FASAB issues bulletin on reimbursable work agreements

By Kevin Brewer

The Federal Accounting Standards Advisory Board (FASAB) on Friday issued Technical Bulletin 2023-1, Intragovernmental Leasehold Reimbursable Work Agreements, which is intended to further explain and address accounting issues not directly covered under Statement of Federal Financial Accounting Standards 54, Leases, and other relevant statements.

"This technical bulletin addresses a complex accounting topic in a manner that is harmonious with numerous board statements and conceptual framework considerations," FASAB Executive Director Monica Valentine said in a news release.

Under such work agreements, according to the news release, "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. These reimbursable costs are beyond what may be included in the tenant improvement allowances of the lease agreement for the related underlying asset."

The bulletin requires the following approach for agreements in which the provider-lessor is expected to derive a significant level of economic benefits and services from the reimbursable work:

  • Customer-lessees are to recognize an intragovernmental reimbursable work asset for reimbursable acquisition, construction, improvement, and/or alteration costs.
  • Provider-lessors are to recognize the resulting leasehold improvement (property, plant, and equipment) and an intragovernmental unearned reimbursable work revenue liability for reimbursable acquisitions, construction, improvements, and/or alterations provided to the customer-lessee on a reimbursable basis.

Friday's bulletin is the second addition to the FASAB Current Handbook since the last annual update, alongside Technical Release 21, Omnibus Technical Release Amendments 2022: Conforming Amendments.

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.

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