Federal reporting entities get alternative method for opening balance valuations

By Ken Tysiac

New guidance for federal government reporting entities issued Wednesday is designed to assist with valuation for opening balances for inventory, operating materials and supplies, and stockpile materials.

The Federal Accounting Standards Advisory Board (FASAB) issued the guidance, which is contained in Statement of Federal Financial Accounting Standards 48, Opening Balances for Inventory, Operating Materials and Supplies, and Stockpile Materials.

Under the guidance, a reporting entity is allowed to apply an alternative valuation method, which is available only when presenting information following GAAP either:

  • For the first time; or
  • After a period during which existing systems could not provide the information necessary for GAAP-based financial statements.

A reporting entity is permitted to apply SFFAS 48 based on the second condition one time.

FASAB Chairman Scott Showalter said in a news release that the standard is an effort to provide the Department of Defense with a cost-effective means to adopt GAAP.

“SFFAS 48 is intended to provide an alternative valuation method for the adoption of GAAP when historical records and systems do not provide a basis for valuation of opening balances in accordance with SFFAS 3, Accounting for Inventory and Related Property, which has thus far been a challenge faced by [the Department of Defense],” Showalter said.

SFFAS 48 will take effect for periods beginning after Sept. 30, 2016; early implementation is permitted.

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

SPONSORED REPORT

How the election may affect taxation of business income

This report summarizes recent proposals to reform the U.S. business income tax system and considers the path to enactment of any such legislation.

VIDEO

How to Excel pivot a general ledger

The general ledger is a vast historical data archive of your company's financial activities, including revenue, expenses, adjustments, and account balances. J. Carlton Collins, CPA, shows how to prepare data for, and mine data with, PivotTables.

QUIZ

Did you follow 2016’s biggest accounting news?

CPAs will remember 2016 as a year of new standards and new faces. How well did you follow the biggest accounting events? The 7 questions in this quiz will help you find out