How Do I Value My Assets? Understanding Federal Financial Accounting Technical Release #15
Accumulating costs for the purposes of properly capitalizing assets can be very challenging for agencies with large complex acquisitions. For agencies like DoD and NASA, asset capitalization can be especially difficult. In fact, appropriately valuing assets is one of the most significant challenges to audit readiness.
The Federal Accounting Standards Advisory Board’s (FASAB) most recent Technical Release addresses this issue directly. The Federal Financial Accounting Technical Release #15: Implementation Guidance for General Property, Plant, and Equipment Cost Accumulation, Assignment, and Allocation supports compliance with the Statement of Federal Financial Accounting Standards 6 (SFFAS 6), Accounting for Property, Plant, and Equipment and outlines the recognition requirements for general property, plant, and equipment (G-PP&E) except for internal use software. Paragraph 26 in the SFFAS 6 states:
“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.”
Technical Release #15 focuses primarily on the implementation guidance as it relates to:
a) Recognition requirements for total costs (i.e., programmatic, managerial, administrative, and other elements of program costs) incurred during the G-PP&E lifecycle, decisions regarding the granularity of cost information, and acceptable methods for recognizing those costs (i.e., capital costs captured on the Balance Sheet or period expense costs captured on the Statement of Net Costs [SNC])
b) The concept of a cost accumulation and allocation decision framework (i.e., acceptable methods of accumulating, assigning, and reporting cost data)
c) Management’s role in applying the cost accumulation, assignment, and allocation decision framework
Appendix C, The Decision Framework, is an especially useful tool that provides managers practical, easy to use guidance. SFFAS 6 and 4 are great references to better understand the context of Technical Release #15.