Question

Discuss the conceptual framework of accounting for federal agencies and compare it to the conceptual framework established by the GASB for state and local governments. Review the financial statements of a federal department/agency and include a specific example of reporting that would differ from that of a state and local government and note the difference(s)

Answer 1

The conceptual framework addresses many of the fundamentals needed to support standards setting. FASAB developed the core of its conceptual framework in the early 1990s. At that time, financial management legislation and administrative directives focused on component entity reporting. Hence, FASAB’s second concepts statement, Entity and Display, focused on the basis for defining a reporting entity and the display of component entity financial statements. Other concepts statements address financial reporting objectives, qualitative characteristics of information, the intended audience for the financial report of the U.S. Government (FR), elements of accrual basis statements and their measurement attributes, communication methods, and managerial cost accounting.   

United States Accounting Standards: Governmental Entities. ... For state and local government entities, additional standards are promulgated by the Governmental Accounting Standards Board ("GASB"). For the federal government, additional standards are promulgated by the Federal Accounting Standards Advisory Board ("FASAB").

Federal agency balance sheets (see exhibit 1, at right) include nonentity assets, meaning assets that are not available for spending because the recipient is going to transfer them to another federal reporting entity. For example, when the Bureau of Customs collects import taxes or duties and transfers them to the Treasury, the Customs balance sheet would show them as nonentity assets.

A federal entity's assets include normal balance sheet entries plus a few items unique to government. One example is the fund balance with the Treasury, which is the aggregate amount in accounts with the Treasury that the entity can use. Property, plant and equipment is another balance sheet element worthy of comment. ( Note: Not all individual assets are included in the exhibits—just the categorizations that are uniquely federal.) For a federal entity, it includes only assets used for and chargeable to the cost of government goods and services, such as government-owned buildings, automobiles and computers. Entities do not report the remaining and vast majority of federal PP&E (such as federal parklands, weapon systems and monuments) on federal balance sheets. They are considered stewardship assets, and their accounting is contained in the required supplementary stewardship information.