (GAO Budget Glossary)
OUTPUT -A tabulation, calculation, or recording of activity or
effort that can be expressed in a quantitative or qualitative
manner. They shall have two key characteristics: 1) they shall be
systematically or periodically captured through an accounting or
management information system, and 2) there shall be a logical
connection between the reported measures and the program's
purpose.
OUTPUT MEASURE - A tabulation, calculation, or recording of
activity or effort that can be expressed in a quantitative or
qualitative manner. It shall have two key characteristics: 1) it
shall be systematically or periodically captured through accounting
or management information system, and 2) there shall be a logical
connection between the reported measures and the program's
purpose.
PERFORMANCE MEASUREMENT - A means of evaluating efficiency,
effectiveness, and results. A balanced performance measurement
scorecard includes financial and nonfinancial measures focusing on
quality, cycle time, and cost. Performance measurement should
include program accomplishments in terms of outputs (quantity of
products or services provided, e.g., how many items efficiently
produced?) and outcomes (results of providing outputs, e.g., are
outputs effectively meeting intended agency mission objectives?).
See Statement of Federal Financial Accounting Concepts No. 1,
Objectives of Federal Financial Reporting, para. 192.
POST-1991 DIRECT LOANS -Direct loans obligated after September
30, 1991. [Special Term from SFFAS 2]
POST-1991 LOAN GUARANTEES -Loan guarantees committed after
September 30, 1991. [Special Term from SFFAS 2]
POST-MODIFICATION LIABILITY - The present value of net cash
outflows of loan guarantees estimated at the time of modification
under the post-modification terms, discounted at the current
discount rate. [Special Term from SFFAS 2]
POST-MODIFICATION VALUE -The present value of net cash inflows
of direct loans estimated at the time of modification under the
post-modification terms, discounted at the current discount rate.
[Special Term from SFFAS 2]
PRE-MODIFICATION VALUE - The present value of net cash inflows
of direct loans estimated at the time of modification under
pre-modification terms, discounted at the current discount rate.
[Special Term from SFFAS 2]
PRE-1992 LOAN GUARANTEES - Loan guarantees committed before
October 1, 1991. [Special Term from SFFAS 2]
PRE-1992 DIRECT LOANS - Direct loans obligated before October 1,
1991. [Special Term from SFFAS 2] PRE-MODIFICATION LIABILITY - The
present value of net cash outflows of loan guarantees estimated at
the time of modification under the pre-modification terms,
discounted at the current discount rate. [Special Term from SFFAS
2]
PREMIUM DEFICIENCY - A condition under which a liability for
future policy benefits using current conditions exceeds the
liability for future policy benefits using contract conditions. In
such cases, the difference should be recognized as a charge to
operations in the current period.
PRESENT VALUE (PV) - The value of future cash flows discounted
to the present at a certain interest rate (such as the reporting
entity's cost of capital), assuming compound interest. (Adapted
from Kieso and Weygandt, Intermediate Accounting, 7th ed., p.
264.)
PROBABLE - That which can reasonably be expected or believed to
be more likely than not on the basis of available evidence or logic
but which is neither certain nor proven.
PROCESS - The organized method of converting inputs (people,
equipment, methods, materials, and environment), to outputs
(products or services). The natural aggregation of work activities
and tasks performed for program delivery.
PROCESS COSTING - A method of cost accounting that first
collects costs by processes and then allocates the total costs of
each process equally to each unit of output flowing through it
during an accounting period.
PROCESS VALUE ANALYSIS - Tools and techniques for studying
processes through customer value analysis. Its objective is to
identify opportunities for lasting improvement in the performance
of an organization. It provides an in-depth review of work
activities and tasks, through activity analysis, which aggregate to
form processes for agency program delivery. In addition to
activity-based costing, quality and cycle time factors are studied
for a complete analysis of performance measurement. Each activity
within the process is analyzed, including whether or not the
activity adds value for the customer.
PRODUCT - Any discrete, traceable, or measurable good or service
provided to a customer. Often goods are referred to as tangible
products, and services are referred to as intangible products. A
good or service is the product of a process resulting from the
consumption of resources.
PROGRAM ACCOUNT -The budget account into which an appropriation
to cover the subsidy cost of a direct loan or loan guarantee
program is made and from which such cost is disbursed to the
financing account. Usually, a separate amount for administrative
expenses is also appropriated to the program account. (OMB Circular
A-11)
PROJECTED UNIT CREDIT ACTUARIAL METHOD - A method under which
the projected benefits of each individual included in an actuarial
present valuation are allocated by a consistent formula to
valuation years. The actuarial present value of benefits allocated
to the valuation year is called the normal cost. The actuarial
present value of benefits allocated to all periods before a
valuation year is called actuarial liability. (Actuarial Standard
of Practice)
PROPRIETARY ACCOUNTING - Also known as financial accounting, a
process that supports accrual accounting and financial reporting
that attempts to show actual financial position and results of
operations by accounting for assets, liabilities, net position,
revenues, and expenses. (See Tierney, Cornelius E., Handbook of
Federal Accounting Practices, Reading Massachusetts:
Addison-Wesley, 1982:122).
PURCHASES METHOD -A method of accounting for goods, such as
materials and supplies, in which the acquisition cost is recognized
as an expense upon purchase of the goods rather than upon their
use.
REAPPROPRIATION -Enacted legislation that continues the
availability of unexpended funds that expired or would otherwise
expire. (JFMIP Standardization Project)
RECOGNITION (OR RECOGNIZE) - The term recognition, as used in
this Statement, bears the same meaning as used by the Financial
Accounting Standards Board in its conceptual statements.
Recognition is the process of formally recording or incorporating
an item into the financial statements of an entity as an asset,
liability, revenue, expense, or the like. A recognized item is
depicted in both words and numbers, with the amount included in the
statement totals. Recognition comprehends both initial recognition
of an item and recognition of subsequent changes in or removal of a
previously recognized item. (Financial Accounting Standards Board,
Statement of Financial Accounting Concepts No. 5, A Replacement of
FASB Concepts Statement No. 3, para. 6.)
RECOGNIZE - To determine the amount, timing, classification, and
other conditions precedent to the acceptance and entry of a
transaction. Hence, to give expression on the books of account;
said of transactions. (Kohler's Dictionary for Accountants)
RECORD -To give expression to a transaction on (or in) the books
of account; to enter. (Kohler's Dictionary for Accountants)
RECOURSE -The rights of a holder in due course of a financial
instrument (such as a loan) to force the endorser on the instrument
to meet his or her legal obligations for making good the payment of
the instrument if dishonored by the maker or acceptor. The holder
in due course must have met the legal requirements of presentation
and delivery of the instrument to the maker of a note or acceptor
of a draft and must have found that this legal entity has refused
to pay for or defaulted in payment of the instrument. (Rosenberg's
Dictionary)
REESTIMATE -Refers to estimates of the subsidy costs performed
subsequent to their initial estimates made at the time of a loan's
disbursement.
REIMBURSEMENTS - Sums received as payment or advance payment for
goods or services furnished either to the public or to another
federal government account. If authorized by law, these sums are
credited directly to specific appropriation and fund accounts.
These amounts are deducted from the total obligations incurred (and
outlays) in determining net obligations (and outlays) for such
accounts. (Budget Glossary) Reimbursements are offsetting
collections. (See offsetting collections.)
REPAIRABLE - An inventory item that is expected to be repaired
when broken or worn out.
REPLACEMENT COST - The cost to reproduce an inventory item by
purchase or manufacture. In lower of cost or market computations,
the term "market" means replacement cost, subject to ceiling and
floor limitations.
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (RSSI) - The
category defined by the Board for reporting information required by
the stewardship standards. Stewardship information may be presented
as RSSI, in the financial statements, or in the notes to them.
Stewardship information will be necessary for a fair presentation
of financial position and results of operations.
RESEARCH AND DEVELOPMENT -Federal investment in research and
development refers to those expenses incurred in support of the
search for new or refined knowledge and ideas and for the
application or use of such knowledge and ideas for the development
of new or improved products and processes with the expectation of
maintaining or increasing national economic productive capacity or
yielding other future benefits. Research and development is
composed of basic research, applied research, and development.
RESPONSIBILITY SEGMENT - A significant organizational,
operational, functional, or process component which has the
following characteristics: (a) its manager reports to the entity's
top management; (b) it is responsible for carrying out a mission,
performing a line of activities or services, or producing one or a
group of products; and (c) for financial reporting and cost
management purposes, its resources and results of operations can be
clearly distinguished, physically and operationally, from those of
other segments of the entity.
RESPONSIBILITY CENTER - An organizational unit headed by a
manager or a group of managers who are responsible for its
activities. Responsibility centers can be measured as revenue
centers (accountable for revenue/sales only), cost centers
(accountable for costs/expenses only), profit centers (accountable
for revenues and costs), or investment centers (accountable for
investments, revenues, and costs).
RESTATEMENT (OF DIRECT LOANS OR LOAN GUARANTEES) -Refers to
establishing a new book value of a direct loan or the liability of
a loan guarantee.
REVENUE ADJUSTMENT -A contra revenue account that is used to
report reduction in revenue when realization is not probable (less
likely than not). It includes, returns, allowances, and price
redeterminations but not credit losses (due to the inability of the
debtor to pay the established or negotiated price).
REVOLVING FUND - A fund consisting of permanent appropriation
and expenditures of collections, from both the public and other
Governmental agencies and accounts, that are earmarked to finance a
continuing cycle of business-type operations. (OMB Circular
A-34)
RISK CATEGORY -Subdivisions of a cohort of direct loans or loan
guarantees into groups of loans that are relatively homogeneous in
cost, given the facts known at the time of obligation or
commitment. Risk categories will group all loans obligated or
committed for a program during the fiscal year that share
characteristics predictive of defaults and other costs. (OMB
Circular A-11)
SEIZING AGENCY - The agency that seizes property as a part of
its law enforcement activities.
SELLING EXPENSE (COST) -Expenses incurred in selling or
marketing, e.g., salaries, commissions, and promotion expenses.
(Kohler's Dictionary for Accountants)
SERVICE - An intangible product or task rendered directly to a
customer.
SOCIAL INSURANCE PROGRAMS - Income transfer programs financed by
compulsory earmarked taxes and also, in certain cases, general
revenues of the federal government. (Also see separate definition
of insurance and guarantees).
SPACE EXPLORATION EQUIPMENT -Items that are intended to operate
above the atmosphere to explore space and any specially designed
equipment to aid, service or operate other equipment engaged in
exploring space.
SPECIAL FUND - Federal fund accounts for receipts earmarked for
specific purposes and the associated expenditure of those receipts.
(OMB, The Budget System and Concepts)
SPECIFIC IDENTIFICATION - An inventory system in which the
seller identifies which specific items are sold and which remain in
ending inventory.
STANDARD COSTING - A costing method that attaches costs to cost
objects based on reasonable estimates or cost studies and by means
of budgeted rates rather than according to actual costs incurred.
The anticipated cost of producing a unit of output. A predetermined
cost to be assigned to products produced. Standard cost implies a
norm, or what costs should be. Standard costing may be based on
either absorption or direct costing principles, and may apply
either to all or some cost elements.
STANDARD COSTS - Predetermined expected unit costs, which are
acceptable for financial reporting purposes if adjusted
periodically to reflect actual results.
STATE AND LOCAL GOVERNMENTS -State and local governments
generally include: the 50 States and the District of Columbia;
cities, counties, townships, school districts, special districts,
public authorities, and other local governmental units as defined
by the Bureau of the Census; and Puerto Rico, the Virgin Islands,
and other US territories.
STEWARDSHIP -The Federal Government's responsibility for the
general welfare of the nation in perpetuity.
STEWARDSHIP INVESTMENTS -Items recognized as expense in
calculating net cost, but meriting special treatment to highlight
the substantial investment and long-term benefit of the expenses.
This would include nonfederal physical property, human capital, and
research and development.
STEWARDSHIP LAND -Land and land rights owned by the Federal
Government that are not acquired for or in connection with items of
general PP&E.
STEWARDSHIP RESPONSIBILITIES - The projected financial impact on
the Government of sustaining the current services that it provides
pursuant to laws already enacted. The commitments and constraints
reflected in "current services" are inherent in the tax and
spending policies contained in current law.
SUBSIDY COST -The cost of a grant of financial aid, usually by a
governmental body, to some person or institution for particular
purposes. (Kohler's Dictionary) Credit subsidy cost is the
estimated long-term cost to the government of direct loans or loan
guarantees calculated on a net present value basis, excluding
administrative costs. (Adapted from OMB Circular A-11) Direct loan
subsidy cost is the estimated long-term cost to the government of
direct loans calculated on a present value basis, excluding
administrative costs. The cost is the present value of estimated
net cash outflows at the time the direct loans are disbursed. The
discount rate used for the calculation is the average interest rate
(yield) on marketable Treasury securities of similar maturity to
the loan, applicable to the time when the loans are disbursed.
(Adapted from OMB Circular A-11) Loan guarantee subsidy cost is the
estimated long-term cost to the government of loan guarantees
calculated on a present value basis, excluding administrative
costs. The cost is the present value of estimated net cash outflows
at the time the guaranteed loans are disbursed by the lender. The
discount rate used for the calculation is the average interest rate
(yield) on marketable Treasury securities of similar maturity to
the loan guarantees, applicable to the time when the guaranteed
loans are disbursed. (Adapted from OMB Circular A-11)
SUPPORT COSTS - Costs of activities not directly associated with
production. Typical examples are the costs of automation support,
communications, postage, process engineering, and purchasing.
TAX EXPENDITURE -A revenue forgone attributable to a provision
of the federal tax laws that allows a special exclusion, exemption,
or deduction from gross income or provides a special credit,
preferential tax rate, or deferral of tax liability. (GAO Budget
Glossary)
TAX GAP - An estimate of taxes (including duties) that are
unpaid because of non-compliance with existing laws and
regulations.
TERMINAL DIVIDENDS - Dividends to policyholders calculated and
paid upon termination of a contract, such as on death, surrender,
or maturity. If the payment of terminal dividends is probable and
the amount can be reasonably estimated, the liability should be
recognized. AICPA Statement of Position 95-1.
TITLE -The right to property; the means by which such right is
established. (Kohler's Dictionary for Accountants) TOTAL COST
METHOD - An accounting method that includes the actual acquisition
cost of each item held plus the costs of any additions,
improvements, alterations, rehabilitations, or replacements that
extend the useful life of an asset.
TRACEABILITY - The ability to assign a cost directly to a
specific activity or cost object by identifying or observing
specific resources consumed by the activity or cost object.
TRANSACTION - A particular kind of external event involving the
transfer of something of value concerning two or more entities. The
transfer may be a two way or one way flow of resources or of
promises to provide resources. (Adapted from Financial Accounting
Standards Board, Statement of Financial Accounting Concepts No. 6,
Elements of Financial Statements)
TRANSFERS BETWEEN APPROPRIATION/FUND ACCOUNTS -Occur when all or
part of the budget authority in one account is transferred to
another account when such transfers are specifically authorized by
law. The nature of the transfer determines whether the transaction
is treated as an expenditure transfer or a non-expenditure
transfer. (JFMIP Standardization Project)
TREASURY WARRANT -An official document that the Secretary of the
Treasury issues pursuant to law and that establishes the amount of
monies authorized to be withdrawn from the central accounts that
Treasury maintains. Warrants for currently unavailable special and
trust fund receipts are issued when requirements for their
availability have been met. (GAO Budget Glossary)
TRUST FUNDS - Accounts that are designated by law as trust
funds, for receipts earmarked for specific purposes and the
associated expenditure of those receipts (OMB, Budget System and
Concepts).
TRUST REVOLVING FUNDS -Accounts that record permanent
appropriation and expenditure of collections used to carry out a
cycle of business type operations in accordance with a statute that
designates the fund as a trust fund. (OMB Circular A-34)
UNCONTROLLABLE COST - The cost over which a responsible manager
has no influence.
UNIT COST - The cost of a selected unit of a good or service.
Examples include dollar cost per ton, machine hour, labor hour, or
department hour.
UNOBLIGATED BALANCES -Balances of budgetary resources that have
not yet been obligated. (JFMIP Standardization Project) Unobligated
balances expire (cease to be available for obligation) for:--
1-year accounts at the end of the fiscal year;-- multiple-year
accounts at the end of the period specified;-- no-year accounts
only when they are 1) rescinded by law, 2) purpose is accomplished,
or 3) when disbursements against the appropriation have not been
made for 2 full consecutive years. (GAO Budget Glossary).
USEFUL LIFE - The normal operating life in terms of utility to
the owner.
VALUATION ACCOUNT (ALLOWANCE OR RESERVE) -An account that partly
or wholly offsets one or more other accounts; for example,
accumulated depreciation is a valuation account related to specific
depreciable assets and allowance for bad debts is a valuation
account related to accounts receivable. If a valuation account is
deducted from the related asset or liability it is sometimes
referred to as a contra-asset or contra-liability account.
(Kohler's Dictionary for Accountants) VALUATION (OR ACCOUNTING
VALUATION) -Valuation methods and bases are numerous and varied;
and may be expressed quantitatively and in monetary terms.
Application may be made to a single asset, a group of assets, or an
entire enterprise, as determined by various bases and methods.
(Kohler's Dictionary for Accountants)
VALUE-ADDED ACTIVITY - An activity that is judged to contribute
to customer value or satisfy an organizational need. The attribute
"value-added" reflects a belief that the activity cannot be
eliminated without reducing the quantity, responsiveness, or
quality of output required by a customer or organization.
Value-added activities should physically change the product or
service in a manner that meets customer expectations.
VARIABLE COST - A cost that varies with changes in the level of
an activity, when other factors are held constant. The cost of
material handling to an activity, for example, varies according to
the number of material deliveries and pickups to and from that
activity.
VARIABLE VALUE SECURITIES - Securities that have unknown
redemption or maturity values at the time of issue. Values of these
securities can vary on the basis of regulation or specific language
in the offering.
VARIANCE - (1) The amount, rate, extent, or degree of change, or
the divergence from a desired characteristic or state. (2) The
difference for a year or less between the elements (direct
material, direct labor, factory overhead) of standard cost and
actual cost. The term applies to (a) a money difference or (b)
changes in the character or purpose of amounts expended. (Kohler's
Dictionary for Accountants)
WEAPONS -Instruments of combat used to destroy, injure, defeat
or threaten an enemy. (adapted from Dictionary of Weapons and
Military Terms)
WEAPONS SYSTEMS - A combination of one or more weapons with all
related equipment, materials, services, personnel and means of
delivery and deployment required for self-sufficiency. (Joint
Chiefs of Staff, Department of Defense Dictionary of Military and
Associated Terms, Joint Publication 1-02, Mar. 23, 1994.)
WEIGHTED-AVERAGE -A periodic inventory costing method where
ending inventory and cost of goods sold are priced at the
weighted-average cost of all items available for sale. [Special
Term from SFFAS 3]
WHOLE LIFE POLICIES - Policies that provide insurance over the
insured's entire life and the proceeds (face amount) are paid only
upon death of the insured.
WRITE-OFF -An action to remove an amount from an entity's
assets. A write-off of a loan occurs when an agency official
determines, after all appropriate collection tools have been used,
that a debt is uncollectible. Active collection on an account
ceases, and the account is removed from an entity's receivables.
(Treasury Financial Manual Supplement)
WRITE-OFF -An action to remove an amount from an entity's assets
or financial resources. A write-off of a loan occurs when an agency
official determines, after all appropriate collection tools have
been used, that a debt is uncollectible. Active collection on an
account ceases, and the account is removed from an entity's
receivables. (Treasury Financial Manual Supplement)