Federal reporting entities get alternative method for opening balance valuations -
New guidance for federal government reporting entities issued Wednesday is designed to assist with valuation for opening balances for inventory, operating materials and supplies, and stockpile materials.
The Federal Accounting Standards Advisory Board (FASAB) issued the guidance, which is contained in Statement of Federal Financial Accounting Standards 48, Opening Balances for Inventory, Operating Materials and Supplies, and Stockpile Materials.
Under the guidance, a reporting entity is allowed to apply an alternative valuation method, which is available only when presenting information following GAAP either:
- For the first time; or
- After a period during which existing systems could not provide the information necessary for GAAP-based financial statements.
- A reporting entity is permitted to apply SFFAS 48 based on the second condition one time.
FASAB Chairman Scott Showalter said in a news release that the standard is an effort to provide the Department of Defense with a cost-effective means to adopt GAAP.
“SFFAS 48 is intended to provide an alternative valuation method for the adoption of GAAP when historical records and systems do not provide a basis for valuation of opening balances in accordance with SFFAS 3, Accounting for Inventory and Related Property, which has thus far been a challenge faced by [the Department of Defense],” Showalter said.
SFFAS 48 will take effect for periods beginning after Sept. 30, 2016; early implementation is permitted. Source: Journal of Accountancy.