Proposal would revise standards for recognition of federal agency inter-entity costs

New rules proposed Friday by the Federal Accounting Standards Advisory Board (FASAB) would revise current accounting standards for federal agencies to provide for recognition of inter-entity costs by business-type activities.

The proposed Statement of Federal Financial Accounting Standards (SFFAS) No. 4, Amending Inter-entity Cost Provisions, would amend SFFAS No. 4, Managerial Cost Accounting Standards and Concepts.

SFFAS No. 4 requires reporting entities to recognize the full costs of services received from other federal reporting entities even if there is no requirement to reimburse the provider for the full costs of those services.

After considering the Department of Defense’s implementation challenges related to SFFAS No. 4, FASAB decided to reconsider the inter-entity cost provisions for all federal reporting entities. FASAB concluded that when a reporting agency has many subcomponents working together, it may be challenging to relate cost to performance of each subcomponent.

As a result, FASAB is proposing to revise SFFAS No. 4 to provide for recognition of inter-entity costs by business-type activities and rescind:

• SFFAS No. 30, Inter-entity Cost Implementation: Amending SFFAS 4, Managerial Cost Accounting Standards and Concepts.

• Interpretation No. 6, Accounting for Imputed Intra-departmental Costs: An Interpretation of SFFAS No. 4.

Comments can be submitted by email through Nov. 30 at fasab@fasab.gov.

—Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.