FASAB Issues Technical Bulletin on Reimbursable Work Agreements
The Federal Accounting Standards Advisory Board (FASAB) recently issued Technical Bulletin 2023-1, addressing intragovernmental accounting issues not directly covered under Statement of Federal Financial Accounting Standards (SFFAS) 54, Leases, and other relevant Statements.
Under intragovernmental leasehold reimbursable work agreements, one reporting entity (the provider-lessor) acquires, constructs, improves and/or alters an underlying asset that is or will be leased to another reporting entity (the customer-lessee) and the customer-lessee agrees to reimburse the provider-lessor for direct and indirect costs for the acquisition, construction, improvement, and/or alteration. These reimbursable costs are beyond what may be included in the tenant improvement allowances of the lease agreement for the related underlying asset.
The Technical Bulletin, titled Intragovernmental Leasehold Reimbursable Work Agreements, requires the following approach for agreements in which the provider-lessor is expected to derive a significant level of economic benefits and services from the reimbursable work:
- Customer-lessees are to recognize an intragovernmental reimbursable work asset for reimbursable acquisition, construction, improvement and/or alteration costs.
- Provider-lessors are to recognize the resulting leasehold improvement (property, plant and equipment) and an intragovernmental unearned reimbursable work revenue liability for reimbursable acquisitions, construction, improvements and/or alterations provided to the customer-lessee on a reimbursable basis.
The new bulletin is the second addition to the FASAB Current Handbook since the last annual update.