USSGL Board MeetingMay 3, 2012

Amortization and Market Adjustments for Investments

Presented by:

Sherry Pontell, USSGLAD

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Amortization of Investments

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Issue

Both discount amortization and premium amortization (on the liability side) are recorded in the same USSGL account 253300 “Amortization of Discount and Premium on Securities Issued by BPD.”

Having them combined in the same USSGL makes eliminations more difficult to reconcile since the discount amortization amount is not easily identified separately from the premium amortization amount.

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Proposal

Split out the current USSGL account 253300 to have two separate accounts: one for amortization of discount and one for amortization of premium.

Modification of Account: 253300 Amortization of Discount and Premium on

Securities Issued by Federal Agencies Under General and Special Financing Authority

New Account: 253400 Amortization of Premium on Securities Issued by

Federal Agencies Under General and Special Financing Authority

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Impact on GTAS Attribute Table

USSGL ATTRIBUTES BULK FILE ATTRIBUTES

USSGLACCT NO.

Anticipated

Budg/Prop

Begin/End

Debit/Credit

Fed/NonFed

Trading Ptnr

Trading PtnrMain

253300 N P B/E C/D F/N ### ####

253400 N P B/E C/D F/N ### ####

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Impact on GTAS Attribute Table

TAS ATTRIBUTES

USSGL ACCTNO.

Financing Acct

Indicator

Fund Type Reporting Type Code

TAS Status

Trans Code

253300 N

EG/UG/EC/EM/EP/ER/ES/US/ET/

UT/TR/CF/DFE/F/U E/U N/X

253400

N

EG/UG/EC/EM/EP/ER/ES/US/ET/

UT/TR/CF/DFE/F/U E/U N/X

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Crosswalk Impact

USSGLAcctNo.

Bal.Sheet

Net Cost

NetPosition

Cust Activity

P&F/ SF133

SBR 2108 Reclass ified Bal. Sheet

Reclass ified Net Cost

Reclassi-fied NetPosition

253300 Lines18, 23

N/A N/A N/A N/A N/A N/A Lines6.2, 7.3

N/A N/A

253400 Lines18, 23

N/A N/A N/A N/A N/A N/A Lines6.2, 7.3

N/A N/A

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New Transaction

E126  To record in the issuing entity, the amortization of premium on securities held by a nonfiduciary deposit fund.

Reference: USSGL Implementation Guide: Nonfiduciary Deposit Fund with Investment Authority and Clearing Account Guidance

Budgetary Entry

None

Proprietary Entry

Debit 253400 Amortization of Premium on Securities Issued by Federal Agencies Under General and Special Financing Authority

  Credit 632000 Interest Expenses on Securities

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Transaction ModificationsE124  To record in the issuing entity, the amortization of discount on securities held by a nonfiduciary deposit fund.

Comment: Reverse this entry for amortization of premium. Reference: USSGL Implementation Guide: Nonfiduciary Deposit Fund with Investment Authority and Clearing Account Guidance

Budgetary Entry

None

Proprietary Entry

Debit 632000 Interest Expenses on Securities

     Credit 253300 Amortization of Discount on Securities Issued by Federal Agencies Under General and Special Financing Authority

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Transaction Modifications

D308  To record a prior-period adjustment that reduces the value of a liability.

Budgetary EntryNone

Proprietary Entry**Debit 253300 Amortization of Discount on Securities Issued by Federal Agencies Under General and Special Financing Authority **Credit 253400 Amortization of Premium on Securities Issued by Federal Agencies Under General and Special Financing Authority

**For illustration purposes only, only the new and revised accounts are being shown due to the longlist of accounts involved in this transaction.

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Transaction Modifications

D312  To record a prior-period adjustment that increases the value of a prior-year liability.

Budgetary EntryNone

Proprietary Entry**Debit 253400 Amortization of Premium on Securities Issued by Federal Agencies Under General and Special Financing Authority

**Credit 253300 Amortization of Discount on Securities Issued by Federal Agencies Under General and Special Financing Authority

**For illustration purposes only, only the new and revised accounts are being shown due to the longlist of accounts involved in this transaction.

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Market Adjustment Accounts for Zero Coupon

Bonds

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Issue

SFFAS 5, paragraph 50, states "Fixed value securities have a known maturity or redemption value at the time of issue. These securities should be valued at their original face (par) value net of any unamortized discount or premium.”

BPD discontinued reporting market adjustments on the Zero Coupon Bonds it issues to its trading partners to be in accordance with FASAB standards. Agencies were advised back then to no longer record market adjustments for Zero Coupon Bonds.

However, there are some agencies, like PBGC that follow FASB standards for their stand alone financial statements and do record market adjustments.

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Proposal

Modify the definitions for the market adjustment accounts for zeros instead of deleting them.

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Modification of Accounts

Account Title: Market Adjustment – Investments in U.S. Treasury Zero Coupon Bonds Account Number: 163800

Definition: The accumulated amount of unrealized holding gains and losses for U.S. Treasury Zero Coupon Bond investments due to adjustments to market value. In accordance with FASAB SSFAS No. 5 “Accounting for Liabilities of the Federal Government,” paragraph 50, do not use the account for market adjustments for fixed value securities. Although the normal balance for this account is a debit, it is acceptable in certain instances for this account to have a credit balance. This account does not close at year-end.

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Modification of AccountsAccount Title: Contra Market Adjustment – Investments in U.S. Treasury Zero Coupon Bonds Account Number: 163900Definition: The offset to market adjustments for investments in U.S. Treasury Zero Coupon Bonds. The account provides a mechanism for these bonds to be reported on a basis other than market value on the Balance Sheet. In accordance with FASAB SSFAS No. 5 “Accounting for Liabilities of the Federal Government,” paragraph 50, do not use

the account for market adjustments for fixed value securities. Although the normal balance for this account is a credit, it is acceptable in certain instances for this account to have a debit balance. This account does not close at year-end.

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Modification of Accounts

Account Title: Amortization of and Market Adjustment - Investments in U.S. Treasury Zero Coupon BondsAccount Number: 429000

Definition: The amount of amortized discount unrealized gains and losses (for market adjustments), and realized gains and losses in Treasury Appropriation Fund Symbols that invest offsetting collections in U.S. Treasury Zero Coupon Bonds.

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Modification of Transactions

D589 To record the adjustment of a U.S. Treasury Zero Coupon Bond in a special or non-revolving trust fund based on the current market value determined monthly by Treasury.

Comment: In accordance with FASAB SSFAS No. 5 “Accounting for Liabilities of the Federal

Government,” paragraph 50, do not use this transaction for market adjustments for fixed value securities. If the zero coupon bond is reported at market value on the Balance Sheet, USSGL account 718000, “Unrealized Gains,” may be used in place of USSGL account 163900. If the market value decreases, use USSGL account 728000, “Unrealized Losses.” Reverse this entry at the time of sale or maturity.

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Modification of Transactions

D590 To record the adjustment of a U.S. Treasury Zero Coupon Bond issued by the Bureau of the Public Debt in a trust revolving fund, based on the current market value determined monthly by Treasury.

Comment: In accordance with FASAB SSFAS No. 5 “Accounting for Liabilities of the Federal Government,” paragraph 50, do not use this transaction for market adjustments for fixed value securities. If the zero coupon bond is reported at market value on the Balance Sheet, USSGL account 718000, “Unrealized Gains,” may be used in place of USSGL account 163900. If the market value decreases, use USSGL account 728000, “Unrealized Losses.” Reverse this entry at the time of sale or maturity.

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Questions?

USSGL Division Contactswww.fms.treas.gov/ussgl/contacts

USSGL Issues Formwww.fms.treas.gov/form-issues