FASAB issues guidance on loss allowance for receivables
The Federal Accounting Standards Advisory Board staff has released a technical bulletin in an effort to clarify the loss allowance standards for accounts receivable and related recognition standards and reporting.
Technical Bulletin (TB) 2020-1, Loss Allowance for Intragovernmental Receivables, clarifies that the recognition of losses, provided in paragraphs 40-52 of SFFAS 1, "Accounting for Selected Assets and Liabilities," applies to both intragovernmental receivables and receivables from nonfederal entities.
The bulletin also clarifies the standard by explaining that the allowance approach isn’t a “write-off” of a receivable. Instead, it’s a method of reporting an amount that the entity thinks is realizable by requiring only accounts receivable, net of an allowance, to be reported on the financial statements.
An allowance recognized in a reporting entity’s financial statements doesn’t change the underlying statutory authority to collect the receivable or the legal obligation of the other intragovernmental entity to pay, according to the guidance.
“TB 2020-1 will help clear any uncertainty that may have existed regarding the recognition of losses for intragovernmental receivables,” said FASAB executive director Monica Valentine in a statement Thursday.
TB 2020-1 is available at https://fasab.gov/accounting-standards/.