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Notice

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

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Information about this document as published in the Federal Register.

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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 Start Printed Page 46634amendments 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 wascakr@fasab.gov.

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.

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FOR FURTHER INFORMATION, CONTACT:

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

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

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Dated: August 30, 2001.

Wendy M. Comes,

Executive Director.

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[FR Doc. 01-22327 Filed 9-5-01; 8:45 am]

BILLING CODE 1610-01-M