The Federal Accounting Standards Advisory Board (FASAB) on Monday released an exposure draft technical bulletin, Intragovernmental Leasehold Reimbursable Work Agreements, intended to further explain and address accounting issues not directly covered under Statement of Federal Financial Accounting Standards (SFFAS) 54, Leases, and other relevant statements.
FASAB is seeking comments on the draft, which was developed based on consultations with affected parties, including the Department of the Treasury and the General Services Administration, according to Executive Director Monica R. Valentine.
Under such intragovernmental agreements, "one reporting entity (the provider-lessor) acquires, constructs, improves, and/or alters an underlying asset that is or will be leased to another reporting entity (the customer-lessee) and the customer-lessee agrees to reimburse the provider-lessor for direct and indirect costs for the acquisition, construction, improvement, and/or alteration," according to a FASAB news release. "These reimbursable costs are beyond what may be included in the tenant improvement allowances of the lease agreement for the related underlying asset."
The proposal would require customer-lessees to recognize an intragovernmental reimbursable work asset for reimbursable acquisition, construction, improvement, and/or alteration costs, FASAB said. Provider-lessors would recognize an intragovernmental unearned reimbursable work revenue liability for reimbursable acquisitions, construction, improvements, and/or alterations provided to the customer-lessee on a reimbursable basis.
Accounting for the substance of these agreements involves professional judgment in determining which reporting entity should report the leasehold improvement asset (or PP&E) — particularly in situations when both parties are expected to derive economic benefits and services from the reimbursable work over the useful life of the resulting PP&E, according to FASAB. The proposal would assist reporting entities with recognizing appropriate types of assets and liabilities embodied under these intragovernmental agreements in a similar manner.
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