[Federal Register Volume 66, Number 173 (Thursday, September 6, 2001)]
[Notices]
[Pages 46633-46634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22327]


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FEDERAL ACCOUNTING STANDARDS ADVISORY BOARD


Notice of New Exposure Draft Accounting for National Defense PP&E 
and Associated Cleanup Costs

Board Action

    Pursuant to the Federal Advisory Committee Act (Pub. L. No. 92-
463), as amended, and the FASAB Rules of Procedure, as amended in 
October, 1999, notice is hereby given that the Federal Accounting 
Standards Advisory Board has published a new exposure draft, Accounting 
for National Defense PP&E and Associated Cleanup Costs.

Summary of the Proposed Statement

    On August 29, 2001, the Federal Accounting Standards Advisory Board 
(FASAB) released for public comment an exposure draft (ED) to amend 
Statement of Federal Financial Accounting Standards (SFFAS) No. 11, 
Amendments to Accounting for Property, Plant, and Equipment--
Definitional Changes, which was issued in December 1998; SFFAS, No. 8, 
Supplementary Stewardship Reporting, which was issued in June 1996; and 
SFFAS No. 6, Accounting for Property, Plant, and Equipment, which was 
issued in November 1995. The proposed amendments would change the 
definition of ND PP&E, the method of accounting for it, and the 
information reported about it. The exposure draft, entitled Accounting 
for National Defense PP&E and Associated Cleanup Costs, amending SFFAS 
No. 11, Amendments to Accounting for Property, Plant, and Equipment--
Definitional Changes, SFFAS No. 8, Supplementary Stewardship Reporting, 
and SFFAS No. 6, Accounting for Property, Plant, and Equipment will be 
out for comment until November 29, 2001.
    In the existing standards, ND PP&E consists of: (a) 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 (b) vessels held in a preservation status by the Maritime 
Administration's National Defense Reserve Fleet. Expenditures made to 
acquire, replace, or improve those PP&E are recognized as an expense in 
the period incurred, rather than being recognized as assets on the 
balance sheet. In addition, ND PP&E valuation (using either a 
historical or latest acquisition cost valuation method), condition, and 
deferred maintenance information are to be reported as Required 
Supplementary Stewardship Information (RSI). Also, the total estimated 
cleanup cost for ND PP&E is to be recognized as an expense in the 
period the asset is placed into service.
    In early 1998, the FASAB issued an exposure draft to amend SFFAS 
Nos. 6 and 8. The exposure draft was initiated (1) to respond to 
definitional questions from several agencies, and (2) in recognition of 
the need to provide a transition plan in light of DoD's inability to 
comply with the provisions of SFFAS No. 8. During the process, the 
Board reconsidered whether SFFAS No. 8 was an appropriate end goal. 
Ultimately, the 1998 exposure draft included, among other proposals, 
proposals to replace the requirement to report cumulative cost 
information in the supplementary stewardship report with a requirement 
to report ND PP&E annual acquisition costs for each of five years 
(i.e., annual trend information rather than cumulative costs), unit, 
and condition information. In addition to considering the written 
comments, FASAB held a public hearing on these proposals to explore 
further the concerns expressed by some respondents.
    After the public comment period and hearing, the Board proceeded to 
issue standards relating to various aspects of the proposal. In 
December of 1998, the FASAB issued SFFAS No. 11, Amendments to 
Accounting for Property, Plant, and Equipment--Definitional Changes, 
which amended SFFAS Nos. 6 and 8. SFFAS No. 11 accomplished only the 
definitional changes sought in the 1998 ED. Because of the divergent 
views of both respondents and Board members on accounting for ND PP&E, 
the FASAB did not reach a final conclusion on revisions to the 
reporting requirements for ND PP&E in SFFAS No. 8.
    The amendments proposed in this ED would make the following 
changes. The definition of ND PP&E would be amended. ND PP&E would 
consist of 2 separate categories of items within the amended 
definition: (a) Major End Items and (b) Mission Support Items. The two-
category approach facilitates application of different standards for 
expense recognition and disclosures for different types of ND PP&E. 
Beginning in fiscal year (FY) 2002, Major End Items would be subject to 
a reporting of the number of units and condition assessment information 
by asset type or category. Beginning in FY 2006, Major End Items would 
be capitalized but not depreciated, while Mission Support Items would 
be capitalized and depreciated. Also, beginning in FY 2006, data for 
the ten largest (in planned dollar terms) current acquisition programs 
would be disclosed. In addition, the total estimated cleanup cost per 
Major End Items would be recognized as a part of the acquisition cost 
as items are placed into service. For Mission Support Items, a portion 
of the total estimated cleanup cost would be recognized as an expense 
during each period that the item is in operation. The amendments 
proposed in this ED that affect the definition of ND PP&E, and unit and 
condition reporting would take effect in FY 2002. The remaining

[[Page 46634]]

amendments would take effect in FY 2006 or upon implementation of this 
standard if implemented earlier.
    One Board member, who believes various proposed reporting 
requirements do not meet criteria to be considered essential for 
financial statement purposes, provided an alternative view in the ED.
    The exposure draft will soon be mailed to FSAB's mailing list 
subscribers. Additionally, it is available on FSAB's home page http://www.financenet.gov/fasab.htm. Copies can be obtained by contacting FSAB 
at (202) 512-7350, or [email protected].
    The Board has posed specific questions for comment. Respondents are 
encouraged to address those questions and to comment on any part of the 
ED in light of Statement of Federal Financial Accounting Concepts 1, 
Objectives of Federal Financial Reporting. For further information call 
Risk Wascak (202) 512-7363.
    Written comments are requested by November 29, 2001, and should be 
sent to: Wendy M. Comes, Executive Director, Federal Accounting 
Standards Advisory Board, 441 G Street, NW, Suite 6814, Mail Stop 
6K17V, Washington, DC 20548.

FOR FURTHER INFORMATION, CONTACT: Wendy Comes, Executive Director, 441 
G St., NW., Room 6814, Washington, DC 20548, or call (202) 512-7350.

    Authority: Federal Advisory Committee Act. Pub. L. No. 92-463.

    Dated: August 30, 2001.
Wendy M. Comes,
Executive Director.
[FR Doc. 01-22327 Filed 9-5-01; 8:45 am]
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