163. Exchange transactions with the public
ordinarily take place at prices set by the agency or the Congress, such as electricity rates, book prices, and interest on delinquent taxes.
Sometimes the market sets the price, as with the rents and royalties from companies that bid to explore and produce oil and gas on the Outer Continental Shelf. In either case the actual prices represent the inflow of resources to the entity and, therefore, are the appropriate basis for measuring revenue.
164. Except for prices set by law, OMB Circular No. A-25 and other regulations generally provide that user charges for transactions with the public should be set at full cost or market price.16
However, compliance with these regulations is partial, and potential revenue is not realized in many cases. To help report users understand how the entity's operations are financed, disclosures are needed about (1) differences in pricing policy from the guidance in OMB's circular on user charges and (2) transactions where prices are set by law or executive order and are not based on full cost or market pricing. Other accompanying information is needed about the revenue forgone in these transactions but only if a reasonable estimate is practicable. The other accompanying information should explain whether, and to what extent, the quantity demanded was assumed to change as a result of the change in price. 165. Circular A-25 defines "full cost" as “all direct and indirect costs to any part of the Federal Government of providing a good, resource, or service.”49
This generic definition and the accompanying examples in the circular are
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and the recognition and measurement of many particular expenses in other Federal accounting standards.51 However, unlike those standards, Circular A-25 also includes as part of the
definition of full cost an annual rate of return on land, structures, equipment, and other capital resources (unless they are rented);52 and it
includes depreciation not only on structures and equipment that are classified as general PP&E (property, plant, and equipment), which is
required by Federal accounting standards, but also on structures and equipment classified as
stewardship PP&E, which in a few cases may be used in connection with the production of goods or
services for sale.53 Aside from these differences, the cost accounting and other accounting standards should enable the Circular A-25 definition of full cost to be measured more accurately than has been possible heretofore.54
Federal Government, pp. 38-44.
51
For example, the standards for expenses related to credit are stated in SFFAS No. 2, Accounting for Direct Loans and Loan Guarantees; and numerous standards for expense are stated in SFFAS No. 5, Accounting for Liabilities of the Federal Government.
52
The Board currently has a project to consider whether the rate of return on capital should be recognized as a cost in financial accounting statements.
53
The extent of differences between Circular A-25 and Federal accounting standards can be found by comparing Circular A-25, section 6(d)(1)(b), with SFFAS No. 6, Accounting for Property, Plant, and Equipment.
54
Circular A-25 says that “full cost shall be determined or estimated from the best available records of the agency, and new cost accounting systems need not be established solely for this purpose.” See section 6(d)(1)(e). The cost accounting and other standards should improve agency records and specify the nature of costs more precisely and comprehensively.
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166. The appropriate basis for measuring revenue from intragovernmental exchange transactions is likewise the actual price (or reimbursement) that the seller receives from the buyer. Accounting systems should be able to provide the information needed to set the reimbursement at full cost, but often the full cost is not charged. In these
cases, the amount of the reimbursement is an incomplete measure of the economic value of the transaction. When one entity receives goods or services from another without paying all related costs, the net operating cost of the receiving entity is understated if it does not recognize (by imputation) the additional cost paid by the
providing entity.
167. Other Federal financial accounting standards require such inter-entity cost subsidies to be recognized by the receiving entity in certain cases.55 This Statement, in the section on "Other Financing Sources," provides standards to
recognize other financing sources that are imputed to offset whatever subsidy costs those other
standards require to be recognized and imputed. Accounting for the imputed cost of goods and services provided by one Government entity to another requires the exercise of judgment, based on the specific circumstances of each case.
Therefore, whether costs are imputed or not, the providing entity should disclose an explanation of the amount and reason for material disparities between the billing (if any) and the full cost.
55
The general principles for recognizing imputed cost are stated in SFFAS No. 4, Managerial Cost Accounting Concepts and Standards for the Federal
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