The Federal Accounting Standards Advisory Board (FASAB) issued a standard that it said is aimed at resolving problems created, in part, by agencies’ use of different interpretations of “deferred maintenance.” The board said that Statement of Federal Financial Accounting Standards (SFFAS) no. 40, Definitional Changes Related to Deferred Maintenance and Repairs: Amending Statement of Federal Financial Accounting Standards 6, Accounting for Property, Plant, and Equipment, represents a first step toward improved reporting on deferred maintenance and repairs.
The new standard revises maintenance and repair (M&R) terminology in SFFAS no. 6, Accounting for Property, Plant, and Equipment, as amended, by modifying the definition of maintenance and by replacing the term “deferred maintenance” with “deferred maintenance and repairs.”
The new standard incorporates the definitional changes in response to concerns raised by the financial and technical communities. The board said a review of SFFAS no. 6 by the Federal Facilities Council (FFC) Committee on Operations & Maintenance identified the following concerns: (a) different interpretations among agencies and auditors regarding what to report and how to report, (b) introduction of terms not used in the technical community, (c) terms in the maintenance definition loosely defined, and (d) terms in the maintenance definition not reflective of actual practice.
The board said in a press release that it will continue to work closely with stakeholders interested in improved reporting on deferred maintenance and repairs. By addressing definitional issues as a first step, the board will facilitate continued cooperation. Two areas in need of improvement relate to: (1) the lack of comparability when assessing asset condition both within and among agencies; and (2) measurement and reporting practices that vary greatly among agencies.
“Redefining the term ‘maintenance’ to include repair activities and better reflect asset management practices is an initial step in resolving the problems noted,” FASAB Chairman Tom Allen said in a press release. “However, the board also plans to address measurement and reporting issues through continued consultation with stakeholders which could lead to the issuance of additional guidance and/or standards.”
SFFAS no. 40 is effective for periods beginning after Sept. 30, 2011. Earlier implementation is encouraged. All FASAB standards are available at fasab.gov/accounting-standards.
FASAB issued implementation guidance in Statement of Federal Financial Accounting Technical Release (TR) 13, Implementation Guide for Estimating the Historical Cost of General Property, Plant & Equipment, to address the historical cost estimating of general property, plant and equipment (G-PP&E) as it applies to Statement of Federal Financial Accounting Standards (SFFAS) nos. 6, 23 and 35.
The guide provides support and direction as to the types of estimating methodologies and the documentation that could be used to support the valuation estimates of G-PP&E. TR 13 provides a foundation for preparers to exercise judgment in formulating those estimates.
The examples outlined in the guide illustrate the use of various estimating methodologies to derive the historical cost of G-PP&E in accordance with SFFAS no. 35, Estimating the Historical Cost of General Property, Plant, and Equipment—Amending Statements of Federal Financial Accounting Standards 6 and 23. SFFAS no. 35 clarifies that federal entities should report their G-PP&E based on historical cost information in accordance with the asset recognition and measurement provisions of SFFAS no. 6, Accounting for Property, Plant, and Equipment, as amended. However, reasonable estimates of historical cost may be used to value G-PP&E.
All FASAB accounting standards and technical releases are available at fasab.gov/accounting-standards.
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