FASAB proposal addresses opening balances for general PP&E

By Ken Tysiac

The Federal Accounting Standards Advisory Board (FASAB) has issued a proposal that would permit a federal government reporting entity to apply alternative methods in establishing opening balances for general property, plant, and equipment (PP&E).

The proposal was prompted by a Department of Defense request for guidance on establishing opening balances for general PP&E.

“The board is seeking less costly alternatives for [the Department of Defense] to establish opening balances,” FASAB Chairman Tom Allen said in a news release. “A cost-effective means to adopt GAAP may facilitate needed progress. We considered the costs and benefits and concluded that establishing a sound financial management system is of primary importance.”

The alternative methods would include:

  • Use of deemed cost to establish opening balances of general PP&E.
  • Selecting between deemed cost and prospective capitalization of internal-use software.
  • Exclusion of land from opening balances with disclosure of acreage information.

The alternative methods would be available only when presenting information using GAAP for the first time or after a period during which existing systems could not provide the information necessary for producing such GAAP-based financial statements without use of the alternative valuation method. The application of this proposal based on the second condition would be available to a reporting entity just once per line item addressed in the proposal.

Comments are requested by email at fasab@fasab.gov by Feb. 4.

Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

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