FASAB clarifies federal accounting rules for debt cancellation
The Federal Accounting Standards Advisory Board (FASAB) released a new interpretation which specifies that federal accounting standards provide that debt cancellation is an activity without direct consideration that must be declared by federal entities in the statement of changes in net position.
Details are included in Interpretation 11, Debt Cancellation: An Interpretation of SFFAS 7, paragraph 313. According to the FASAB, paragraph 100 of the Statement of Federal Financial Accounting Concepts (SFFAC) 2, Entity and display, provides that non-stock market activity is declared on the statement of changes in net position. Concepts related to debt cancellation are included in paragraph 313 of SFFAS 7, Revenue recognition and other sources of finance and concepts for reconciling budget and financial accounting.
Interpretation 11 considers paragraph 313 of SFFAS 7 and SFFAC 2 together. Interpretation 11 also clarifies that paragraph 313 of SFFAS 7 should not be interpreted as requiring that a particular âgainâ or âlossâ item be displayed on the statement of changes in net position.
Interpretation 11 does not provide guidance on budget accounting, but notes that budget accounting should be considered. According to paragraph 313 of SFFAS 7, debt cancellation requires an act of Congress, and each debt cancellation is governed by the particular language used in the enacted debt cancellation legislation.
FASAB Chairman George Scott said in a press release that Interpretation 11 provides clarification that will facilitate the consistent reporting of debt forgiveness on the statement of changes in net position.
– Ken tysiac ([email protected]) is the JofAeditorial director of.