Valuation Overview

The AT&L Property and Equipment Policy Office is responsible for assisting DoD Components in preparing for the FY2018 Financial Statement audit. Currently, there is a major focus on establishing opening balances and go-forward processes for General Equipment owned by the Government. The P&EP Office works with other organizations such as, but not limited to, OUSD(C) and the Financial Improvement and Audit Readiness (FIAR) Committee, to establish policies and standards to assist with setting these values and processes. Throughout the webpage you will find references to the main sources of guidance that are being utilized by the Components and other agencies in an effort to meet auditing standards and receive a “clean” opinion in the future.

Valuation Assertion Defined

According to the FIAR Guidance, the Valuation of assets, liabilities, revenues and costs reported in the financial statements is one of the final priority focuses in preparation for the FY2018 DoD Audit. The amounts reported in each reporting entities’ financial statements must be accurate and supportable. Valuation methodologies (e.g., in calculating environmental liabilities or valuing cost of historical assets) should be appropriate, reasonable and well-documented. Management estimates should be justifiable in the circumstances, supportable and thoroughly documented as well. Effectively designed controls should be implemented to ensure all transactions are recorded in the appropriate amounts.

One significant and potentially very costly challenge is obtaining auditable values for the significant amount of existing DoD assets located worldwide and procured many years ago, well before the passage of the CFO Act and other legislation mandating auditability. To address and overcome this impediment to achieving auditability, OUSD Comptroller has issued several policy memoranda and the Federal Accounting Standards Advisory Board (FASAB) issued Statement on Federal Financial Accounting Standard (SFFAS) 50 to assist reporting entities in asserting audit readiness by the end of Fiscal Year 2017.

Phases

As stated in the Strategy and Implementation Guidance for General Equipment Valuation, that was released on March 14, 2016 by OUSD(AT&L) and OUSD(C), the DoD Components will complete the following in preparation for the FY2018 DoD audit:

In addition, DoD Components are expected to work toward and achieve the end state target environment, which will include process improvement through automation, integration and monitoring.

Valuation Elements

In order to value General Equipment assets appropriately for financial reporting purposes, there are key data elements which must be present; Cost, Date Placed in Service and Estimated Useful Life.

Cost

The valuation of equipment includes all costs incurred to bring the General Equipment to a form and location suitable for its intended use. Many different costs enter into the value of a General Equipment asset. See SFFAS 6, page 13 for an illustrative list of cost factors that may be included.

Date Placed In Service

Placed in service dates are critical to calculating accurate net book values for financial reporting. The validation of placed in service dates, along with other data elements relevant to existence, completeness, rights, and presentation should have already been completed by DoD Components as part of their Financial Improvement and Audit Readiness (FIAR) Wave 3 efforts.

Estimated Useful Life

DoD Components must also ensure that the useful life used for calculating depreciation is compliant with DoD Policy for general equipment useful lives. For additional information on useful lives and the calculation of depreciation, please refer to the FMR, Volume 4 Chapter 6. A chart is provided on page 6-36 that prescribes useful lives (recovery periods) for General PP&E.


Return to top