U.S. federal government entities will be required to report the effects of general property, plant, and equipment impairments under new standards issued Thursday by the Federal Accounting Standards Advisory Board (FASAB).
Statement of Federal Financial Accounting Standards (SFFAS) 44, Accounting for Impairment of General Property, Plant, and Equipment Remaining in Use, is designed to provide clarity for users of financial statements.
The standards will enable users to discover the cost of impairments when they occur, the financial impact on the reporting entity, and the cost of services provided following the impairment. Comparability of financial statements between federal government entities also should improve because the standards require those entities to account for impairments in a similar manner.
Administrative burdens are expected to be negligible because the standards do not require departments or agencies to specifically search for impaired assets, according to FASAB. Impairments are required to be considered in the context of entities’ existing practices, and the statement is required to be applied only when an indicator of significant impairment is present.
In developing the standards, the board reviewed the work of other public-sector standard setters as well as comments from the government and private sector, FASAB Chairman Tom Allen said in a statement.
“The resulting standards are intended to focus attention on significant impairments so that needed financial information is provided without undue effort,” Allen said.
The standards take effect for reporting periods beginning after Sept. 30, 2014, and FASAB encourages early implementation.
—Ken Tysiac (email@example.com) is a JofA senior editor.