2BDoD 7000.14-R Financial Management Regulation Volume 4, Chapter 24, Annex 4
* October 2019
A4-1
Annex 4. Alternative Valuation Methodology for Establishing Opening Balances for Buildings,
Structures, Linear Structures, Land and Land Rights
4.1 Establishing Opening Balances for Buildings, Structures and Linear Structures (A40101)
4.1.1. The alternative valuation methods for establishing opening balances for Property,
Plant and Equipment described in Federal Accounting Standards Advisory Board (FASAB)
Statement of Federal Financial Accounting Standards (SFFAS) 50, “Establishing Opening
Balances for General Property, Plant and Equipment: Amending Statement of Federal Financial
Accounting Standards (SFFAS) 6, SFFAS 10, SFFAS 23, and Rescinding SFFAS 35,” is available
only once to each reporting Department of Defense (DoD) Component. Therefore, prior to the
establishment of opening balances for buildings, structures and linear structures (real property
facilities), DoD Components must validate that they are prepared to account for and comply with
the recognition, measurement, presentation and disclosure requirements for real property in
accordance with FASAB SFFAS 6, “Accounting for Property, Plant and Equipment.”
4.1.2. If historical cost, as described in SFFAS 6, has not already been recorded and
included in financial statements that have been audited by an Independent Public Accountant and
received an unmodified opinion, deemed cost will be used as a surrogate to establish opening
balances for real property. In this context, deemed cost is an amount used as a surrogate for initial
amounts that otherwise would be required by SFFAS 6 to establish opening balances. Although
deemed cost may be based on any one of, or a combination of, allowable valuation methods such
as fair value, estimated historical cost, or replacement cost (which includes Plant Replacement
Value (PRV)), DoD’s selected valuation method for real property facilities is PRV. Once
established using PRV, opening balances will be used as a surrogate for the initial amounts that
would have existed had an SFFAS 6 compliant valuation method been used.
4.1.3. Only existing real property assets with a gross PRV value equal to or over the current
real property capitalization threshold and with a remaining book value will be recorded as a part
of the opening balance. When evaluating real property for the purpose of establishing opening
balances, DoD Components should apply the applicable capitalization threshold to their entire
population of real property retroactively, irrespective of the capitalization thresholds in effect for
years prior to October 1, 2013. The current real property threshold is $250,000 for both the General
Fund and Working Capital Fund (WCF), except for the National Security Agency (NSA) and the
Office of the Director of National Intelligence (ODNI) for which the threshold is $1 million. When
establishing real property opening balances, DoD Components need to take the appropriate steps
to ensure all relevant prior period adjustments and note disclosures are included in their annual
financial statements in accordance with SFFAS 50. As part of their evaluation, DoD Components
should not simply value assets already recorded above the capitalization threshold. DoD
Components should perform additional analytical procedures to identify any assets that have been
improperly capitalized or expensed. Examples of this type of review can include searching for
real property assets with values of $0 or $1 which are indications of erroneous values. An
additional example can include real property for which an additional zero was added in error,
incorrectly placing the asset above the capitalization threshold.