FASAB committee proposal would withdraw inter-entity cost guidance

by | Nov 12, 2018 | Best Business Helps | 0 comments

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FASAB committee proposal would withdraw inter-entity cost guidance

The Accounting and Auditing Policy Committee of the Federal Accounting Standards Advisory Board (FASAB) is proposing to withdraw one of its technical releases on ­accounting for interentity costs for federal government reporting entities.

FASAB also issued a clarification explaining that federal government entities should not convert their lease accounting practices to follow FASB’s new lease accounting standard.

The interentity proposal was made because Technical Release 8, Clarification of Standards Relating to Inter-Entity Costs, is no longer consistent with Statement of Federal Financial Accounting Standards (SFFAS) 4, Managerial Cost Accounting Standards and Concepts, as amended by SFFAS 55, Amending Inter-entity Cost Provisions.

SFFAS 55 significantly revised the requirement to recognize interentity costs, amending SFFAS 4 to provide for the continued recognition of significant interentity costs by businesstype activities. Recognition of interentity costs by activities that are not businesstype activities no longer is required with the exception of interentity costs for personnel benefits and the Treasury Judgment Fund settlements, unless otherwise directed by the Office of Management and Budget.

Nonbusinesstype activities may be accounted for under an election to recognize imputed cost and corresponding imputed financing for other types of interentity costs. Comments were requested by Oct. 5.

Lease accounting requirements clarified. FASAB, which creates accounting standards for federal entities, in April issued its own new lease accounting standard, SFFAS 54, Leases: An Amendment of SFFAS 5, Accounting for Liabilities of the Federal Government, and SFFAS 6, Accounting for Property, Plant, and Equipment.

The new FASAB standard for federal entities takes effect in fiscal year 2021, and early adoption is not permitted. The clarification FASAB issued in August explains that until the new FASAB standard takes effect, federal entities should continue to follow the current FASAB guidance on accounting for lease transactions.

FASAB’s current lease accounting guidance is contained in paragraphs 43—46 of SFFAS 5 and paragraphs 20 and 29 of SFFAS 6. These paragraphs will be superseded when SFFAS 54 takes effect.

If current standards are silent on an issue, FASAB’s clarification explains that the federal reporting entity should review the guidance in SFFAS 34, The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued by the Financial Accounting Standards Board, to identify practices consistent with SFFAS 5 and SFFAS 6. 

Research & References of FASAB committee proposal would withdraw inter-entity cost guidance|A&C Accounting And Tax Services
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