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A01747 1 (2001-08-30)

handle is hein.gao/gaobacxku0001 and id is 1 raw text is: Federal Accounting Standards Advisory Board Mailstop 6K17V Washington, DC 20548 (202) 512-7350 FAX (202) 512-7366 August 30, 2001 To: Heads of Agencies, Users, Preparers, and Auditors of Federal Financial Information The Federal Accounting Standards Advisory Board is requesting comments on the exposure draft (ED), Accounting for National Defense PP&E and Associated Cleanup Costs. Currently, the acquisition costs for items classified as national defense (ND) property, plant, and equipment (PP&E) are expensed in the period incurred. In addition, valuation (using either a historical or latest acquisition cost valuation method), condition, and deferred maintenance information for ND PP&E are to be reported off-balance sheet. 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. 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. 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 current acquisition programs would be disclosed. In addition, the total estimated cleanup cost per Major End Item 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 amendments would take effect in FY2006 or upon implementation of this standard if implemented earlier. In Appendix D, the Board has posed specific questions for comment. You are encouraged to address some or all of these questions and to comment on any section of this document. In particular, however, the Board would like to bring to your attention Question 4, which addresses provisions for recognition of a periodic cost of ND PP&E, and Question 5, which addresses a difference in accounting for the cleanup cost for the two categories of ND PP&E. While most FASAB members support the standards proposed in this ED, some members believe that there should be some form of periodic recognition of the expense of using capital items, and greater consistency in accounting for environmental cleanup cost. To ensure full consideration of your responses by the Board, please provide your rationale for agreement or disagreement with a particular area, including explanations of alternative proposals in areas of disagreement. Respondents are encouraged to consider the issues in light of Statement of Federal Financial Accounting Concepts 1, Objectives of Federal Financial Reporting. Responses are due by November 29, 2001 and should be sent to: 441 G Street, NW Suite 6814

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