Inter-entity cost accounting rules amended for federal agencies

By Ken Tysiac

A new accounting standard issued Thursday amends accounting rules for recognition of U.S. federal agencies’ inter-entity costs.

The Federal Accounting Standards Advisory Board (FASAB) issued Statement of Federal Financial Accounting Standards (SFFAS) 55, Amending Inter-Entity Cost Provisions. The new standard provides for the continued recognition of significant inter-entity costs by business-type activities.

SFFAS 55 also rescinds:

  • SFFAS 30, Inter-Entity Cost Implementation: Amending SFFAS 4, Managerial Cost Accounting Standards and Concepts.
  • Interpretation 6, Accounting for Imputed Intra-Departmental Costs: An Interpretation of SFFAS No. 4.

By rescinding SFFAS 30, FASAB restored Paragraphs 110 and 111 of SFFAS 4, as amended, to their original language prior to the issuance of SFFAS 30. Unless otherwise directed by the Office of Management and Budget, recognition of inter-entity costs by activities that are not business-type activities will not be required, with the exception of inter-entity costs for personnel benefits and the Treasury Judgment Fund settlements.

In the absence of a requirement, recognition of imputed cost and corresponding imputed financing for other types of inter-entity costs may be elected by non-business-type activities.

“The amended inter-entity cost provisions strike the needed balance to provide relevant and decision-useful information after carefully considering cost-benefit factors,” FASAB Chairman Scott Showalter said in a news release. “The statement affords less costly financial reporting by aligning financial reporting with established structures used by complex matrixed organizations while ensuring continued recognition of significant inter-entity costs where warranted.”

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

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