The Federal Accounting Standards Advisory Board (FASAB) has proposed an interpretation that would address how amounts received in deposit funds from non-federal sources in anticipation of an order (an advance) should be presented on component entity financial statements.
The proposed interpretation would clarify the classification and presentation of non-federal non-entity Fund Balance with Treasury (FBWT). The proposed interpretation would explain that the inclusion of the phrase “other non-federal non-entity FBWT” in paragraph 31 of Statement of Federal Financial Accounting Standards (SFFAS) 1, Accounting for Selected Assets and Liabilities, was intended to provide for similar treatment of activities that were comparable with fiduciary activity but had not been identified specifically in SFFAS 31, Accounting for Fiduciary Activities, when SFFAS 31 amended SFFAS 1.
The proposed interpretation would clarify that FASAB did not intend to require similar treatment for activities that were explicitly excluded from the provisions of SFFAS 31.
Although amounts received in deposit accounts may come from non-federal non-entity sources for unfilled orders, FASAB says these amounts do not qualify as fiduciary activity because SFFAS 31 specifically excludes unearned revenue from fiduciary activity reporting.
As a result, FASAB believes it would be inconsistent to apply the phrase “other non-federal non-entity” to unearned revenue, including amounts received from non-federal sources for unfilled orders. Instead, FASAB stated in a news release that non-federal non-entity amounts received for unfilled orders that are reflected in FBWT should be reported as an intragovernmental asset of the component reporting entity.
“The proposed interpretation is necessary to provide clarification in SFFAS 1 that resulted from amendments made while issuing SFFAS 31,” FASAB Chairman George Scott said in a news release. “The guidance will ensure consistent reporting of intragovernmental assets.”
FASAB requests comments on the exposure draft by Jan. 6, 2021. Comments can be emailed to firstname.lastname@example.org.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.