NASA Procedural Requirements

NPR 9060.1B Effective Date: April 24, 2023 Expiration Date: April 24, 2028

Subject: Accrual Accounting - Revenues, Expenses, and Program Costs

Responsible Office: Office of the Chief Financial Officer

Appendix A. Definitions

Accrual Accounting. To record the effect on a reporting entity of transactions and other events and circumstances in periods in which those transactions, events, and circumstances occur rather than only in periods in which cash is received or paid by the entity. Accrual accounting is concerned with an entity’s acquisition of goods and services and use of them to produce and distribute other goods and services. It recognizes that the buying, producing, selling, distributing, and other operations of an entity during a period, as well as other events that affect entity performance, often do not coincide with cash receipts and payments of the period.

Actual Cost. An amount determined based on cost incurred including amounts determined using cost recognition techniques properly adjusted for applicable variance.

Capitalize. An accounting method used to delay the recognition of expenses by recording cost as a long-term asset. The depreciation expense is recognized over the asset’s estimated useful life. Cost is recorded as a fixed asset (written off as depreciation over several accounting periods) instead of an expense (charged off against earnings in one accounting period).

Constructive Receipt. The recognition of the estimated liability and cost of work in process on goods or services performed to NASA specifications prior to their actual receipt or acceptance.

Cost. The monetary value of resources used, or liabilities incurred, to achieve an objective, such as to acquire or produce a good or to perform an activity or service.

Cost Object. An activity, output, or item whose cost is to be measured. In a broad sense, a cost object can be an organizational division, a function, task, product, service, or a customer. The cost object is represented in the WBS as the project’s task, product, or service. It is the ultimate accumulation of cost in the WBS.

Cost Type (Cost-Reimbursement and Incentive). Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. The cost-plus-incentive-fee contract is a cost-reimbursement contract that provides for the initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. Appropriate for services or development and test programs. A cost-plus- award-fee contract is a cost-reimbursement contract that provides for a fee consisting of: (1) a base amount fixed at inception of the contract, if applicable, and at the discretion of the Contracting Officer (CO), and (2) an award amount that the contractor may earn in whole or in part during performance.

Depreciation. A method of allocating the cost of an asset over its useful life to reflect a reduction in asset value due to obsolescence or wear and tear.

Direct Cost. The cost of resources directly consumed by an activity. Direct costs are assigned to activities by direct tracing of units of resources consumed by individual activities. A cost that is specifically identified with a single cost object.

Estimated Cost. The process of projecting a future result in terms of cost, based on information available at the time. Estimated costs, rather than actual costs, are sometimes the basis for credits to work-in-process accounts and debits to finished goods inventory.

Exchange Revenue. The inflow of resources to a Government entity that the entity has earned. They arise from exchange transactions, which occur when each party involved with the transaction forfeits value and receives value in return.

Exchange Transaction. Transactions that arise when each party involved with the transaction forfeits value and receives value in return.

Expense. Outflows or other using up of assets or incurrences of liabilities (or a combination of both) during a period from providing goods, rendering services, or carrying out other activities related to an entity’s programs and missions, the benefits from which do not extend beyond the present operating period.

Fixed-Price Contracts. A firm fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. May be used to acquire commercial items.

Fixed-Price Incentive Contracts. A fixed-price incentive contract is a fixed-price contract that provides for adjusting profit and establishing the final contract price by a formula based on the relationship of final negotiated total cost to total target cost.

Fixed-Price with Prospective Price Redetermination. A fixed-price contract with prospective price redetermination may be used in acquisitions of quantity production or services for which it is possible to negotiate a fair and reasonable firm fixed-price for an initial period, but not for subsequent periods of contract performance.

Full Cost. The total amount of resources used to produce the output. More specifically, the full cost of an output produced by a responsibility segment is the sum of the costs of resources consumed by the responsibility segment that directly or indirectly contributes to the output and the costs of identifiable supporting services provided by other responsibility segments within the reporting entity and by other reporting entities.

Government-wide Commercial Purchase Cards. Government-wide commercial purchase card is a purchase card, similar in nature to a commercial credit card, issued to authorized agency personnel to use to acquire and to pay for supplies and services.

Imputed Costs. The unreimbursed (i.e., non-reimbursed and under-reimbursed) portion of the full costs of goods and services received by the entity from a providing entity. Imputed inter- departmental costs occur when the providing entity is not part of the same department or larger reporting entity other than the U.S. Government as a whole. Imputed intra-departmental costs occur when the providing entity is part of the same department or larger reporting entity (i.e., other bureaus, components, or responsibility segments within the department, or a larger reporting entity).

Imputed Financing. Financing provided to the reporting entity by another Government entity covering certain costs incurred by the former.

Indirect Cost. A cost that cannot be identified specifically with or traced to a given cost object in an economically feasible way.

Interagency Agreements. An interagency agreement documents the procedure by which an agency needing supplies or services (the requesting agency) obtains them from another agency (the servicing agency).

Nonexchange Revenue. The inflow of resources to the Federal Government upon its demand (includes taxes, duties, fines, and penalties) or received by donation.

Nonexchange Transaction. Transactions that arise when one party to a transaction receives value without giving or promising value in return or one party to a transaction gives or promises value without receiving value in return.

Object Class. Categories in a classification system that present obligations by the items or services purchased by the Federal Government.

Other Financing Sources. Inflows of resources that increase the net position of a reporting entity during the reporting period but are not revenues or gains. They include appropriations used, transfers of assets from other Government entities, and financing imputed with respect to any cost subsidies. Financing outflows may result from transfers of the reporting entity’s assets to other Government entities or from exchange revenues earned by the entity but required to be transferred to the general fund or another Government entity. Unexpended appropriations are recognized separately in determining net position but are not financing sources until used.

Outcome. Accomplishments or results that occur (at least partially) because of the service efforts of Government entities. Terms like “impact,” “effect,” or “results” distinguish the change in outcomes specifically caused by the Government activity from the total change in conditions, which can be caused by many factors. An assessment of results of a program compared to its intended purpose capable of being described in financial, economic, or quantitative terms and providing a plausible basis for concluding that the program has, had, or will have this intended effect.

Output. A tabulation, calculation, or recording of activity or effort that can be expressed in a quantitative or qualitative manner. Outputs have two key characteristics: they are systematically or periodically captured through an accounting or management information system and there is a logical connection between the reported measures and the program’s purpose.

Performance Evaluation. A means of measuring efficiency, effectiveness, and results. A balanced performance evaluation should use a scorecard that includes financial and nonfinancial measures focused on quality, cycle time, and cost. Program accomplishments should be in terms of outputs (quantity of products or services provided) and outcomes (results of providing outputs, e.g., how outputs effectively meet intended agency mission objectives).

Probable. Events or situations that can reasonably be expected. What is believed to be more likely than not to occur based on available evidence or logic, which is neither certain nor proven.

Purchase Orders. A purchase order is an offer by the Federal Government to buy supplies or services, including construction and research and development, upon specified terms and conditions, using simplified acquisition procedures.

Recognize/Recognition. To determine amount, timing, classification, and other conditions prior to acceptance and entry of a transaction and express the transactions on the books of account. Recognition is the process of formally recording or incorporating an item into the financial statements of an entity as an asset, liability, revenue, expense, or the like. A recognized item is depicted in both words and numbers, with the amount included in the statement totals. Recognition comprises initial recognition of an item and subsequent changes in or removal of a previously recognized item.

Revenue. An inflow of resources that the Government demands, earns, or receives by donation.

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Contracts. SBIR contracts are designed to foster technological innovation by small businesses with 500 or fewer employees. STTR contracts provide opportunities in Federal innovation research and development that include joint venture opportunities for small business and the Nation’s premier nonprofit research institutions. Stable cost patterns are inherent to both programs.

Treasury Account Symbol (TAS). An identification code assigned by Treasury, in collaboration with OMB and the owner agency, to an individual appropriation, receipt, or other fund account. All financial transactions of the Federal Government are classified by TAS for reporting to Treasury and OMB. It is sometimes confused with the Treasury Appropriation Fund Symbol, used to describe a particular type of TAS; one with budget authority.

Upward Adjustment. An increase to prior year obligations for allowable cost when valid obligations are unrecorded or under recorded.

Work Breakdown Structure (WBS). A hierarchical categorization of the work to be executed. It shows a subdivision of effort to achieve an objective (e.g., a program, project, or contract). A WBS element may be a product, data, service, or any combination. It provides the necessary framework for detailed cost estimating and control, along with providing guidance for schedule development and control.

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