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Natural Resources

This project is addressing accounting for oil and gas resources. Other natural resources starting with solid minerals such as coal will be addressed in subsequent phases. A very capable natural resources task force spent years developing a paper on accounting for a variety of natural resources including oil and gas. The conclusion of that task force was that measuring natural resources (with the exception of timber) was so uncertain that no capitalization could be recommended - the numbers were too soft. The surprising development for this project on accounting for oil and gas resources is that it has been determined that estimates are firm enough to allow for capitalizing a royalty stream for the federal government's royalty share for proved oil and gas reserves on lands under the control of the federal government. (The federal government is not a developer of its oil and gas reserves.)

FASAB has agreed on a formula to value the royalty stream which will be recognized on the balance sheet. As oil and gas are extracted, the amount of revenue recognized will be equal to the amount of depletion expense.  Cash will increase and the oil and gas asset will decrease. Annually, the value of the oil and gas asset will be re-valued based on new estimates resulting in unrealized gains or losses.

At the May FASAB meeting staff presented an issues paper on royalty relief.  The Board decided that foregone revenue resulting from royalty relief should be reported as required supplementary information with an explanation in the basis for conclusions regarding the complexity of estimating such foregone revenue since other factors including bonus bids are involved in estimating foregone revenue.

At the July FASAB meeting minor changes were made to the draft exposure draft and CBO explained its alternative view.

At the November FASAB meeting, the Board reviewed a draft exposure draft entitled Accounting for Federal Oil and Gas Resources. Since the July meeting technical changes have been made including discretely valuing the royalty share of proved oil and lease condensate, natural gas plant liquids, and gas reserves. At the November meeting the Board decided to address in the exposure draft the component entity's liability resulting from the requirement to distribute the royalty revenues to others. The draft exposure draft will be on the agenda for the January 2007 FASAB meeting.
The Board decided on a FY 2010 effective date.



The concepts project has two phases - an objectives phase and an elements phase. In 1993, FASAB issued its first concepts statement - Statement of Federal Financial Accounting Concepts 1 Objectives of Federal Financial Reporting. The objectives were broad and many years after the issuance of SFFAC 1, FASAB questioned the usefulness of the document since the subsequent output of FASAB could not be reconciled with SFFAC 1 in many respects. Thus, FASAB is addressing objectives of federal financial reporting for a second time to help it determine its proper role more definitively.  A series of roundtable discussions was held in the latter part of CY 2005 to assist FASAB in its deliberations.

At the March meeting, FASAB decided to keep the objectives broad in scope and not eliminate any of the objectives currently contained in SFFAC 1 Objectives of Federal Financial Reporting based at least partly on the roundtable discussions. Board members agreed to the notion of amending SFFAC 1  to reflect current thinking about FASAB's role and other issues that have emerged in the 13 years since SFFAC 1 was issued but amending SFFAC 1 is not a high priority - the focus will be on developing a strategic plan.

At the May FASAB meeting, staff presented proposals for continuing the development of a white paper.  After some discussion it was decided to use the white paper as a strategic plan for use by FASAB - the white paper will identify areas that FASAB has a comparative advantage in relationship to the broad objectives of federal financial reporting.

At the July FASAB meeting, a 61 page document entitled "FASAB's Strategic Directions: Clarifying FASAB's Near-Term Role in Achieving the Objectives of Federal Financial Reporting" was approved for issuance on FASAB's website.

The report was issued on November 2, 2006 and can be accessed at FASAB's website.


Elements of federal financial reporting include such items as assets, liabilities, net position, revenue, and expense. Except for liabilities, FASAB has not defined the elements.  Liabilities were defined in SFFAS 5.  The intent of this phase is to define all the elements including redefining the definition of liabilities. (A key reason for redefining liabilities is to allow for capturing social insurance programs such as Social Security and Medicare in the new definition.)

At the January 2006 FASAB meeting, FASAB focused on the proposed definitions of revenue and expense. It was agreed that appropriations will not be included in the definition of revenue and that gains and losses will not be defined as separate elements - they are sub-elements of revenue and expense.

At the March FASAB meeting, it was noted that GASB and FASAB are both working on definitions of elements.  An analysis of the work products of the two accounting standard setting boards will be provided by staff prior to the May FASAB meeting. There were no significant changes to the draft exposure draft provided to board members for this meeting. Accordingly, an exposure draft of an elements concepts statement will be voted on at the May FASAB meeting.

At the May FASAB meeting, FASAB approved an exposure draft after adding and modifying questions for respondents.  A large outreach effort is planned for the exposure draft with comments due by August 5.

A hearing was held at the September FASAB meeting and comments from respondents were discussed. Work will commence on drafting a recommended concepts statement - the Board decided not to include additional elements.

At the November FASAB meeting, the Board continued to address the issues raised in the exposure draft taking into consideration the comments received: (1) the Board decided not to include in the final statement a repeat of the qualitative characteristics of information in financial reports (see SFFAC 1); (2) the Board decided not to change the document to accommodate the view that the government's power to modify laws is a reason for not recognizing certain liabilities.

Additional issues will be addressed at subsequent FASAB meetings.

Financial Reports

This project will lead to a concepts statement on key components of federal financial reports and will rescind paragraphs 54-112 of SFFAC 2. The objective is to determine best ways to communicate information.

At the November FASAB meeting, the Board discussed an outline of a proposed concepts statement.

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