FASAB clarifies loss allowance for intragovernmental receivables

By Ken Tysiac

Accounting guidance for federal government entities on the loss allowance for intragovernmental receivables was clarified in a technical bulletin issued Thursday by the Federal Accounting Standards Advisory Board.

Technical Bulletin 2020-1, Loss Allowance for Intragovernmental Receivables, explains that the recognition of losses, provided in Paragraphs 40–52 in Statement of Federal Financial Accounting Standards 1, Accounting for Selected Assets and Liabilities, applies to both intragovernmental receivables and receivables from nonfederal entities.

The bulletin also clarifies SFFAS 1 guidance by explaining that the allowance approach is not a write-off of a receivable. Rather, it is a method for reporting an amount that the entity believes is realizable by requiring only accounts receivable, net of an allowance, to be reported on the financial statements.

An allowance recognized in a reporting entity’s financial statements does not alter the underlying statutory authority to collect the receivable or the legal obligation of the other intragovernmental entity to pay, according to the bulletin.

“TB 2020-1 will help clear any uncertainty that may have existed regarding the recognition of losses for intragovernmental receivables,” FASAB Executive Director Monica Valentine said in a news release.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

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