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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
APPENDIX C
Excerpts from Amendments to FASAB Standard Number 6
Statement of Federal Financial Accounting Standards Number 10, June 1998
Accounting for Internal Use Software
Executive Summary
This statement provides recommended accounting standards for internal use software. Under the provisions of this statement, internal use software is classified as “general property, plant, and equipment ” (PP&E) as defined in Statement of Federal Financial Accounting Standards (SFFAS) No. 6, Accounting for Property, Plant, and Equipment. This statement includes software used to operate a federal entity 's programs (e.g., financial and administrative software, including that used for project management) and software used to produce the entity's goods and services (e.g., air traffic control and loan servicing).
Internal use software can be purchased off-the-shelf from commercial vendors and can be developed by contractors with little technical supervision by the federal entity or developed internally by the federal entity. SFFAS No. 6 specified treatment for internally developed software different from that for commercial off-the-shelf (COTS) software and contractor-developed software. SFFAS No. 6 addressed COTS and contractor-developed software generally, providing that they were “subject to its provisions.” On the other hand, specific provision was made for internally developed software.
SFFAS No. 6 prohibited the capitalization of the cost of internally developed software unless management intended to recover the cost through user charges, and the software was to be used as general PP&E. For capitalizable software, capitalization would begin after the entity completed all planning, designing, coding, and testing activities that are necessary to establish that the software can meet the design specifications.
At the conclusion of the PP&E project the Federal Accounting Standards Advisory Board discussed whether the standard for internally developed software should also apply to contractor-developed software. Also, some users of SFFAS No. 6 were unsure how to apply it to COTS and contractor-developed software. The Board decided, in December 1996, to review the issue and develop a separate standard for internal use software.
This standard requires the capitalization of the cost of internal use software whether it is
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
APPENDIX C
Excerpts from Amendments to FASAB Standard Number 6
Statement of Federal Financial Accounting Standards Number 10, June 1998
Accounting for Internal Use Software
Executive Summary
This statement provides recommended accounting standards for internal use software. Under the provisions of this statement, internal use software is classified as “general property, plant, and equipment ” (PP&E) as defined in Statement of Federal Financial Accounting Standards (SFFAS) No. 6, Accounting for Property, Plant, and Equipment. This statement includes software used to operate a federal entity 's programs (e.g., financial and administrative software, including that used for project management) and software used to produce the entity's goods and services (e.g., air traffic control and loan servicing).
Internal use software can be purchased off-the-shelf from commercial vendors and can be developed by contractors with little technical supervision by the federal entity or developed internally by the federal entity. SFFAS No. 6 specified treatment for internally developed software different from that for commercial off-the-shelf (COTS) software and contractor-developed software. SFFAS No. 6 addressed COTS and contractor-developed software generally, providing that they were “subject to its provisions.” On the other hand, specific provision was made for internally developed software.
SFFAS No. 6 prohibited the capitalization of the cost of internally developed software unless management intended to recover the cost through user charges, and the software was to be used as general PP&E. For capitalizable software, capitalization would begin after the entity completed all planning, designing, coding, and testing activities that are necessary to establish that the software can meet the design specifications.
At the conclusion of the PP&E project the Federal Accounting Standards Advisory Board discussed whether the standard for internally developed software should also apply to contractor-developed software. Also, some users of SFFAS No. 6 were unsure how to apply it to COTS and contractor-developed software. The Board decided, in December 1996, to review the issue and develop a separate standard for internal use software.
This standard requires the capitalization of the cost of internal use software whether it is
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
COTS, contractor-developed, or internally developed. Such software serves the same purposes as other general PP&E and functions as a long-lived operating asset. This standard provides guidance regarding the types of cost elements to capitalize, the timing and thresholds of capitalization, amortization periods, accounting for impairment, and other guidance.
Statement of Federal Financial Accounting Standards No. 11, October 1998
Amendments to Accounting for Property, Plant, and Equipment - Definitional Changes – Amending SFFAS No. 6 and SFFAS No. 8 Accounting for Property, Plant, and Equipment And Supplementary Stewardship Reporting
Executive Summary
The purpose of this Statement is to amend certain standards in Statement of Federal Financial Accounting Standards No. 6, Accounting for Property, Plant, and Equipment, (SFFAS No. 6), which was issued in November 1995; and, Statement of Federal Financial Accounting Standards No. 8, Supplementary Stewardship Reporting, (SFFAS No. 8), which was issued in June 1996. The amendments specifically affect the definition in the standards for Federal mission property, plant, and equipment (PP&E) and the classification of space exploration equipment as general PP&E in these two Statements.
Rather than specifying types of PP&E, the original standards defined Federal mission PP&E with a set of criteria. PP&E items that met those criteria would be reported as Federal mission PP&E. Those criteria, however, were subject to inconsistent interpretations and appeared to be resulting in a broader application of Federal mission PP&E than originally intended.
To resolve this problem, the amendments eliminated the category of Federal mission PP&E and created a new category for national defense PP&E, which consists of: (1) the PP&E components of weapons systems and support PP&E owned by the Department of Defense or its component entities for use in the performance of military missions, and (2) the vessels held in a preservation status by the Maritime Administration's National Defense Reserve Fleet. As a result space exploration equipment shall be treated as general PP&E.
Statement of Federal Financial Accounting Standards No. 14, April 1999
Amendments To Deferred Maintenance Reporting
Amending SFFAS No. 6 Accounting for Property, Plant and Equipment and SFFAS No. 8 Supplementary Stewardship Reporting
Executive Summary
Deferred maintenance reporting is a required disclosure per Statement of Federal Financial Accounting Standards No. 6, Accounting for Property, Plant, and Equipment (SFFAS No. 6), and is referenced in SFFAS No. 8, Supplementary Stewardship Reporting. This amendment does not modify the information to be provided users of
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
federal financial statements. It does, however, modify the status of that information and thus the level of its review by financial statement auditors.
When SFFAS No. 6 was issued, the Board indicated that deferred maintenance reporting would evolve as preparers gained experience. The Board provided maximum flexibility to preparers noting that management would determine “acceptable condition” against which deferred maintenance would be assessed. (see SFFAS No. 6, par. 78, footnote 58) In addition, the Board noted that acceptable condition might vary between entities and between sites within the same entity. To ensure that readers would understand the deferred maintenance disclosures, the Board required that management's method of measuring deferred maintenance and management 's requirements for acceptable condition be disclosed with the estimated amounts.
After the statement became effective, questions arose about whether this flexibility was appropriate given the status of the information as basic information (i.e., an integral part of the financial statements). The Board agreed that a change in status was warranted.
This statement amends SFFAS No. 6 and SFFAS No. 8 to define deferred maintenance information as required supplemental information (RSI) rather than within the financial statements and the notes thereto.
As required supplementary information, the deferred maintenance information will be subject to the audit procedures prescribed in AU Section 558.07, Codification of Statements on Auditing Standards. These procedures include inquiries to management and comparisons of the information for consistency. In addition, the auditor should consider whether the RSI should be covered in management's representation letter. The auditor may need to apply additional procedures required by other guidance, and to make additional inquiries if necessary based on the outcome of the required procedures. Readers should refer to the most current auditing standards for relevant guidance.
Statement of Recommended Accounting Standards No. 16, July 1999
Amendments to Accounting for Property, Plant, and Equipment
Measurement and Reporting for Multi-Use Heritage Assets
Amending SFFAS No. 6 and SFFAS No. 8 Accounting for Property, Plant, and Equipment And Supplementary Stewardship Reporting
Executive Summary
The purpose of this Statement is to amend certain standards for heritage assets in Statement of Federal Financial Accounting Standards No. 6, Accounting for Property, Plant, and Equipment, (SFFAS No. 6), which was issued in November 1995; and, Statement of Federal Financial Accounting Standards No. 8, Supplementary Stewardship Reporting, (SFFAS No. 8), which was issued in June 1996. Specifically, the amendments affect accounting and reporting standards for heritage assets that serve a dual purpose; that is, heritage assets that 1) have a heritage characteristic, and 2) are used in general government operations.
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DEFERRED MAINTENANCE REPORTING FOR FEDERAL FACILITIES: Meeting the Requirements of Federal Accounting Standards Advisory Board Standard Number 6, as Amended
In SFFAS No. 6 and SFFAS No. 8, these heritage assets were referred to as “multi-use heritage assets.” To clarify the meaning of the term “multi-use heritage assets,” the amendments define “multi-use heritage assets” as being heritage assets whose predominant use is general government operations. Heritage assets having incidental use in general government operations are not referred to as “multi-use heritage assets.” Rather, they are simply “heritage assets.”
In addition, the original standards required the cost of multi-use heritage assets that did not directly relate to operations be accounted for as an expense, while costs that directly support operations be accounted for as general property, plant, and equipment (PP&E). This treatment would have resulted in inconsistent cost measures between agencies using heritage office buildings and those using non-heritage office buildings.
To alleviate this inconsistency, the Board decided that the all acquisition, reconstruction, and betterment costs of multi-use heritage assets (i.e., heritage assets whose predominant use is general government operations) be capitalized as general PP&E and depreciated over their service life. This amendment should result in consistent accounting for the cost of PP&E predominantly used in general government operations.
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