Federal Standards and Guidance on Valuation

Generally Accepted Accounting Principles (GAAP)

Generally accepted accounting principles for the proper financial reporting of General Equipment assets can be found in the FASAB Standards SFFAS 6 and SFFAS 50.

For all acquisition programs (new and existing), business processes and controls must continue to operate effectively in order to produce financial statements which are in accordance with GAAP. To accomplish this, stakeholders from across the DoD Components (e.g., Finance, Acquisitions, Logistics, etc.) must work together to structure the acquisition process accordingly to ensure accounting and valuation for equipment are in accordance with these principles. It is the responsibility of the DoD Components to form an integrated team comprised of these roles within their functional communities. The success of the integrated team rests with the DoD Components and not through additional mandates from Office of the Under Secretary of Defense (OUSD). It is important that this integrated team begin fully implementing the requirements on all new General Equipment acquisition programs and new contracts. Implementation of these requirements must also include documenting processes and controls, testing controls, remediating deficiencies, and ensuring Federal Information System Controls Audit Manual (commonly known as FISCAM) reviews are performed on all systems material to the financial statements (e.g., the APSR, general ledger accounting system, key feeder systems, etc.).

A Component will make an unreserved assertion (i.e., unconditional statement) that its financial statements as a whole, or specifically its General Equipment, are presented fairly in accordance with GAAP. To make this assertion, two conditions must be met:

Statement of Federal Financial Accounting Standards (SFFAS) 6

The Federal Accounting Standards Advisory Board (FASAB) has issued Statements on Federal Financial Accounting Standards that provide guidance for accounting treatments for different areas of audit.

SFFAS 6, Accounting for Property, Plant and Equipment contains accounting standards for federally owned property, plant, and equipment (PP&E).

The Federal Government has a high dollar investment in PP&E and includes many types of PP&E used for many different purposes. “PP&E” is defined as follows:

Assets included in the PP&E category relevant to the Property & Equipment Policy Office may consist of items that:

All general PP&E shall be recorded at cost. Cost shall include all costs incurred to bring the PP&E to a form and location suitable for its intended use.

For additional information on accounting for GPP&E, depreciation expense and disclosure requirements please refer to SFFAS 6.

Statement of Federal Financial Accounting Standards (SFFAS) 50

SFFAS 50, Establishing Opening Balances for Property, Plant and Equipment provides implementation guidance to allow a reporting entity, under specific conditions, to apply alternative methods in establishing opening balances for general property, plant, and equipment (GPP&E). The alternative methods include (1) using deemed cost to establish opening balances of general property, plant, and equipment, (2) selecting between deemed cost and prospective capitalization of internal use software, and (3) allowing an exclusion of land and land rights from opening balances with disclosure of acreage information and expensing of future acquisitions. FASAB is currently in the process of issuing a Technical Release on the Implementation of SFFAS 50, which is expected to be released in Fall of 2017.

The alternative methods are permitted when presenting financial statements following generally accepted accounting principles (GAAP) promulgated by the Federal Accounting Standards Advisory Board (FASAB) either (1) for the first time or (2) after a period during which existing systems could not provide the information necessary for producing such GAAP-based financial statements without use of the alternative methods.

SFFAS 50 provides supplementary information to SFFAS 6. SFFAS 6 states that all GPP&E is to be recorded at cost. SFFAS 50 adds language allowing reasonable estimates to be used to establish opening balances for GPP&E.

The alternative methods for establishing opening balances may be applied for the reporting period in which the reporting entity, taken as a whole, makes an unreserved assertion that its financial statements are presented fairly in accordance with GAAP. The alternative methods provided should also be applied to correct subsequently discovered errors in general PP&E that were valued under an alternative method.

Please refer to the “Valuation Approaches” tab to find more information related to the alternative methods provided in SFFAS 50.

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