Now that I’ve captured your attention with the title, let me hasten to explain why I selected it. As G. Edward DeSeve was fond of telling us when he was Deputy Director for Management at OMB, the generally accepted meaning of the phrase close enough for government work has changed diametrically over the years.

The genesis of the phrase goes back to the World War II era when the country’s industrial complex became the military-industrial complex. Shipbuilders, airframe assemblers, automotive corporations, and other companies united with the government in the war effort found themselves needing to meet new sets of specifications—military specifications, or Mil-Specs. These Mil-Specs were more strict and precise, requiring parts to be made with closer tolerances and higher degrees of quality than similar parts made for commercial use. Hence, during the quality control and inspection processes, an engineer might find a part intended for commercial use that was of particularly high quality and declare, “this one’s close enough for government work.”

Sometime during the past 50 years, the phrase took on the opposite meaning. Turned around, it now is used derisively to imply that if the work is for the government, it doesn’t need to be exact—just close enough. As with the similar (but reverse) metamorphosis of the phrase Made in Japan, exactly how and when the meaning got turned around is unclear.

The Federal Accounting Standards Advisory Board (FASAB) is in a remarkable position to return close enough for government work to its original, positive meaning. This article will look at a few recent board actions and deliberations to illustrate some of the pressures the board faces and how it has responded to them. Three key issues FASAB studied in the past 2 years lend insight into its thinking and show how the board is struggling to come to grips with a key question: Should Federal accounting standards result in better, higher quality, more useful, and more meaningful financial statements and accountability reports than counterpart standards promulgated for use by non-government (FASB standards) and state and local government (GASB standards) entities?

We’ll look at (1) the standard for recognition of contingent liabilities, (2) the proposed deletion of an obscure paragraph in the standard for revenue accounting, and (3) the attempt to amend the standard for accounting for defense plant property and equipment. Finally, we’ll examine some of the implications of the American Institute of Certified Public Accountants’ (AICPA) October 19, 1999, designation of FASAB as the body authorized to promulgate generally accepted accounting principles—GAAP—for Federal government entities.

“More Likely Than Not”

The issue of contingent liability recognition is a good illustration of FASAB’s recent focus. Having done a superlative job of promulgating a thorough core body of accounting standards during its first 6 years of existence, FASAB finds itself having to return to these core standards to deal with some unintended consequences. It also illustrates what FASAB faces when it tries to ratchet up standards in areas where other standard-setting bodies have already deliberated and acted.

Statement of Federal Financial Accounting Standards (SFFAS) Number 5, Accounting for Liabilities of the Federal Government, was issued in September 1995. In writing SFFAS No. 5, the board made a conscious decision to make one part of the standard more strict and precise than its FASB and GASB counterparts. Under FASB and GASB standards, a liability for a loss contingency must be recognized when the past event or exchange transaction makes a future outflow of resources probable and measurable. FASAB adopted the same requirement with one seemingly small difference. FASB and GASB defined probable as “likely to occur,” whereas FASAB defined it as “more likely than not.” On that small difference, a great deal of remedial energy has been expended.

In practice, likely to occur is generally interpreted as meaning somewhere in the range of an 85- to 90-percent probability, a fairly high threshold. On the other hand, more likely than not obviously means anything more than a 50-percent probability, a significantly lower threshold.

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