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BSTfinaccountingmanual .pdf



Nombre del archivo original: BSTfinaccountingmanual.pdf
Título: Financial Accounting Manual for Federal Reserve Banks
Autor: Federal Reserve Board

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Financial Accounting Manual for
Federal Reserve Banks
January 2014

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Financial Accounting Manual for
Federal Reserve Banks
January 2014

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

v

Contents
Introduction ........................................................................................................ 1
Revision Set 54 .................................................................................................... 3
1

Balance Sheet ................................................................................................. 7

2

Collateral and Custodies .............................................................................. 71

3

Property and Equipment .............................................................................. 81

4

System Open Market .................................................................................. 101

5

Federal Reserve Notes ................................................................................ 111

6

Reporting Requirements ............................................................................ 119

7

[Reserved]

8

Special Topics ............................................................................................. 133

Appendixes ...................................................................................................... 173
A

Currency ................................................................................................... 175

B

Dividends .................................................................................................. 179

C

Priced Service Compensation .................................................................... 189

D

Software ................................................................................................... 203

E

Restructuring ............................................................................................ 217

F

Pension ...................................................................................................... 225

1

Introduction
This Financial Accounting Manual for Federal Reserve Banks (FAM) contains the
accounting standards that should be followed by the Federal Reserve Banks.1
The Board of Governors has delegated, within certain parameters, the authority to the
director of the Division of Reserve Bank Operations and Payment Systems (RBOPS), to
set accounting policy for the Reserve Banks and to define, amend, and interpret FAM as
prescribed by FRAM 1-001 and 1-035. Periodic amendments to FAM are made primarily
to codify changes in accounting policy that result from new transactions and other
accounting developments. Although setting accounting policy and updating FAM are
responsibilities of the RBOPS Accounting Policy and Operations Section, Reserve Banks’
accounting staffs also play significant consultative roles in the development of accounting
policies included in this manual.
FAM provides guidance to Reserve Banks that should result in uniform accounting policies
conforming to the standards established. In some places, FAM provides examples of
subsidiary accounts to facilitate an understanding of the scope of the broader balance
sheet items. In these cases, unless otherwise noted, the maintenance of such accounts is
discretionary with the Reserve Bank.
Although FAM covers the receipt and disbursement of funds and specifies their location
on the balance sheet, and is thus the controlling document on capitalization, rates of
depreciation, correction of errors in expenses, entries to Profit and Loss, and so on, it does
not provide guidance for cost accounting. The Federal Reserve Planning and Control
System Manual (PACS Manual) sets rules for cost accounting.
Federal Reserve Bank staff should consult with the RBOPS Accounting Policy and
Operations Section on financial accounting questions or issues that are not specifically
covered in this manual. The section’s email group is RBOPS FRB Accounting Policy and
Operations.

1

Portions of the FASB Accounting Standards Codification®, are copyrighted by the Financial Accounting
Foundation, 401 Merritt 7, Norwalk, CT 06856, and are reproduced with permission. In June 2009, the
Financial Accounting Standards Board issued ASC Topic 105, formerly SFAS No. 168, The FASB Accounting
Standards Codification, (“codification”), which has become the single source of U.S. GAAP. References to U.S.
GAAP include both the codification as well as the legacy references.

3

Revision Set 54
December 2013

Revisions are effective as of January 1, 2014.

Summary of Revisions
Chapter 1
Paragraph .45 Quarterly Report – Added a description of the Federal Reserve Banks
Combined Quarterly Financial Report, which is published by the Board.
Paragraph 2.40 Loans (140-025 and 140-050) – Modified the policy to require each Bank to
submit only its fourth quarter evaluation of loan collectability. Also, removed the account
descriptions related to closed lending facilities: the Asset-Backed Commercial Paper Money
Market Liquidity Facility, the Primary Dealer Credit Facility, and the Commercial Paper
Funding Facility LLC.
Added the following new general ledger accounts:
• Paragraph 3.00 U.S. Government Securities: Floating Rate Notes (142-125) – For the U.S.
Treasury floating rate notes.
• Paragraph 3.06 Other Assets – Markets (145-260) – For non-participated, low-value, and
infrequent non-SOMA transactions conducted by the New York Reserve Bank.
• Paragraph 3.07 Other Assets – SOMA (145-275) – For participated, low-value, and
infrequent SOMA transactions conducted by the New York Reserve Bank.
• Paragraph 11.98 Other Liabilities – Markets (240-950) – For non-participated, low-value,
and infrequent non-SOMA transactions conducted by the New York Reserve Bank.
Removed the following account descriptions and accounting policy for closed programs:
• Paragraph 3.03 Consolidated Commercial Paper Funding Facility LLC Accounts (145-050,
145-055, 145-060, 145-065, and 145-070)
• Paragraph 3.09 AIG Allowance for Loan Modification (145-345)
• Paragraph 3.11 AIG Loan and Capitalized Interest (145-375)
• Paragraph 3.14 Preferred Securities (145-830, 145-845, 145-860, 145-875)
• Paragraph 4.93 Securities Borrowing (170-500)
• Paragraph 11.81 Earnings Credits Due to Depository Institutions (240-175)
• Paragraph 11.90 Accumulated proceeds – AIG (240-470)
• Paragraph 12.35 Cost of Earnings Credits (330-075)

4

Financial Accounting Manual for Federal Reserve Banks

Paragraph 4.94 Central Bank Liquidity Swap Accounts (170-525, 170-530) – Clarified the
policy for U.S. dollar liquidity and foreign currency liquidity swaps.
Paragraph 11.70 Sundry Items Payable (240-125) – Modified the description of the types of
transactions recorded in this account to exclude the cash collateral posted by
counterparties pursuant to the commitments to purchase mortgage-backed securities.
Paragraph 11.94 Federal Agency MBS Fails (240-875) – Modified the description of the
types of transactions recorded in this account to include the cash collateral posted by
counterparties pursuant to the commitments to purchase mortgage-backed securities.

Chapter 3
Paragraph 30.75 Depreciation – Clarified depreciation policy for impaired assets.

Chapter 4
Changed the chapter title from Central Bank Unique Accounting to System Open Market
Account and restructured the chapter to enhance understandability and flow.
Paragraph 40.13 Federal Agency and GSE Mortgage-Backed Securities (MBS) – Clarified
the policy related to the accounting for MBS commitment margin balance interest expense
and charges to counterparties for failing to deliver collateral.
Paragraph 40.50 Central Bank Liquidity Swaps – Clarified the policy related to U.S. dollar
and foreign currency liquidity swaps.
Paragraph 40.55 Foreign Deposits – Removed the policy related to foreign deposits, which is
redundant Paragraph 10.60.
Paragraph 40.70 SOMA Participation – Clarified the policy related to SOMA activity
participation with the addition of discussion for the foreign currency activity participation.

Chapter 6
Paragraph 60.70 Charges Assessed and Waived for Deficiencies in Required Balances and
Paragraph 60.96 RBOPS Financial Accounting Reports System (RFARS) -- As a result of
the changes to reserve requirements effective June 27, 2013, eliminated the requirements for
Reserve Banks to submit the FR1217.
Paragraph 60.94 Real Estate Reporting Requirements Annual and Special and Paragraph
60.96 RBOPS Financial Accounting Reports System (RFARS) – Added to the instructions
for FR892 in section 2.g. a requirement to report the number of Bank employees that
occupy the leased space. Removed the requirement for reporting FR892 in the RFARS; the
report is submitted via email.

Chapter 8
Paragraph 81.01 Allowance for Loan Losses – Removed the policy specific to loans that
were extended under lending facilities that are now closed.

Revision Set 53

5

Paragraph 81.07 Program Specific Analysis – Modified the policy to require each Bank to
submit only its fourth quarter evaluation of loan collectability. Conformed the text to
changes made by the Dodd-Frank Act to the Reserve Banks’ authorization to extend
emergency credit and removed the accounting policy related to closed lending facilities.

Appendix
Appendix A.1 Currency Shipment – Removed accounting instructions for currency
shipments that are no longer applicable. Revised instructions are available in the Board’s
notes accountability system.
Appendix D Software, Section 6. Capitalizable costs during software development – Clarified
the accounting policy related to the internally developed software parallel testing and
processing accounting policy.

7

1 Balance Sheet
Contents
.01
.10
.15
.20
.25
.30
.40
.45
.50
.60
.70
.80
.90
.95
1.00
1.01
1.02
1.04
1.06
1.10
1.20
1.24
1.25
1.30
2.00
2.10
2.20
2.30
2.40
2.70
2.80
2.90
2.95
2.96

General ..................................................................................................... 11
Daily Preparation ....................................................................................... 19
Adjustments to Prior Day Balances ............................................................... 19
Daily Submission ....................................................................................... 19
Monthly Submission ................................................................................... 19
Confidential Daily Summary (L.6.1) ............................................................. 20
Condition Statement of Federal Reserve Banks (H.4.1) ................................... 20
Quarterly Report ........................................................................................ 20
Annual Report ........................................................................................... 20
Accruals .................................................................................................... 20
Accruals of Earnings .................................................................................. 21
Accrual of Expenses Within the Month ......................................................... 21
Accrual of Expense/Expenditure at Month-End and Year-End ......................... 21
Accruals of Expenses for Employee Termination Plans
(Involuntary/Voluntary) .............................................................................. 22
Accrual of Reimbursements at Month-End .................................................... 23
Accruals and prepayments for the consolidated health plans ............................. 23
Accruals for Self-Insured Medical/Dental Expenses ......................................... 24
Accruals for Compensated Absences ............................................................. 26
Accruals for Contingent Liabilities ................................................................ 27
Dividend Accruals ...................................................................................... 27
Prepayments .............................................................................................. 28
Operating Leases ........................................................................................ 28
Recovery of Disbursements for Others .......................................................... 29
Accounting for Rebates ............................................................................... 29
Balance Sheet Accounts—General ................................................................ 29
Gold Certificate Account (110-025) .............................................................. 29
Special Drawing Rights Certificate Account (120-025) ..................................... 30
Coin (130-025) ........................................................................................... 31
Loans (140-025 and 140-050) ....................................................................... 31
Acceptances: Bought Outright and Held Under Repurchase
Agreement (140-070 and 140-075) ................................................................. 32
Federal Agency Obligations: Bought Outright and Held Under
Repurchase Agreement (140-100 and 140-125) ............................................... 32
U.S. Government Securities Bought Outright: Bills, Notes, and Bonds
(140-150, 140-175, and 140-200) ................................................................... 33
U.S. Government Securities: Held Under Repurchase Agreement
(140-225) ................................................................................................... 33
Consolidated Maiden Lane II LLC Asset Accounts (142-025,
142-050, 142-075, and 142-100) .................................................................... 33

8

Financial Accounting Manual for Federal Reserve Banks

3.00 U.S. Government Securities: Floating Rate Notes (142-125) ............................. 34
3.01 Consolidated Maiden Lane LLC Asset Accounts (145-025, 145-030,
and 145-035) .............................................................................................. 34
3.02 Loan Fees Deferred (145-040) ...................................................................... 34
3.03 Consolidated Commercial Paper Funding Facility LLC Accounts
(145-050, 145-055, 145-060, 145-065, and 145-070) .......................................... 35
3.04 Consolidated Money Market Investor Funding Facility LLCs
Accounts (145-100, 145-115, 145-130, 145-145, and 145-160) ............................ 35
3.05 Consolidated Maiden Lane III LLC Asset Accounts (145-200,
145-215, 145-230, and 145-245) .................................................................... 35
3.06 Other Assets – Markets (145-260) ................................................................. 35
3.07 Other Assets – SOMA (145-275) ................................................................... 35
3.08 Federal Agency and GSE Mortgage-Backed Securities (145-300,
145-315, 145-330) ....................................................................................... 36
3.09 AIG Allowance for Loan Modification (145-345) ........................................... 36
3.10 Allowance for Loan Losses (145-360) ............................................................ 36
3.11 AIG Loan and Capitalized Interest (145-375) ................................................. 36
3.12 Term Asset-Backed Securities Loan Facility Accounts (145-400,
145-415, 145-430, 145-445, 145-460, 145-475, 145-500, 145-515,
145-530,145-545, 145-560, and 145-575) ........................................................ 36
3.13 Investment in LLC (145-600) ....................................................................... 37
3.14 AIG Preferred Securities (145-830, 145-845, 145-860, and 145-875) ................... 37
3.20 Expansion Accounts – Total Assets ............................................................... 37
3.30 Items in Process of Collection (150-025, 150-050, 150-100, and
150-150) .................................................................................................... 38
3.40 Bank Premises—Land (160-025) .................................................................. 39
3.45 Bank Premises—Buildings (including vaults - 160-050) .................................... 39
3.50 Bank Premises—Machinery and Equipment (160-075) .................................... 39
3.55 Bank Premises—Construction Account (160-100) ........................................... 39
3.60 Bank Premises—Depreciation (160-125) ........................................................ 40
3.65 Furniture and Equipment (170-025) .............................................................. 40
3.66 Furniture and Equipment—Depreciation (170-050) ........................................ 40
3.70 Claims Account Closed Banks (170-075) ....................................................... 40
3.85 Foreign Currencies (170-100 and 170-110) ..................................................... 40
3.90 Reimbursable Expenses and Other Items Receivable (170-125) .......................... 40
3.93 Allowance for Doubtful Treasury Reimbursement (170-130) ............................ 41
3.94 FDIC assumed indebtedness (170-140) .......................................................... 41
3.95 Interest Accrued (170-150) ........................................................................... 41
4.00 Premium on Securities (170-175) .................................................................. 42
4.10 Overdrafts (170-200) ................................................................................... 42
4.20 Deferred Charges (170-225) ......................................................................... 42
4.30 Prepaid Expenses—Materials and Supplies (170-250) ...................................... 44
4.33 Prepaid Expenses—Pension Costs (170-260) .................................................. 46
4.35 Prepaid Expenses—Other (170-275) .............................................................. 46
4.40 Difference Account, Net (170-300) ................................................................ 46
4.50 Suspense Account—General (170-325) .......................................................... 47
4.60 Other Real Estate, net (170-350) ................................................................... 47

Chapter 1. Balance Sheet

4.70
4.80
4.90
4.91
4.92
4.93
4.94
4.99
5.00
5.10
10.01
10.25
10.26
10.30
10.40
10.50
10.60
10.70
10.80
11.01
11.10
11.20
11.25
11.30
11.40
11.50
11.60
11.65
11.70
11.80
11.81
11.82
11.83
11.84
11.85
11.86
11.87
11.88
11.89
11.90

9

Currency and Coin Exhibits (170-375) ........................................................... 47
Old Currency Series (170-400) ...................................................................... 48
Miscellaneous Cash Items (170-425) ............................................................. 48
Suspense Account—Pricing (170-450) ........................................................... 48
Accrued Service Income (170-475) ................................................................ 49
Securities Borrowing (170-500) ..................................................................... 49
Central Bank Liquidity Swap Accounts (170-525 and 170-530) ......................... 49
Expansion Accounts – Other Assets .............................................................. 50
Interdistrict Settlement Account (180-025) ..................................................... 50
Branches or Head Office—Interoffice Account (190-025) ................................. 50
Federal Reserve Notes Outstanding (210-025) ................................................ 50
Federal Reserve Notes—Held by Bank and Branches (210-050) ........................ 51
Federal Reserve Notes—In Transit (210-075) .................................................. 52
Deposits: Depository Institutions (220-025) ................................................... 52
Due to Other FR Banks—Collected Funds (220-075) ...................................... 52
U.S. Treasury—General Account (220-100) .................................................... 52
Foreign Deposits (220-125, 220-130) ............................................................. 52
U.S. Treasury — Special Account (220-140) ................................................... 53
Officers' and Certified Checks (220-150) ........................................................ 53
International Organizations (220-175) ........................................................... 53
Secretary of Treasury Special Account (220-200) ............................................ 53
Government-Sponsored Enterprise Accounts (220-225); Less
Unclassified Charges (220-250); Net (220-275) ............................................... 53
FRB as Fiscal Agent (220-325) ..................................................................... 53
Miscellaneous Deposits (220-400) ................................................................. 54
Deferred Credit Items (230-025, 230-050, 230-075, 230-100, 230-125,
and 230-150) .............................................................................................. 54
Accrued Dividends Unpaid (240-025) ........................................................... 55
Unearned Discount (240-050) ...................................................................... 56
Discount on Securities (240-075) .................................................................. 56
Sundry Items Payable (240-125) .................................................................... 56
Suspense Account—General (240-150) .......................................................... 56
Earnings Credits Due to Depository Institutions (240-175) .............................. 57
Exchange translation liability – central bank liquidity swaps (240-190) ............... 57
Accrued Expenses Unpaid—Estimated (240-200) ........................................... 57
Accumulated Postretirement Benefit Obligation (240-300) ............................... 57
Consolidated Maiden Lane LLC Liability Accounts (240-400 and
240-425) .................................................................................................... 58
Interest on Reserves Accounts - Interest Due to Depository
Institutions (240-430) .................................................................................. 58
Consolidated Maiden Lane II LLC Liability Accounts (240-435 and
240-440) .................................................................................................... 59
Consolidated Money Market Investor Funding Facility LLCs
Liability Accounts (240-450 and 240-455) ...................................................... 59
Consolidated Maiden Lane III LLC Liability Accounts (240-460 and
240-465) .................................................................................................... 59
Accumulated proceeds – AIG (240-470) ........................................................ 59

10

Financial Accounting Manual for Federal Reserve Banks

11.91
11.92
11.93
11.94
11.95
11.96
11.97
11.98
11.99
12.00
12.01
12.02
12.05
12.10
12.20
12.30
12.33
12.35
12.36
12.37
12.39
12.40
12.43
12.45
12.46
12.47
12.48
12.50
12.60
12.65

Expansion accounts - Other Liabilities .......................................................... 59
Branches or head office—interoffice account (240-825) .................................... 59
Term Deposit Facility (240-850) ................................................................... 60
Federal Agency MBS Fails (240-875) ............................................................ 60
Designated Financial Market Utilities Deposits (240-900) ................................ 60
Interest on Federal Reserve Notes (240-925) ................................................... 60
TALF liability (240-930, 240-940, and 240-960) .............................................. 60
Other Liabilities – Markets (240-950) ............................................................ 61
Central Bank Liquidity Swap Accounts (242-100) ........................................... 61
Reverse Repurchase Agreements – Foreign Pool (242-120) ............................... 61
Reverse Repurchase Agreements – Other (242-140) ......................................... 61
Expansion accounts - Total Liabilities ........................................................... 61
Capital Paid-In (310-025) ............................................................................ 61
Surplus (320-025) ....................................................................................... 62
Current Income (330-025) ........................................................................... 62
Operating Expenses (330-050) ...................................................................... 64
System Net Periodic Pension Cost (330-060) .................................................. 64
Cost of Earnings Credits (330-075) ............................................................... 64
Interest on Reserves and Term Deposits – Interest Expense (330-078) ................ 64
Provision for Loan Loss Expense (330-080) .................................................... 65
Expansion Accounts – Current Net Income ................................................... 65
Profit and Loss (330-100) ............................................................................ 65
Cost of Unreimbursed Treasury Services (330-110) ......................................... 66
Assessments by Board of Governors (330-125 and 330-150) ............................. 67
Assessments by Board of Governors – Bureau of Consumer Financial
Protection (330-135) ................................................................................... 67
Assessments by Board of Governors – Office of Financial Research
(330-140) ................................................................................................... 68
Expansion Account – Board assessments (330-130) ......................................... 68
Dividends Accrued Since January 1 (330-175) ................................................ 68
Interest Paid on Federal Reserve Notes (330-200) ............................................ 68
Transferred To or From Surplus (330-225) ..................................................... 69

Chapter 1. Balance Sheet

.01

11

General
The balance sheet, form FR 34, shows in detail the assets, liabilities, and capital accounts of
the Federal Reserve Banks and certain additional information such as U.S. Government
deposits with special depositaries, collateral and custodies held, classifications of “Other
deposits—Miscellaneous,” and certain memorandum accounts.
The balance sheet is the basis for the weekly statement of condition which the Board of
Governors is required by law to publish periodically. It also furnishes the Board of
Governors with basic, original source material for statistical data, much of which is
published, relating to the condition of Federal Reserve Banks.
Each Reserve Bank should set up such general ledger and subsidiary accounts as it requires
for its own purposes and as such will enable it to prepare the balance sheet and to maintain
satisfactory internal controls. This chapter provides general descriptions of the scope of the
balance sheet accounts to promote uniformity of accounting treatment. It is not the intent
of this Manual to redefine basic accounting principles. In those cases where the accounting
treatment is unclear, Reserve Banks should contact the RBOPS Accounting Policy and
Operations Section for a FAM interpretation. Transactions of the Reserve Bank must be
recorded in the general ledger and reflected on the Balance Sheet; none of the principles or
possible lack of specific instructions for any given transactions in this Manual should be
interpreted as allowing otherwise. Proper accounting practice requires consistent
application of accounting principles throughout the District (i.e. head office and Branches)
from year to year. Where this Manual permits Reserve Banks to choose optional treatments
for transactions, Reserve Banks should consistently apply the chosen option to all similar
transactions in the future. In general, the provisions of this Manual address Reserve Bank
accounting issues and should be applied from a District perspective (for example, the
process for accruals required by paragraph .90 should be applied on a Districtwide basis
rather than department or Branch basis).

12

Financial Accounting Manual for Federal Reserve Banks

Balance Sheet
ASSETS
GOLD CERTIFICATE ACCOUNT
SPECIAL DRAWING RIGHTS certificate account
COIN
LOANS AND SECURITIES:
Loans to depository institutions
Loans to others
Acceptances
Bought outright
Held under repurchase agreement
Federal agency obligations:
Bought outright
Held under repurchase agreement
U.S. Govt. securities bought outright:
Bills
Notes
Bonds
U.S. Govt. sec. held under repurchase agreement
Total U.S. Government securities
Total loans and securities
ML II portfolio holdings at fair value
ML II reserve account
ML II loan payable to FRBNY at par
ML II accrued interest payable—FRBNY
Expansion account
Expansion account
Portfolio holdings of Maiden Lane LLC
Loan payable to FRBNY at par (ML)
Accrued interest payable to FRBNY (ML)
Loan fees deferred
CPFF loan payable to FRBNY
CPFF accrued interest payable to FRBNY
CPFF assets, face
CPFF assets, discount
CPFF other investments
Expansion account
MMIFF loan payable to FRBNY
MMIFF accrued interest payable to FRBNY
MMIFF portfolio assets
MMIFF portfolio assets—valuation adjustment
MMIFF other investments
Expansion account
ML III portfolio holdings at fair value
ML III reserve account
ML III loan payable to FRBNY at par
ML III accrued interest payable
Expansion account
Expansion account
Fed agency MBS
Fed agency MBS—fail to deliver
Fed agency MBS—temporary investments
AIG allowance for loan modification
Allowance for loan losses
AIG loan and capitalized interest

110-025
120-025
130-025
140-025
140-050
140-070*
140-075
140-100
140-125*
140-150
140-175
140-200
140-225*
140-275
140-800
142-025*
142-050*
142-075*
142-100*
142-125
142-150
145-025*
145-030*
145-035*
145-040
145-050*
145-055*
145-060*
145-065*
145-070*
145-075
145-100*
145-115*
145-130*
145-145*
145-160*
145-175
145-200*
145-215*
145-230*
145-245*
145-260
145-275
145-300
145-315
145-330
145-345*
145-360
145-375*

(continued on next page)

Chapter 1. Balance Sheet

13

Balance Sheet—continued
TALF—loans extended to borrowers
TALF—ABS held by FRBNY
TALF—value of put option with LLC
TALF—cash equivalents
TALF—credit extended by FRBNY to LLC
TALF—accrued interest payable—FRBNY
TALF—other investments
TALF—ABS held by LLC
TALF—AIR investments
TALF—senior loan payable to FRBNY
TALF—FV adj of senior loan pay to FRBNY
TALF—FV of TALF loans
Investment in LLC
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
AIG—preferred securities—AIA
AIG—accrued dividends on preferred securities—AIA
AIG—accrued dividends on preferred securities —ALICO
AIG—preferred securities—ALICO
ITEMS IN PROCESS OF COLLECTION:
Transit items—
Federal Reserve Banks
Depository institutions
Other items in process
Adjustments, net
Total items in process of collection
BANK PREMISES:
Land
Buildings (including vaults)
Building machinery and equipment
Construction account
Total bank premises
Less depreciation
Bank premises, net
OTHER ASSETS:
Furniture and equipment
Less depreciation
Furniture and equipment, net
Claims account closed banks
Foreign currencies
(gross $
)
Reimbursable exp. and other items receivable
Less allowance for doubtful reimbursement
Reimbursable expenses, net
FDIC assumed indebtedness

145-400*
145-415*
145-430*
145-445*
145-460*
145-475*
145-500*
145-515*
145-530*
145-545*
145-560*
145-575
145-600
145-615
145-630
145-645
145-660
145-675
145-700
145-715
145-730
145-745
145-760
145-775
145-800
145-815
145-830*
145-845*
145-860*
145-875*

150-025
150-050
150-100
150-150
150-900
160-025
160-050
160-075
160-100
160-110
160-125
160-150
170-025
170-050
170-060
170-075
170-100
170-110*
170-125
170-130
170-135
170-140

(continued on next page)

14

Financial Accounting Manual for Federal Reserve Banks

Balance Sheet—continued
Interest accrued
Premium on securities
Overdrafts
Deferred charges
Prepaid expenses:
Materials and supplies
Pension costs
Other
Difference account, net
Suspense account—general
Other real estate, net
Currency and coin exhibits
Old currency series
Miscellaneous cash items
Suspense account—pricing
Accrued service income
Securities borrowing
Foreign currency liquidity swap arrangements
Foreign currency swap arrangements
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
Total other assets
Interdistrict settlement account
Branches or head office—interoffice account
TOTAL ASSETS

170-150
170-175
170-200
170-225
170-250
170-260*
170-275
170-300
170-325
170-350
170-375
170-400
170-425
170-450
170-475
170-500*
170-525
170-530
170-540
170-550
170-560
170-570
170-580
170-590
170-800
180-025
190-025
190-050

LIABILITIES
FEDERAL RESERVE NOTES:
Outstanding (Received from Agent, net)
Less—
Held by Bank and branches
In transit
Federal Reserve notes, net
DEPOSITS:
Depository institutions
Due to other F.R. Banks—collected funds
U.S. Treasury—general account
Foreign
Foreign (gross $
)
Other deposits:
U.S. Treasury—special account
Officers’ and certified checks
International organizations
Secy. of Treasury special account
Govt.-sponsored enterprise accounts
Less unclassified charges
Net
FRB as Fiscal Agent
Miscellaneous
Total other deposits
Total deposits

210-025
210-050
210-075
210-100
220-025
220-075
220-100
220-125
220-130*
220-140*
220-150
220-175
220-200*
220-225*
220-250*
220-275*
220-325*
220-400
220-450
220-500

(continued on next page)

Chapter 1. Balance Sheet

15

Balance Sheet—continued
DEFERRED CREDIT ITEMS:
Other offices—Own District
Other Federal Reserve Banks
U.S. Treasury—general account
Depository institutions
Other items in process
Adjustments, net
Total deferred credit items
OTHER LIABILITIES:
Accrued dividends unpaid
Unearned discount
Discount on securities
Sundry items payable
Suspense account—general
Earnings credit due to depository institutions
Exchange translation liability—central bank liquidity swaps
Accrued expenses unpaid—estimated
Accumulated Postretirement Benefit Obligation
ML loan and interest payable
ML loan payable—fair value adjustment
Interest on reserves due to depository institutions
ML II loan payable
ML II loan payable—fair value adjustment
Expansion account
MMIFF asset backed commerical paper (ABCP) issued
MMIFF ABCP accrued interest payable
ML III loan and accrued interest payable
ML III loan payable—fair value adjustment
Accumulated proceeds—AIG
Expansion account
Expansion account
Expansion account
Total other liabilities
Branches or head office—interoffice acct.
Term Deposit Facility
Federal agency and GSE MBS—fails
Designated Financial Market Utilities Deposits
Interest on Federal Reserve notes
TALF—U.S. Treasury equity, including accrued interest
TALF—FV of loan commitment
Expansion account
TALF—FV adj of U.S. Treasury loan
Central bank liquidity swap accounts
Reverse repurchase agreements—foreign pool
Reverse repurchase agreements—other
Expansion account
Expansion account
Expansion account
Expansion account
Expansion account
TOTAL LIABILITIES

230-025
230-050
230-075
230-100
230-125
230-150
230-500
240-025
240-050
240-075
240-125
240-150
240-175
240-190*
240-200
240-300
240-400
240-425
240-430
240-435*
240-440*
240-445
240-450*
240-455*
240-460*
240-465*
240-470
240-475
240-480
240-485
240-800
240-825
240-850
240-875
240-900
240-925
240-930*
240-940*
240-950
240-960*
242-100
242-120
242-140
242-160
242-180
242-200
242-220
242-240
250-025

CAPITAL ACCOUNTS
CAPITAL PAID IN
SURPLUS

310-025
320-025

(continued on next page)

16

Financial Accounting Manual for Federal Reserve Banks

Balance Sheet—continued
INCOME, EXPENSES, AND DIVIDENDS:
Current income
Operating expenses (deduct)
Net periodic pension costs
Cost of earnings credits (deduct)
Interest on reserves and term deposits
Provision for loan loss expense
Expansion account
Expansion account
Current net income
Profit and loss, net
Cost of unreimbursed Treasury services
Assessment by Board of Governors (deduct)
Board expenditures
Expansion account
Assessments by Board of Governors—Bureau of Consumer
Financial Protection
Assessments by Board of Governors—Office of Financial Research
Assessments by Board of Governors—F.R. currency costs
Net income available for distribution
Deduct:
Dividends accrued since January 1
Interest paid on Federal Reserve notes
Transferred to or from surplus
Undistributed net income
TOTAL CAPITAL ACCOUNTS
TOTAL LIABILITIES & CAPITAL ACCTS:

330-025
330-050
330-060*
330-075
330-078
330-080
330-082
330-085
330-090
330-100
330-110
330-125
330-130
330-135
330-140
330-150
330-160
330-175
330-200
330-225
330-275
340-025
350-025

(Monthly)
Special depositaries, Treasury tax and loan accounts
Collateral for Treasury tax and loan accounts:
Held in own vaults
Held by other offices in own district
Held by other F.R. Banks
Held by depository institutions
Collateral for loans:
Held in own vaults
Held by other offices in own district
Held by other F.R. Banks
Held by depository institutions
Accountability to Treasury for U.S. Government securities:
Marketable securities—
Retired
Canceled redeemed
Non-marketable securities—
On hand
On consignment with—
Issuing agents
Branches
Savings bonds issued—book entry
Accountability for other securities:
U.S. Government agencies—
*Unissued
Retired

$
Definitive
$

Book Entry
$

(continued on next page)

Chapter 1. Balance Sheet

17

Balance Sheet—continued
Canceled redeemed
International Organizations—
*Unissued
Retired
Canceled redeemed
Other custodies held as fiscal agent of the Treasury:
Gold—
Held in own vaults
Held by other F.R. Banks
Other
Custodies held for:
Commodity Credit Corporation
U.S. Treasury—
Special gold custody account:
For display purposes
Other
Other Government departments, agencies, and officials—
Held in own vaults
Held by other offices in own district
Held by other F.R. Banks
Held by depository institutions
Other offices in own district—
Unissued U.S. Government securities on consignment—
On hand
With issuing agents
Other
System Open Market Account
Other F.R. Banks
Depository Institutions—
Securities, etc.—
Held in own vaults
Held by other offices in own district
Held by other F.R. Banks
Held by depository institutions
Foreign correspondents—
Acceptances
Securities—
Held in own vaults
Held by others
Earmarked gold—Held in own vaults
Foreign Debt Collateral
Held in own vaults
Held by others
International Bank for Reconstruction & Dev.—securities
International Finance Corporation—securities
International Monetary Fund—
securities
gold
International Development Association—securities
Inter-American Development Bank—securities
Asian Development Bank—securities
Miscellaneous custody items
Collateral and custody items in process
TOTAL

(continued on next page)

18

Financial Accounting Manual for Federal Reserve Banks

Balance Sheet—continued
OTHER DEPOSITS—MISCELLANEOUS
Name of Account

Amount
$

Memorandum Accounts
Food coupons pending—
verification
destruction
Noncash collection items:
Securities and coupons on hand
U.S. Government and agency coupons:
Unclassified (or redeemed)
Suspense or holdover
Miscellaneous cash items
International coupons:
Redeemed
Suspense or holdover
Coupons detached from safekeeping holding awaiting shipment to paying
agents
Coupons clipped from unissued Treasury and agency stock

MATURITY DISTRIBUTION
Maturity distribution of loans:
15 days or less
16–90 days
Over 90 days
Total loans
Maturity distribution of acceptances:
15 days or less
16–90 days
Over 90 days
Total Acceptances
Supplemental #1
Supplemental #2
Supplemental #3
Supplemental #4
Supplemental #5

615-020
615-025
615-030
615-035
615-040*
615-045*
615-050*
615-055*
615-110
615-115
615-120
615-125
615-130

(continued on next page)

Chapter 1. Balance Sheet

19

Balance Sheet—continued
Supplemental #6
Supplemental #7
Supplemental #8
Supplemental #9

.10

615-135
615-140
615-145
615-150

Daily Preparation
A combined balance sheet for each Federal Reserve Bank should be prepared for each day
that the Bank or any Branch is open for business. (See paragraph 60.11 for standard
holiday schedule.) Special procedures are required for Wednesday, month-end, and
year-end balance sheets:
• On the last day of the month the combined balance sheet and the individual balance
sheets for each office should show on the reverse all the data for which provision has been
made.
• When Wednesday is not the first day of the month and is a holiday, or when the last day
of the month is a holiday, the balance sheet for the preceding business day should reflect
accruals of earnings, expenses, and dividends through the Wednesday holiday or the last
day of the month. (See accrual instructions beginning with paragraph .60.)
• At the end of each day, no amount should be reported in undistributed net income on
the combined balance sheet. (See paragraph 60.20 for additional discussion.)

.15

Adjustments to Prior Day Balances
While adjustments to prior day balances may be made before balance sheets are submitted,
adjustments to prior day Treasury and depository institution account balances should be
rare. The Manager of the RBOPS Financial Reporting and Control Section should be
notified of all prior day adjustments to Treasury and depository institution accounts, when
identified, in order to ensure that their implications are properly communicated to
monetary projection and fiscal staff.

.20

Daily Submission
Combined balance sheet data for each District should be transmitted to the Board daily.
Technical procedures for the transmission of FR 34 data may be found in Technical
Memorandum No. 15. Data should be transmitted to reach the Board no later than 1:30
p.m. Eastern Time each business day.

.25

Monthly Submission
A copy of the reverse side of the combined District balance sheet, FR 34, should be
forwarded electronically or by mail to the RBOPS Financial Reporting and Control Section
to be received within 15 business days after month-end. (See paragraph .10.) The reverse
side of the individual office balance sheets should be included at year-end. (See paragraph
.50.)

20

Financial Accounting Manual for Federal Reserve Banks

.30

Confidential Daily Summary (L.6.1)
The combined balance sheet data are consolidated daily and, together with figures from
other sources, are used in preparing a confidential daily statement, which is furnished to the
Board and various members of its staff, certain Treasury officials, and the Federal Reserve
Banks.

.40

Condition Statement of Federal Reserve Banks (H.4.1)
Section 11(a) of the Federal Reserve Act provides that the Board of Governors shall
publish once each week a statement showing the condition of each Federal Reserve Bank
and a consolidated statement for all Federal Reserve Banks. This section of the Act further
provides that “ such statements should show in detail the assets and liabilities of the Banks,
single and combined, and shall furnish full information regarding the character of the
money held as reserve and the amount, nature, and maturities of the paper and other
investments owned or held by Federal Reserve Banks.”
The Board's weekly statement is published each Thursday and is compiled from the
previous Wednesday’s data.

.45

Quarterly Report
The Board publishes the Federal Reserve Banks Combined Quarterly Financial Report,
which presents the Federal Reserve Banks’ combined financial statements and is prepared
using data that the Reserve Banks make available.

.50

Annual Report
The Board publishes the Annual Report of the Board of Governors of the Federal Reserve
System, which provides the Board’s financial statements, the Reserve Banks’ combined
financial statements, and pro forma financial statements for Federal Reserve priced
services. The Annual Report is prepared using data that the Reserve Banks make available.

.60

Accruals
Under accrual accounting, the financial effects of transactions and other economic events
are recorded in the periods in which they have their primary economic effect. Accordingly,
accrual accounting recognizes revenues and expenses as they are earned or incurred, not as
cash is received or paid.
Accruals should be made weekly at a minimum (see paragraph .80) unless otherwise
specified. Prior to the end of the reporting period, Reserve Banks should ensure that all
accruals are properly reflected in the underlying accounts. In most cases, the accrual should
be based on a transaction or other economic event that has been completed (i.e. the
goods/services have been received). Accruals for standard timing lags may be made by using
a standard accrual made in the beginning of the year, and then reversed at year-end
(“standing accrual”).
Paragraphs .70 - 1.00 provide general procedures for making accruals at different intervals.
Due to their unique nature, detailed instructions have also been provided for making the
following accruals: consolidated health plans (see paragraph 1.01), self-insured

Chapter 1. Balance Sheet

21

medical/dental expenses (see paragraph 1.02), compensated absences (see paragraph 1.04),
contingent liabilities (see paragraph 1.06), and dividends (see paragraph 1.10).

.70

Accruals of Earnings
Calculate earnings on all types of earning assets, except SOMA assets (see paragraph 40.60)
for each calendar day on the basis of holdings of such assets at opening of business on
such day or at close of business on the last preceding business day if the day in question is
a Sunday or a holiday. Accrual of earnings on advances to depository institutions should
be calculated at the interest rate in effect on the previous day. Other earnings are ordinarily
credited when received or when services are rendered.

.80

Accrual of Expenses Within the Month
Operating expenses or, as an option, salaries and related expenses, should be accrued in
total along with estimates of compensation paid or received for check, automated clearing
house, electronic access, and funds and securities transfer services provided or bought, as
outlined in the following paragraphs, in order that expenses may be reflected consistently in
published condition reports.
On each Wednesday, if accruals are made weekly, or on each day, the difference between
total estimated net operating expenses and total net operating expenses recorded for the
week or day should be debited (or credited) to a special expense account e.g., “Expenses
accrued-estimated” and credited (or debited) to a special liability account, e.g., “Accrued
expenses unpaid—estimated” (paragraph 11.83). After these entries are made, the balances
in these two accounts will represent the difference between estimated net operating
expenses for the month-to-date and total net operating expenses for the month-to-date as
recorded.
On the form FR-34, the debit balance in the "Expenses accrued-estimated" account should
be included in the item "Operating expenses" account (330-050) and the credit balance in
the "Accrued expenses unpaid-—estimated" account (240-200) should be reported under
the caption "Other liabilities." If month-to-date net operating expenses recorded exceeds
total estimated net operating expenses, resulting in a credit balance in "Expenses
accrued-estimated" and a debit balance in "Accrued expenses unpaid-estimated," these two
accounts should be adjusted to zero. On the last day of the month, these accounts should
be closed against each other. (See paragraph .90 for month-end accruals).

.90

Accrual of Expense/Expenditure at Month-End and Year-End
Expenses incurred should be accrued as of the last day of the month and the year.
Expenses are considered incurred if the service has been rendered or the product or
material has been received. Non-incurred expenses should not be accrued. Types of
transactions that normally give rise to accruals include receipt of goods or services; taxes;
transportation costs; certain payroll costs, such as overtime charges; and costs associated
with acquiring or improving physical assets, such as buildings and equipment. (Also see
paragraphs 1.20 and 4.35 for additional clarification and examples.)
To ensure the proper recognition of expenses and liabilities at month-end and year-end,
Reserve Banks are expected to maintain robust accrual processes to identify expenses
timely and record them in the proper period. These processes may differ depending on the

22

Financial Accounting Manual for Federal Reserve Banks

nature of the transaction as long as they effectively accrue significant expenses. For
example, some transactions may be more efficiently accrued on a comprehensive basis than
on a transaction basis. Examples of these may include automated accruals associated with
purchase orders, purchasing cards, and personnel-related expenses. Other transactions,
such as recurring monthly payments for utilities, may be more efficiently recorded on a
cash basis if the monthly differences are minor and they are handled consistently
month-to-month.
Although some transactions, particularly those acquisitions of goods and services outside
the purchase order/purchasing card processes, may be difficult to identify, Reserve Banks
must maintain an accrual process to consistently identify and accrue significant
transactions in the appropriate period. Because of the importance of producing accurate
year-end financial statements, additional procedures, such as subsequent payments testing,
should be used to identify and accrue expenses incurred but not paid at year-end.
Amounts accrued should be debited to operating expenses and distributed to the
appropriate subsidiary accounts or to the appropriate asset account, and credited to sundry
items payable (see paragraph 11.70) or credited as offsets to items in prepaid accounts. (See
paragraph 1.20.) For monthly accruals made for purchasing card transactions, the Bank
may choose to offset the accrual for expenses to the current expense undistributed account
rather than the individual PACS account. If the Bank makes significant capital purchases
with purchasing cards, however, accruals for capital items should be debited to the relevant
capital asset account. Generally, each month the previous month-end accruals, except for
standing accruals (see paragraph .60 for standing accruals) should be reversed and
payments should be debited to current expense as noted in paragraph .60. If payment is not
expected to be made until a future period, the Bank can elect to not automatically reverse
the accrual.

.95

Accruals of Expenses for Employee Termination Plans
(Involuntary/Voluntary)
If a Reserve Bank initiates an involuntary employee termination program, it must
recognize the associated liability if it is probable and the amounts are estimable. The
probability test has been met when all four of the following conditions exist and have been
communicated to the affected employees (communication date): 1) the appropriate level of
management has approved and committed the organization to involuntarily terminate
employees, 2) the affected employees have been notified, 3) the terms of the benefits to be
provided have been communicated in sufficient detail to the affected employees, and 4) the
period to complete the planned termination is not likely to change. If the plan requires an
employee to work more than sixty days beyond notification in order to receive benefits, it
may be necessary to accrue the liability over several periods.
Reserve Banks should note that if incremental termination benefits, in addition to the
standard benefit program, are provided to employees as retention incentives, the accrual for
the cost associated should not be included in the accrual for the standard benefit program
— it should be accrued evenly over the period from the communication date to the
termination date.
If a Reserve Bank initiates a voluntary (early) termination program, it must estimate and
recognize the liability for the termination benefits when the following conditions exist:
1) the appropriate level of management has approved and committed to a plan that allows

Chapter 1. Balance Sheet

23

employees to terminate employment, 2) employees have accepted the plan and it is unlikely
that the election will be changed, and 3) the period to complete the termination is not likely
to change.
Any incremental costs such as retention incentives associated with voluntary retirement
programs, unlike the involuntary termination plans, should be accrued in total when the
employee accepts the offer. If the election window for the program falls within a calendar
year, the accrual may be made at the end of the window period; however, if the window
crosses year-end, Reserve Banks should accrue only costs that are associated with
employees who have indicated acceptance of the program.
Given the complexity involved with these programs related to the timing of expense
accruals, Reserve Banks should contact RBOPS Accounting Policy and Operations Section
for guidance when considering such plans.

1.00

Accrual of Reimbursements at Month-End
Estimated reimbursements at the end of the month should be debited to reimbursable
expenses and other items receivable, the purpose being to reflect a more accurate current
expense figure. The accrual entries are reversed, and replaced with actual amounts in the
following month when reimbursable amounts are determined.

1.01

Accruals and prepayments for the consolidated health plans
In January 2003, the Reserve Banks consolidated most of the active and retiree health plans
with the Office of Employee Benefits (OEB) as the administrator. (For Districts that
continue to have locally managed self-insured health plans, see paragraph 1.02 for the
accruals.) Although the Reserve Banks share a common administrator and service
providers, the benefits and costs are still recorded at the Bank level. These costs include
those for active employee medical benefits, retiree medical and life insurance benefits
(FASB ASC Topic 715-60; formerly SFAS No. 106), and Long-Term-Disability
(LTD)/self-insured workers compensation medical benefits (FASB ASC Topic 712-10;
formerly SFAS No. 112). The following summarizes the payment flows and accounting
instructions for these benefits:
• Each month, in order to have sufficient funds to pay claims, OEB collects a monthly
“premium” from the Reserve Banks by initiating a same day settlement (SDS) entry
through the New York Reserve Bank. Reserve Banks record payments to the OEB by
debiting the National Health Care Prepaid Expenses account (170-275) because this
“premium” represents an advance payment to OEB.
• Reserve Banks also accrue monthly expenses related to active employee medical benefits
(including those incurred but not reported (IBNR) – see paragraph 1.02) to the SIP –
National Health Care Accrued Liabilities account (240-125). Care should be taken to
ensure that accruals for medical claims incurred but not paid do not include liabilities for
post-retirement (FASB ASC Topic 715-60; formerly SFAS No. 106) and
post-employment (FASB ASC Topic 712-10; formerly SFAS No. 112) benefits, which are
accrued based on the actuarial valuation.
• When Reserve Banks are notified by the OEB that payments have been made on their
behalf, Reserve Banks debit as appropriate, the SIP – National Health Care Accrued
Liabilities account (240-125) for active employee medical, retiree medical (FASB ASC

24

Financial Accounting Manual for Federal Reserve Banks

Topic 715-60; formerly SFAS No. 106), and LTD/self-insured workers compensation
medical (FASB ASC Topic 712-10; formerly SFAS No. 112) and credit the National
Health Care Prepaid Expenses (170-275) account.
At year-end, each District will need to adjust its incurred but not paid liability associated
with active medical claims based on actual claims paid.

1.02

Accruals for Self-Insured Medical/Dental Expenses
A liability must be recognized for the amount of medical/dental claims that have been
incurred but not paid. A claim has been incurred when the event (e.g. medical treatment)
that precipitates future payouts has occurred. The amount of this liability should reflect an
estimate of the amount that will be paid, ultimately, by the Bank (net of stop-loss
insurance, if the Bank maintains such coverage). It is not appropriate to maintain a
“reserve” for claims that may be incurred in the future. Any funds related to the provision
of self-insured medical/dental expenses that are held on deposit by claims administrators
should be reflected separately as an asset of the Bank, rather than as an offset to the
accrued self-insured medical/dental liability. A District is considered to be self-insured
unless the insurance carrier bears 100% of the risk of loss due to shortfalls between claims
and premiums.
As with most accruals, the liability reflected will be an estimate of the actual amounts of
claims incurred but not paid. In order to maintain consistency among Reserve Bank
estimates, a standard approach to this estimate has been adopted. The year-end liability
should be based on the prior year's experience adjusted for current trends in claims.
Specifically, a Reserve Bank should determine the amount of claims paid in the current
year that were incurred in the prior year (run-out claims). This amount should then be
divided by the total claims paid in the prior year to establish a “subsequent claims ratio.”
This ratio should then be applied to the most recent 12 months of payments data available
to obtain the amount of the liability.
As with most accruals, medical and dental expenses should be accrued weekly, consistent
with paragraph .60. Generally, this liability would be increased by the accruals, decreased
by claim payments, and periodically adjusted to maintain an appropriate balance based on
the “subsequent claims ratio” and the most current 12 months payment history.
Alternatively, a Reserve Bank may choose to charge claims payments directly to expense
while periodically adjusting this liability to its desired level, as described above. In any case,
the liability balance should be reviewed at the end of every quarter, at a minimum (more
frequently if circumstances warrant). This review should re-estimate the liability balance by
applying the “subsequent claims ratio” (see second bullet under “Subsequent Claims
Ratio” discussion below) to the most recent 12 months of payments data. In the first,
second, and third quarter, if the actual liability balance is significantly different from the
amount re-estimated, the on-going weekly accruals should be adjusted accordingly. The
liability balance at year-end should always be adjusted to reflect the amount calculated
using the methodology outlined in the paragraph above.
Exceptional circumstances (e.g., a change in claims administrator or plan design changes)
may exist that would lead to a material misstatement of this liability if additional
adjustments were not made. In such situations, the RBOPS Accounting Policy and
Operations Section should be contacted for approval of an appropriate alternative
estimation methodology.

Chapter 1. Balance Sheet

25

The following items provide further clarification of this estimation process:

Subsequent claims ratio
• Care should be taken when making this computation to remove claims paid that will be
recovered from an insurance carrier due to a stop-loss policy from both the numerator
and denominator.
• Reserve Banks should modify this ratio at some point during the year when data for
claims paid in the current year that were incurred in the prior year are available. This
adjustment should be made as soon as practical, usually by the end of the second or third
quarter. The following example illustrates the calculation of the liability balance:

Example of calculation of liability balance
In 20X2, District Z anticipates that substantially all run-out claims relating to 20X1 will be paid by June
30, 20X2. The calculation of the estimated liability balance for the 4 quarters of 20X2 would be made as
follows:
Actual liability at 12/31/X1 = Claims paid in X1 that relate to X0 × Claims paid Jan X1-Dec X1
Total claims paid in X0
Liability estimate at 3/31/X2 = Ratio calculated for 12/31/X1 × Claims paid Apr X1-Mar X2 (from above)
Liability estimate at 6/30/X2 = Claims paid in X2 that relate to X1* x Claims paid Jul X1-Jun X2
Total claims paid in X1
Liability estimate at 9/30/X2 = Ratio calculated for 6/30/X2 × Claims paid Oct X1-Sep X2 (from above)
Actual liability at 12/31/X2 = Ratio calculated for 6/30/X2 × Claims paid Jan X2-Dec X2 (from above)
* If complete run-out claim information is not available until later in the year, Districts should continue
using the previously calculated ratio until complete information is available.

• In the event that Reserve Banks cannot obtain reliable information regarding the amount
of run-out claims, they should contact the RBOPS Accounting Policy and Operations
Section for assistance.
• Some Reserve Banks maintain little to no “stop-loss” insurance. As a result they often
experience more volatility in claims experience. It is conceivable that the “run-out” claims
from a prior year may contain payments related to an unusual situation resulting in a
ratio that is unreasonably high. Similarly, a Reserve Bank may be aware of an unusual
situation that exists at year-end requiring an increase to the liability. Both cases should be
treated as an exceptional circumstance and RBOPS Accounting Policy and Operations
Section staff should be contacted.

Liability Estimate:
• Given that the ratio is based on an annual amount, the estimate should be computed by
applying the ratio to the most recent 12 month payment history.
• Care should be taken when making this computation to remove claims that will be
recovered from an insurance carrier due to a stop-loss policy from the 12 month payment
history amount.

26

Financial Accounting Manual for Federal Reserve Banks

Special Considerations:
• Remember that medical payments/accruals for retirees and individuals on long-term
disability are covered under FASB ASC Topic 715-60; formerly SFAS No. 106, and
FASB ASC Topic 712-10; formerly SFAS No. 112, respectively, and should be excluded
from the aforementioned calculations.

1.04

Accruals for Compensated Absences
Districts must accrue a liability for employees’ compensation for future absences if a) the
obligation is attributable to services already rendered, b) the obligation relates to rights that
vest or accumulate, and c) payment of the compensation is probable and estimable. This
requirement does not extend to sick-pay benefits unless they vest (i.e. an employee is paid
for unused sick days upon termination).
The purpose of this accrual is to recognize the liability for vested or accumulated
compensated absences.
• Vested rights are those for which the District has an obligation to make payment even if
an employee terminates.
• Accumulated rights are earned, but unused, rights to receive payment for compensated
absences that may be carried forward to one or more periods. Accumulated rights may be
vested, in whole or in part.
The requirement to accrue a liability for compensated absences depends on whether the
unused rights expire at the end of the year in which they are earned or accumulated and are
carried forward to succeeding years. The cost of accumulated compensated absences
should be accrued to the extent that it is probable that employees will use or be paid in
future years for the increased benefits attributable to the accumulated rights and that the
amount can be reasonably estimated. The accrual for the cost of sick pay benefits, however,
should be limited to the vested amount.
Example 1: Assume an employee accumulates vacation time throughout the year and,
at the end of the year, has accumulated four weeks of vacation time. The District’s
policy allows employees to carry over a maximum of three weeks of vacation to the
following year. The District should accrue a liability for the cost of three weeks of
accumulated vacation time (accumulated portion), even if the District’s policy is to
pay only a maximum of two weeks of vacation in the event of termination (vested
portion).
Example 2: Assume that an employee earns sick-pay benefits throughout the year and
the District’s policy allows employees to accumulate sick-pay benefits, but limits the
amount that can be paid to the employee at termination to two weeks (vested portion).
In this case, the accrual should be limited to the vested portion only, or two weeks.
This accrual should be calculated by multiplying total hours of qualifying compensated
absences by actual salary rates. Average salary rates may be used if actual rates are
unavailable or administratively burdensome to use. To ensure the recognition of this
liability while avoiding the burdensome requirements of distinguishing between salary and
compensated absence expense on a weekly basis, this liability need not be continually
adjusted to reflect individual accrual/usage of qualifying benefits. Rather, this liability and
related expense should be adjusted at year-end, to reflect overall changes in the level of the

Chapter 1. Balance Sheet

27

liability. This liability should also be adjusted periodically for significant changes in the
liability that result from events such as merit increases, significant staff level changes, or
policy changes. For example, when merit increases are granted to employees, an adjustment
will be required to increase the liability. Districts that grant merit increases on an
employee’s anniversary date should accrue the annual projected merit increase weekly
ratably over the year in which the increases are granted.

1.06

Accruals for Contingent Liabilities
A loss contingency arises when an uncertain existing condition will be resolved by a future
event that may result in the impairment of an asset or the incurrence of a liability.
Consistent with FASB ASC Topic 450-20; formerly SFAS No. 5, Accounting for
Contingencies, a loss contingency should be accrued if 1) it is probable that a future event
will confirm the impairment of an asset or the incurrence of a liability and 2) the amount is
reasonably estimable. Examples of contingent liabilities are pending or threatened litigation
and conditional asset retirement obligations (refer to paragraph 30.05). Districts should
periodically conduct a review to determine if contingent liabilities exist that may require
accrual. At a minimum, these accruals should be made at the end of every calendar quarter.
Approval to accrue contingent liabilities must be obtained from the RBOPS Accounting
Policy and Operations Section. Note: Information should be maintained on contingent
liabilities that do not meet both tests required for establishing an accrual. This information
may be required to be included in year-end footnote disclosures.

1.10

Dividend Accruals
As required by the Federal Reserve Act, a bank becoming a member of the System must
subscribe to stock in the Federal Reserve Bank in whose territory it is located. All stock
issued to banks within a District is issued by and reflected upon the books of the head
office. Semiannual dividends on the paid-in stock are paid by the issuing Reserve Bank on
the last business day of June and December. These dividends are accrued daily (based on a
360-day year) at the rate of one-half of one percent per month and accumulate in this
account from one payment date until the next. The total amount of the daily accrual is
debited to Dividends Accrued, representing a deduction from current net earnings, and
credited to Accrued Dividends Unpaid (see paragraph 11.50) as the liability for dividends
due but unpaid.
The amount to be accrued daily should be obtained by dividing one-half of one percent of
the Reserve Bank’s paid-in capital stock from member banks by 30 days (representing the
standard number of days in each month). Dividend accruals are computed on the total of
such capital paid-in as of the opening of business that day (close of business previous day).
No accrual should be made on the last day of months with 31 days, and extra accruals will
be required on the last day of February. Accruals for a non-business day should be made
on the succeeding business day except when a non-business day is a month-end or a
Wednesday. In these cases, the accruals should be included in the previous business day
provided the non-business day(s) are of the same month. When the non-business days are
in different months, the accrual for the non-business days should be split appropriately
between the previous and subsequent days. In lieu of accruing dividends daily, accruals
may be made as of each Wednesday and the last business day of the month (excluding the
31st day of any month).

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Financial Accounting Manual for Federal Reserve Banks

Banks become members of the System at various times during an accrual period and
others must subscribe to additional capital. In these instances the stock is issued, upon
opening of business or proper authorization, and the bank’s reserve account is charged for
the amount of the accrued stock dividends (at the daily rate described earlier) from the last
dividend payment date through the issuance date. The corresponding credit is recorded to
the accrued Dividends Unpaid account. At the end of the period, the member bank is paid
a full six months' dividend. The effect of this procedure is to make all stock purchases
effective as of the beginning of the dividend period for accounting purposes. A bank
withdrawing from membership is paid upon actual cancellation of stock or at the effective
date of stock cancellation (as explained in Regulation I) rather than at the regular dividend
payment date. On the day dividends are credited to member bank reserve accounts, a
corresponding summary debit is made to Accrued Dividends Unpaid that will eliminate the
previously accrued account balance.
According to the Federal Reserve Act, after all necessary expenses of a Federal Reserve
Bank have been paid or provided for, the stockholders of the Bank shall be entitled to
receive an annual dividend of 6 percent on paid-in capital stock. The entitlement to
dividends shall be cumulative. That portion of net earnings of each Federal Reserve Bank
which remains after dividend claims have been fully met shall be deposited in the surplus
fund of the Bank. (See FAM 60.20 for remittance to Treasury and Appendix B.1, Payment
of Dividends from Surplus.)

1.20

Prepayments
Payments made in advance for services to be rendered over future periods will be recorded
as deferred charges or prepaid expenses (see paragraph 4.20 and 4.35) and amortized as
appropriate. Prepayments under $25,000 should be charged directly to expense. Among the
types of prepayments normally recorded as prepaids are rent, taxes on real estate, and the
cost of printing and supplies. Special accounts are provided on the balance sheet for
recording the prepayments of services as well as recording inventory items such as materials
and supplies; paragraphs 4.30 and 4.35 should be consulted for specific instructions. In
particular, the $25,000 limitation is designed only to eliminate the need to amortize small
amounts over many periods. All inventory type items purchased for future use should be
recorded as a prepaid upon receipt, regardless of amount. (See 4.30 and 4.35.) Also,
prepayments for equipment purchases should be recorded as either a deferred charge (if
long-term) or prepaid expense until the associated equipment is received.

1.24

Operating Leases
An operating lease is defined as a lease contract that allows the use of an asset, without
conveying rights of ownership. Consistent with the requirements of FASB ASC Topic
840-20; formerly SFAS No. 13, the monthly income or expense recognized should be
derived by dividing the minimum rent to be received or paid (including any rent
escalations) equally over the non-cancelable lease term. Minimum rental payments include
those called for by the lease agreements, such as broker commissions, tenant improvements,
incentive payments, rent escalations and CPI adjustments, and exclude executory costs
(insurance, maintenance, and taxes) and contingent payments. The noncancelable lease
term should include all free rental periods granted. Improvements should be capitalized and
amortized as discussed in paragraph 30.85 and 30.86. For example, if a Reserve Bank
enters into a lease agreement with a rent escalation clause, the Reserve Bank’s monthly
rental expense (or income) will be equal to the total rent that will be paid over the minimum

Chapter 1. Balance Sheet

29

lease term divided by the number of months in the minimum lease term. The difference
between the rental expense (or income) and the actual rent payment will be recognized as a
liability in the Sundry Items Payable (SIP) account (or an asset in the deferred charges
account) during the initial months of the lease and as an offset to the liability (or asset) as
the payments escalate. For example, assume a Reserve Bank enters into a three-year lease
for $100 per month for the first two years and $115 per month for the third year. The total
rental payments over the 36-month life of the lease would be $3,780 ($1,200, $1,200, and
$1,380). The monthly expense would be $105 per month for all 36 months
($3,780/36 months). Each month, for the first 24 months the $5 difference between the
expense recognized and the rent paid would be credited to the SIP account. Beginning with
the first payment of the third year the $10 difference between the rent paid and the expense
recognized ($115 - $105) would be debited to the SIP account.

1.25

Recovery of Disbursements for Others
Disbursements that are earmarked at the outset for recovery from other Reserve Banks, the
Treasury, and others, should not be debited to expense but should be debited to a
reimbursable ledger account pending receipt of payment. This account should not be used
for disbursements related to items defined as recoveries in the PACS Manual.

1.30

Accounting for Rebates
In the course of procuring goods or services, vendors may offer rebates of varying amounts
to the Reserve Banks. In addition, Reserve Banks may receive rebates as a result of
payment arrangements (based on volume of purchases, timing of payments, etc.) such as
with P-cards. Rebates associated with a particular capital acquisition should reduce the
acquisition cost recognized for that asset by the rebate amount. Similarly, rebates
associated with particular expenses should be recorded as a reduction to that expense.
Rebates associated with P-cards or similar arrangements where specific allocation is not
practical should be recognized as a reduction to current expense as they are earned.

2.00

Balance Sheet Accounts—General
The following paragraphs describe the general content of the accounts on FR 34. While the
discussion is not to be regarded as an instruction for individual ledger accounts that may be
maintained by a Reserve Bank, it does serve as an instruction regarding the scope of each
FR 34 account. The more important accounts include a discussion of background
information to aid in understanding.

2.10

Gold Certificate Account (110-025)
The Secretary of the Treasury is authorized to issue gold certificates to the Reserve Banks
to monetize gold held by the U.S. Treasury. At any time, the U.S. Treasury may reacquire
the gold certificates by demonetizing the gold.
The Treasury of the United States maintains an account with the Board of Governors
entitled “Gold certificate fund—Board of Governors of the FR System.” When the
Treasury monetizes gold, it credits this account in return for deposit credit at the New York
Reserve Bank. When demonetizing gold, Treasury decreases the account and authorizes
New York to charge its deposit account. The offsetting entry in each case on New York's
books is made to the Gold Certificate account and the U.S. Treasury – general account.

30

Financial Accounting Manual for Federal Reserve Banks

New York accounting staff sends an advice of these entries to the Board. Also, whenever
the official price of gold is changed, Treasury adjusts the account and, simultaneously, the
deposit account.
The Board maintains the account in the exact amount as shown on Treasury’s books at all
times. The entries are made pursuant to advice from the New York Reserve Bank and
Treasury. The amount of gold certificates on each Bank's balance sheet must agree with the
total in the Board's records and is periodically confirmed by auditors. Monthly statements
of the account are received from Treasury and confirmed by the RBOPS Financial
Reporting and Control Section.
The Board distributes substantially all of the total gold among Reserve Banks based on
Federal Reserve notes outstanding (see paragraph 40.70) with an additional amount
allocated to the New York Reserve Bank as a cushion to accommodate Treasury sales
during the year. By law, each Bank may pledge all or any part of its account with the
Federal Reserve Agent as security for Federal Reserve notes. Prior to 1978, each Bank
pledged a specific amount which was then earmarked in the Board's records on a separate
ledger sheet, and thereafter was subject to and reduced only with prior approval from the
Assistant Federal Reserve Agent. Beginning in 1978, each Bank's holdings were pledged
automatically pursuant to a continuing agreement. The amount of gold certificates pledged
with the Agent—currently the same as the balance sheet total at each Bank—is reported on
the Daily Statement of the Federal Reserve Agent, Form FR 5 and is also confirmed
periodically.
The gold certificate account serves as the medium for affecting an annual settlement among
the Reserve Banks for amounts accumulated in the Interdistrict Settlement account.
Following the annual settlement, each Bank's gold certificate account is restored relative to
the average Federal Reserve notes outstanding through a reallocation of securities in the
System Open Market Account. (See paragraph 40.70.)

2.20

Special Drawing Rights Certificate Account (120-025)
Special Drawing Rights (SDRs) are issued by the International Monetary Fund (Fund) to
its members in proportion to each member’s quota in the Fund at the time of issuance.
SDRs serve as a supplement to international monetary reserves and may be transferred
from one national monetary authority to another. Under the law providing for U.S.
participation in the SDR system, the Secretary of the Treasury is authorized to issue SDR
certificates (broadly comparable with gold certificates) to the Federal Reserve Banks. The
Banks are required to purchase them for the purpose of financing SDR acquisitions or for
financing exchange stabilization operations.
The Treasury, when it wishes to monetize a specific amount of SDRs, authorizes and
requests the New York Reserve Bank to credit a special account of the Secretary of the
Treasury with the total amount of such monetization and to debit the Bank's SDR
certificate account by a corresponding amount. The Board participates the SDR certificate
transactions among all 12 Federal Reserve Banks in proportion to Federal Reserve notes
outstanding in each District at the end of the preceding year. Each of the other Federal
Reserve Banks pays for its share of the SDR certificates through its Interdistrict Settlement
account. Each of the eleven Banks, therefore, has an increase in one asset (SDR
certificates) offset by a decline in another balance sheet asset. The New York Reserve Bank
has an increase in its deposit liabilities (special account of the Secretary of the Treasury)

Chapter 1. Balance Sheet

31

matched by increases in two assets (SDR certificates—to the extent of its share in overall
distribution effected by the Board—and Interdistrict Settlement account). In addition,
pursuant to an agreement between the Federal Reserve and the U.S. Treasury made in the
1960s, whenever the SDR account reaches a level of surplus, the Treasury authorizes and
requests the demonetization of SDRs. When this occurs, the New York Reserve Bank
debits the special account of the Secretary of the Treasury with the total amount of such
demonetization and credits the Bank’s SDR account by a corresponding amount. As in a
monetization, the Board participates these balances among all 12 Federal Reserve Banks.
The New York Reserve Bank maintains an account for each Reserve Bank entitled “Special
Drawing Rights certificate account.” Amounts deposited with New York are distributed on
the day of deposit rounded to the nearest million, and payment is made by direct entry to
each Bank's Interdistrict Settlement account; i.e., New York's account is increased and
accounts of other Reserve Banks are decreased. Entries in the opposite direction are made
when Treasury reduces the total.
An electronic message is distributed to all Reserve Banks showing each Bank's share. Upon
receipt of this message, each Bank other than New York, debits the SDR certificate
account and credits the Interdistrict Settlement account on its books. New York credits the
account by the amount distributed and debits the Interdistrict Settlement account.
Each Bank pledges the full amount in the Special Drawing Rights certificate account as
collateral for Federal Reserve notes under a continuing pledge agreement.

2.30

Coin (130-025)
This account represents all United States coin held by the Reserve Banks except gold coin,
coin in exhibits, and coin in petty cash funds.
For shipments of coin between Districts in which the shipment is not received on the same
day the coin is shipped, the receiving District should establish a sub-account, defined as an
in transit coin account, and follow the same accounting explained in paragraph 50.40 for
shipments of notes between Districts.

2.40

Loans (140-025 and 140-050)
Extensions of credit by Federal Reserve Banks are governed by Regulation A and
Operating Circular 10 of each Bank. Loans to depository institutions are carried at face
amount in a single account on the balance sheet. The interest is accrued on a daily basis
and collected at maturity. Loans to depository institutions are pledged by each Reserve
Bank as collateral for Federal Reserve notes. Loans should be evaluated for collectability on
a quarterly basis and the results of the 4th quarter (December 31) evaluation should be
provided to the RBOPS Accounting Policy and Operations Section. (See paragraph 81.07
for further details.)
Account 140-050 is used for recording loans to others, the authority for which is covered in
paragraphs 3 and 13 of Section 13 of the Federal Reserve Act. Specifically, this account

32

Financial Accounting Manual for Federal Reserve Banks

includes amounts extended to borrowers under Maiden Lane LLC, Maiden Lane II LLC,
and Maiden Lane III LLC.1

2.70

Acceptances: Bought Outright and Held Under Repurchase Agreement
(140-070 and 140-075)
The New York Reserve Bank, in carrying out the domestic policy directive adopted by the
Federal Open Market Committee (FOMC), may be authorized to purchase or make
repurchase agreements with dealers. Some repurchase agreements may be secured by
bankers’ acceptances and mature after a fixed period, usually one to seven days.
Acceptances arise out of the shipment of goods between countries or within the United
States or from the storage of goods within the United States pending marketing. All
holdings of acceptances or repurchase agreements secured by acceptances are retained on
the New York Bank's balance sheet and are not participated to other Reserve Banks. When
acceptances are purchased or sold, the net amount of the transaction is paid to or collected
by the New York Bank from the dealer. Only the par value of this transaction is entered to
this account. Other accounts that may be affected are interest accrued, premium on
securities, discount on securities and, in the case of sales, profit and loss. The New York
Reserve Bank has not engaged in transactions involving acceptances for several years.
Currently account 140-075 is being used for reporting tri-party repurchase agreements
pending the creation of a new account for these purposes. In 2007, the FOMC authorized
the participation of all activity related to tri-party repurchase agreements to each of the
Reserve Banks. Prior to this change, the activity was reported only by the New York
Reserve Bank.

2.80

Federal Agency Obligations: Bought Outright and Held Under Repurchase
Agreement (140-100 and 140-125)
The New York Reserve Bank is authorized by the FOMC to purchase Federal Agency
obligations for the System Open Market Account (SOMA) and to acquire such securities
under repurchase agreements for its own account. This account includes Federal agency
and government-sponsored enterprise (GSE) securities. By law, the securities must be either
direct obligations of an agency of the United States, or fully guaranteed as to principal and
interest by such agency.
When these securities are purchased or sold, the net amount of the transaction is paid to or
collected by the New York Reserve Bank from the dealer and only the par value is entered
to this account. Other accounts that may be affected are interest accrued, premium on
securities, discount on securities and, in the case of sales, profit and loss. The amortization
or accretion of premiums and discounts is discussed in paragraphs 4.00 and 11.65,
respectively. The securities are accounted for at amortized cost rather than fair value;
therefore, no unrealized gains or losses are recognized. Federal agency obligations held
under repurchase agreements are, however, accounted for consistent with the treatment of
U.S. government securities held under repurchase agreements. (See paragraph 2.95.)

1

The Asset-Backed Commercial Paper Money Market Liquidity Facility (AMLF), the Primary Dealer Credit
Facility (PDCF), and Commercial Paper Funding Facility LLC (CPFF) closed on February 1, 2010.
Accounting guidance related to these facilities has been removed from FAM.

Chapter 1. Balance Sheet

33

On the day of settlement the New York Reserve Bank participates a share of the
transaction to each Reserve Bank. Profits and losses are participated to each Bank
according to holdings at the opening of business. (See paragraph 40.70 for the participation
methodology.)

2.90

U.S. Government Securities Bought Outright: Bills, Notes, and Bonds
(140-150, 140-175, and 140-200)
The New York Reserve Bank is authorized by the FOMC to purchase and sell U.S.
Government securities, which consist of U.S. Treasury securities. The securities are bought
from or sold to securities dealers and foreign and international accounts maintained at the
New York Reserve Bank at market prices. Maturing securities may be exchanged with the
Treasury for other securities or may be allowed to mature without exchange.
When securities are purchased or sold, the net amount of the transaction is paid to or
collected by the New York Reserve Bank from the dealer and only the par value is entered
to this account. Other accounts that may be affected are interest accrued, premium on
securities, discount on securities and, in the case of sales, profit and loss. The amortization
or accretion of premiums and discounts is discussed in paragraphs 4.00 and 11.65,
respectively. The securities are accounted for at amortized cost rather than fair value;
therefore, no unrealized gains or losses are recognized.
On the day of settlement the New York Reserve Bank participates a share of the
transaction to each Reserve Bank. Profits and losses are participated to each Bank based
on the holdings at the opening of business. (See paragraph 40.70 for the participation
methodology.)
Holdings of U.S. Government securities are in book-entry form and are pledged as
collateral to secure Federal Reserve notes. Specific securities are not participated to the
individual Reserve Banks and the amounts on each Bank’s books reflect an undivided
interest.

2.95

U.S. Government Securities: Held Under Repurchase Agreement (140-225)
The New York Reserve Bank is authorized by the FOMC to acquire U.S. Treasury, Federal
agency, and GSE securities under agreement with a dealer to repurchase the securities at an
established point in time (securities purchased under agreements to resell). On the day of
settlement, the New York Reserve Bank participates a share of the transaction to each
Reserve Bank. Profits and losses are participated to each Bank according to holdings at the
opening of business. (See paragraph 40.70 for the participation methodology.) The
repurchase agreements generally consist entirely of agreements through third-party
custodial arrangements. (See paragraph 40.15.)

2.96

Consolidated Maiden Lane II LLC Asset Accounts (142-025, 142-050,
142-075, and 142-100)
The Federal Reserve Board authorized the New York Reserve Bank under section 13(3) of
the Federal Reserve Act to provide financing to ML II. The New York Reserve Bank is the
primary beneficiary of ML II, and its assets and liabilities are consolidated for financial

34

Financial Accounting Manual for Federal Reserve Banks

reporting purposes with those of the New York Reserve Bank. The primary asset accounts
of ML II are as follows:

142-025
142-050
142-075
142-100

3.00

ML II Portfolio Holdings at Fair Value
ML II Reserve Account
ML II Loan Payable to FRBNY at Par
ML II Accrued Interest Payable - FRBNY

U.S. Government Securities: Floating Rate Notes (142-125)
The New York Reserve Bank is authorized by the FOMC to purchase or sell U.S. Treasury
floating rate notes. On the day of settlement, the New York Reserve Bank participates a
share of the transaction to each Reserve Bank. Profits and losses are participated to each
Bank according to holdings at the opening of business. (See paragraph 40.70 for the
participation methodology.)

3.01

Consolidated Maiden Lane LLC Asset Accounts (145-025, 145-030, and
145-035)
The Federal Reserve Board authorized the New York Reserve Bank under section 13(3) of
the Federal Reserve Act to provide financing to ML. The New York Reserve Bank is the
primary beneficiary of ML, and its assets and liabilities are consolidated for financial
reporting purposes with those of the New York Reserve Bank. The primary asset accounts
of ML are as follows:

145-025
145-030
145-035

3.02

Portfolio Holdings of Maiden Lane LLC
Loan Payable to FRBNY at Par
Accrued Interest Payable to FRBNY

Loan Fees Deferred (145-040)
Nonrefundable fees, such as origination or commitment fees, paid to the Bank by
borrowers, based on the terms of the agreement, are recorded in this account. As described
in FASB ASC Topic 310-20; formerly SFAS No. 91, such fees are to be deferred and
recognized as income over the life of the loan. The unamortized balance of deferred loan
fees should be reported in the Bank’s financial statements as an offset to the related loan
balance. The periodic amortization of balances in this account should generally be
recorded as an addition to interest income, but in some circumstances may be recorded as
fees in the profit and loss accounts (330-100). Contact RBOPS Accounting Policy and
Operations Section staff to discuss the proper accounting for deferred loan fees.

Chapter 1. Balance Sheet

3.03

Consolidated Commercial Paper Funding Facility LLC Accounts (145-050,
145-055, 145-060, 145-065, and 145-070)2

3.04

Consolidated Money Market Investor Funding Facility LLCs Accounts
(145-100, 145-115, 145-130, 145-145, and 145-160)3

3.05

Consolidated Maiden Lane III LLC Asset Accounts (145-200, 145-215,
145-230, and 145-245)

35

The Federal Reserve Board authorized the New York Reserve Bank under section 13(3) of
the Federal Reserve Act to provide financing to ML III. The New York Reserve Bank is the
primary beneficiary of ML III, and its assets and liabilities are consolidated for financial
reporting purposes with those of the New York Reserve Bank. The primary asset accounts
of ML III are as follows:

145-200
145-215
145-230
145-245

3.06

ML III Portfolio Holdings at Fair Value
ML III Reserve Account
ML III Loan Payable to FRBNY at Par
ML III Accrued Interest Payable

Other Assets – Markets (145-260)
The balance in this account represents infrequent newly established low-value, non-SOMA
markets-related transactions conducted by the New York Reserve Bank and is not
participated to other Reserve Banks. Dedicated accounts must be established prior to
program start dates for transactions related to non-SOMA markets programs that are
expected to be high-value or recurring. This account may be used, however, to record
transactions for newly established programs until a dedicated account is established, when
the balances should be reclassified to the dedicated account. At the close of business each
December 31, this account balance should include only the low-value and infrequent
non-SOMA markets-related transactions.

3.07

Other Assets – SOMA (145-275)
The balance in this account represents infrequent newly established low-value transactions
for newly established low-value, SOMA programs conducted by the New York Reserve
Bank and is participated to each Reserve Bank. Dedicated accounts must be established
prior to program start dates for transactions related to SOMA programs that are expected
to be high-value or recurring. This account may be used, however, to record transactions
for newly established programs until a dedicated account is established, when these
balances should be reclassified to the dedicated account. At the close of business each

2

3

The Commercial Paper Funding Facility was closed on February 1, 2010. The detailed accounting guidance
related to this facility has been removed from FAM.
The Money Market Investor Funding Facility was never used and was discontinued on October 30, 2009. The
detailed accounting guidance related to this facility has been removed from FAM.

36

Financial Accounting Manual for Federal Reserve Banks

December 31, this account balance should include only the low-value and infrequent
SOMA-related transactions.

3.08

Federal Agency and GSE Mortgage-Backed Securities (145-300, 145-315,
145-330)
On January 5, 2009 the mortgage-backed securities (MBS) purchase program began to
purchase MBS guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Outright
transactions in MBS are recorded on the next scheduled settlement date. (See paragraph
40.13.) If a seller fails to provide a security to the New York Reserve Bank, a fail liability is
recorded. (See paragraph 11.94.) The following accounts are participated to the twelve
Reserve Banks:

145-300
145-315
145-330

Fed Agency MBS
(includes GSE MBS)
Fed Agency MBS – fail to deliver
(includes GSE MBS fails)
Fed Agency MBS – temporary investments
(includes temporary investments resulting from GSE MBS transactions)

3.09

AIG Allowance for Loan Modification (145-345)4

3.10

Allowance for Loan Losses (145-360)
In accordance with paragraph 1.06, Reserve Banks are required to recognize a loss on a
loan when it is probable that the loan will be uncollectible in whole or in part and the
amounts of losses are estimable. Detailed instructions on how to recognize, measure, and
record an allowance for loans loss are provided in paragraph 81.01Allowance for Loan
Losses. The Reserve Banks should use account 145-360 to record allowances for loan
losses. Allowances recorded in this account must be approved by the RBOPS Accounting
Policy and Operations Section.

3.11

AIG Loan and Capitalized Interest (145-375)5

3.12

Term Asset-Backed Securities Loan Facility Accounts (145-400, 145-415,
145-430, 145-445, 145-460, 145-475, 145-500, 145-515, 145-530,145-545,
145-560, and 145-575)
Under the Term Asset-Backed Securities Loan Facility (TALF), the New York Reserve
Bank provides loans to eligible issuers of asset-backed securities (ABS). The New York
Reserve Bank will record all TALF loans at fair value under FASB ASC Topic 825-10;
formerly SFAS No. 159, rather than at the remaining principal amount outstanding.

4

5

As a result of the closing of the AIG recapitalization plan on January 14, 2011, the revolving credit facility was
fully repaid. The detailed accounting guidance related to this account has been removed from FAM.
As a result of the closing of the AIG recapitalization plan on January 14, 2011, the revolving credit facility was
fully repaid. The detailed accounting guidance related to this account has been removed from FAM.

Chapter 1. Balance Sheet

37

Recording the TALF loans at fair value improves accounting consistency and results in
appropriate GAAP presentation of the TALF program on a consolidated basis by
matching the change in fair value of TALF loans with changes in the value of the related
TALF LLC commitment. In addition, recording all TALF-related assets and liabilities at
fair value represents the economics of the program.
Pursuant to the put agreement with the New York Reserve Bank, the TALF LLC will
purchase and manage any ABS that might be received by the Bank in connection with the
TALF program loans. The primary asset accounts related to the loan facility and the
TALF LLC are as follows:

Term Asset-Backed Securities Loan Facility:
145-400
TALF – Loans extended to borrowers
145-415
TALF – ABS held by FRBNY
145-430
TALF – Value of put option with LLC
145-445
TALF – Cash equivalents
145-460
TALF – Credit extended by FRBNY to LLC
145-575
TALF – FV of TALF loans

TALF LLC:
145-475
145-500
145-515
145-530
145-545
145-560

3.13

TALF – Accrued interest payable – FRBNY
TALF – Other investments
TALF – ABS held by TALF LLC
TALF – AIR investment
TALF – Senior loan payable to FRBNY
TALF – FV adjustment of FRBNY senior loan

Investment in LLC (145-600)
In February 2012, the New York Reserve Bank acquired a building and transferred title to
a newly formed and wholly owned subsidiary, Maiden & Nassau LLC, a Delaware based
limited liability company (LLC). This account is used to record the investment in the LLC
and is eliminated upon consolidation of the subsidiary.

3.14

AIG Preferred Securities (145-830, 145-845, 145-860, and 145-875)6

3.20

Expansion Accounts – Total Assets
These asset accounts are reserved for future use. Reserve Banks are required to report zero
balances in these expansion accounts: 142-150, 145-075, 145-175, 145-615, 145-630,
145-645, 145-660, 145-675, 145-700 series, 145-800, and 145-815.

6

As a result of the closing of the AIG recapitalization plan on January 14, 2011, the New York Reserve Bank
has been paid in full for its preferred interests. The detailed accounting guidance related to this account has
been removed from FAM.

38

Financial Accounting Manual for Federal Reserve Banks

3.30

Items in Process of Collection (150-025, 150-050, 150-100, and 150-150)
Consists of items, including but not limited to cash letters, return items, and automated
clearing house files, deposited with the Federal Reserve for collection and, on the balance
sheet date, have not yet been presented to the paying bank. The items are segregated on FR
34 according to the accounts described in the following paragraphs. Sufficient detail or
subsidiary accounts should be maintained to identify the general nature of the transactions
for float reporting purposes (see paragraph 11.40), including transportation delays and
midweek/holiday closings.

Transit Items—Federal Reserve Banks (150-025)
Represents amounts due from other Federal Reserve Banks and Branches. The preliminary
total will include transfers of funds, ACH activity, securities transfers, etc., for which
payment is expected on the same day through the Interdistrict Settlement account. The
balance reported on the FR 34 is after application of settlement credits and will, therefore,
represent the total of items forwarded to and still in process of collection with other
Districts, including cash letters, ACH activity, securities, and electronic transfers. Wire
transfers received too late to credit depository institutions should be debited to this account
and credited to Deferred credit items — Other items in process (150-100).

Transit Items—Depository Institutions (150-050)
Represents the amount of items including cash letters, return items, etc., which have been
dispatched for collection and will be settled with depository institutions located in own
office territory. This account is charged when items are forwarded for payment. This
account also includes: ACH credit transactions when the originating depository institution
cannot be debited on the transaction date because of a holiday or mid-week closing; and
deferred debit entries for depository institutions located and/or settled in another Reserve
office using Same Day Settlement procedures. Cash letters reported not received by the
cut-off hour by paying banks because of transportation delays should be reported in this
account. Work that has been identified as lost (i.e. has remained in Transit Items for 3
business days) should not be included in this account, but should be transferred to an
Adjustments, net account.

Other Items In Process (150-100)
Represents the aggregate amount of items held overnight for processing or dispatch on the
following day, exchanges for clearing houses, and return items held over for look-up. Only
items for which credit has been passed or deferred to depositors are included. Also includes
the redemption value of future due securities or coupons held pending maturity and for
which the Reserve Bank has elected to credit the deferred credit account and credit has
been passed or will be passed to customer accounts on a pre-determined availability
schedule, securities transfers where a depository institution has been credited but the
Reserve Bank is unable to complete the transaction and debit ACH return items that have
been held over.

Adjustments, net (150-150)
The balance in this account represents the net amount (+ or -) of check related adjustments
and any other adjustments relating to items that are debited to items in process of

Chapter 1. Balance Sheet

39

collection including differences that are temporarily held in abeyance pending final
resolution. The account contains the net of both debit and credit adjustments to items
originally recorded in an items in process of collection account such as unlocated
differences in settlement, unlocated departmental differences, loose items, cash letters
determined to be lost (see Transit Items—Depository Institutions (paragraph 150-050),
missing bundles reported by drawee banks, items believed to be listed but not enclosed in
outgoing cash letters, adjustment requests received from Banks containing insufficient
information, errors on clearing house statements discovered too late to correct, and cash
letter changes discovered too late for adjustments to be made to accounting charges. Also
included are check truncation adjustment items where the adjustment arises from a
difference occurring between a depository institution and a Reserve Bank. Treasury check
truncation adjustment items and other government related adjustment items where the
adjustment arises from a difference between a Reserve Bank and the Treasury Department
or another government agency, which do not affect float should be held in Suspense
Account—General pending resolution. Transactions involving items in process of
collection that have been dispatched by the Federal Reserve office for which the office is
unable to determine the destination distinction between other Federal Reserve Banks and
depository institutions should also be included in this account. Petty differences or items
below a certain threshold amount are entered to a difference account in Other assets or a
current expense account (as described in paragraph 4.70), as are all other differences where
it is probable that the difference will not be resolved or where it is decided that it is not
feasible to conduct further research.

3.40

Bank Premises—Land (160-025)
The balance in this account represents the original cost of land (less any charge-offs);
incidental expenses in connection with the purchase; cost of wrecking old buildings (less
salvage); and paving, grading, or landscaping.

3.45

Bank Premises—Buildings (including vaults - 160-050)
Includes the total cost of buildings, improvements, and additions that are owned by the
Reserve Bank.

3.50

Bank Premises—Machinery and Equipment (160-075)
Includes machinery and equipment associated with building structures that are considered
part of the building and will convey with the building when it is sold. Examples include air
conditioning units, boilers, elevators, and heating or lighting equipment.

3.55

Bank Premises—Construction Account (160-100)
Includes any material construction or renovation. During construction, all costs of a new
building, the purchase price of a building to be renovated, and all improvement and
renovation costs are reported in this account. When the construction is completed,
amounts to be capitalized should be transferred to the appropriate accounts under “Bank
Premises.” For detailed accounting procedures, see Chapter 3.

40

Financial Accounting Manual for Federal Reserve Banks

3.60

Bank Premises—Depreciation (160-125)
Depreciation is recorded monthly on each building and each unit of machinery and
equipment. A more detailed description of capitalization and depreciation of Bank premise
assets together with reporting requirements is contained in Chapter 3.

3.65

Furniture and Equipment (170-025)
This account contains furniture, furnishings, fixtures, office equipment, automotive
equipment, and operating equipment such as computers, incinerators, and shredding
machines required for specific operations.

3.66

Furniture and Equipment—Depreciation (170-050)
Depreciation is recorded monthly on furniture and equipment in accordance with the
provisions contained in Chapter 3.

3.70

Claims Account Closed Banks (170-075)
Direct costs incurred in connection with the collection of paper of failed banks or other
obligations, such as court costs of filing suits, collection fees paid attorneys, cost of
recording mortgages, premiums paid on fire and other insurance policies covering property
held under mortgage, etc., should be charged to this account. The amount of any overdraft
not offset should be included.

3.85

Foreign Currencies (170-100 and 170-110)
This account represents each Bank’s participated share in balances denominated in foreign
currencies and includes premiums, discounts, and accrued interest on investments
denominated in a foreign currency. For further discussion, see paragraph 40.30.

3.90

Reimbursable Expenses and Other Items Receivable (170-125)
Includes expenses that are reimbursable to the Bank and miscellaneous amounts that the
Bank has advanced or paid on behalf of others. Individual ledger accounts are maintained
as necessary to facilitate control. Each is based on actual amounts with the exception of an
account holding expenses that are estimated at the end of each month that will be
reimbursed in the future.
For the most part, the accounts will represent claims for fiscal agency work performed for
the U.S. Treasury (e.g., public debt operations) and for government departments and
agencies. Other accounts consist of receivables due from employees such as loans or dining
room charges and amounts due from others such as security deposits with airlines for the
use of credit cards, losses incurred in the handling or transportation of currency that are
expected to be recovered, or amounts due from Treasury for mutilated currency. Accounts
may also be maintained for miscellaneous services rendered others and purchases of goods
and services for other Reserve Banks or for other offices in own District.
Under ordinary circumstances, the amounts that are included in claims for expenses
reimbursable or recoverable will represent a calculated part of items such as salaries,

Chapter 1. Balance Sheet

41

retirement contributions, furniture and equipment rentals, etc., that are paid initially by the
Bank and included in gross expenses. In some cases, however, expenditures by the Bank are
earmarked at the outset for reimbursement or recovery. Such expenditures are not included
in the Bank's expenses and are debited directly to one of the receivable ledger accounts
herein pending receipt of payment.
An account covering estimated fiscal agency reimbursable expenses is carried for the
purpose of reflecting a more accurate current expense figure. The reimbursable expenses for
the month are estimated at the end of the month and debited to this account and credited
to the current expenses account. The following month, the estimated receivable is credited
and the actual reimbursables are debited to this account. When funds are received from
Treasury, generally quarterly, the balance is closed out.

3.93

Allowance for Doubtful Treasury Reimbursement (170-130)
This account is a contra-asset account to the Reimbursable Expenses and Other Items
Receivable Account (170-125). At the time entries are made to the reimbursable account,
an estimate is made of the amount of the reimbursable that will not be reimbursed due to
lack of appropriated funds by the Treasury. The original offset to this account is a debit to
the Capital account—Cost of Unreimbursed Treasury Services. When actual amounts are
determined that will not be reimbursed, the Allowance account should be debited and the
Reimbursable account should be credited. As a general rule, there should be little to no
activity in this account as full costs of providing Treasury services will be passed to the
Treasury. The account, however, will be maintained for contingency purposes.

3.94

FDIC assumed indebtedness (170-140)
This account represents depository institution discount window loans that have been
subsequently assumed by the FDIC. Payment and maturity schedules are worked out with
the FDIC on a case-by-case basis.

3.95

Interest Accrued (170-150)
This account represents interest accrued, but not yet collected, on earning assets. The
accruals are based on holdings of such assets at the opening of business and are calculated
and debited to the respective ledger accounts and credited to earnings. The principal ledger
accounts are as follows:
• Interest accrued on securities in the System Open Market Account - The New York
Reserve Bank posts these entries directly to each Federal Reserve Bank’s accounts.
Interest accrued on securities is debited to the account beginning the day that a security is
purchased and ending the day before the security is sold or matures. Daily accruals are
computed on individual issues by dividing the amount of interest to be earned by the
number of days to the payment date.
• Interest accrued on investments of consolidated LLCs – Entries are made to the accounts
of the LLCs and, as a result of consolidation, are reported by the New York Reserve
Bank as a component of accrued interest. Interest accruals are booked at least weekly
and are computed on individual issues by dividing the amount of interest to be earned by
the number of days to the payment date.

42

Financial Accounting Manual for Federal Reserve Banks

• Interest accrued on loans - The daily accrual is based on the rate in effect on the previous
day divided by 365 days. Accrual on a one-day loan is unnecessary.

4.00

Premium on Securities (170-175)
Premium on securities represents the unamortized amount paid in excess of the face value
of securities in the SOMA. On the date of purchase, such excess is debited to this account
and daily thereafter an equal portion of the premiums, computed on individual issues, is
credited to the account. The daily straight-line amortization is determined by dividing the
premiums paid by the number of days to the call date of the issue. Amortization of
premiums on Federal agency and GSE mortgage-backed securities is determined based on
an effective yield calculation. When securities are sold, any applicable premium is credited
to the account. The New York Reserve Bank posts these entries to each Federal Reserve
Bank’s account.

4.10

Overdrafts (170-200)
This account is used to record depository institution overdrafts with the Reserve Bank, and
is debited by the amount necessary to restore the deposit account to a zero balance.

4.20

Deferred Charges (170-225)
Deferred charges arise through long-term prepayments of expenses. Deferred charges
$25,000 or greater should be recorded in this account and amortized over the current and
prospective periods that benefit from the expenditure. Deferred charges will include items
such as multi-year maintenance or licensing agreements and costs of major improvements
to leased space that should be amortized over the life of the contract or lease respectively.
(See Chapter 3 for further discussion of leasehold improvements.) Once a prepayment has
been properly recorded in the deferred charges account, it does not need to be reclassified
as prepaid when the remaining amortization period falls below a year. Advance payments
for vendor purchases held in this account pending delivery should not be amortized, but
should be reversed when goods or services are received.
The deferred charges account should also be used to record charges for internal use
software, which is defined as software acquired, internally developed, or significantly
modified for use by the Reserve Banks in performing their operations. Internally developed
software should be capitalized if the cost exceeds $100,000 and externally-purchased
software should be capitalized if the costs exceed $25,000.7 For internal use software
acquired from a vendor with costs of $100,000 or greater, contract or lease terms should
also be reviewed to determine if the acquisition qualifies for accounting treatment as a
capital lease. (See paragraph 30.80.) Standard desktop utility software, however, should be
charged to current expense.8 Expenditures for bulk purchases of a number of identical
low-cost software licenses that are individually below the capitalization threshold should be

7

8

From 1992 until 1998, computer software purchased from vendors with an acquisition cost of $50,000 or
greater was capitalized in this account and amortized over its estimated useful life, not to exceed three years.
From 1999 to 2004, Reserve Banks capitalized the costs for internal use software whether purchased externally
or developed internally if the costs exceeded $100,000 in this account. Beginning in 2005, to make the threshold
consistent with other prepaid expenses, the capitalization threshold for externally-purchased software, such as
license fees, was lowered from $100,000 to $25,000.
Examples of desktop utility software include word processing, electronic mail, and anti-virus software.

Chapter 1. Balance Sheet

43

capitalized as a single asset if the total cost is $100,000 or more and the license agreement is
for a period longer than a year.
Costs incurred during software development are capitalized or expensed depending on the
stages of development (preliminary stage, development stage, and post-implementation
stage). See Accounting Guidance for Internal Use Software Costs at Appendix D.1 for
additional information related to the appropriate accounting for these costs.
Costs incurred during the preliminary stage, such as evaluation of alternatives and
prototype development, are expensed. Costs incurred in the development stage that are
capitalized include:
• External costs of materials and services (for example, consulting fees and salary,
retirement, and other benefit costs of employees directly associated with the product.)
• Costs associated with time spent specifically to oversee developers (programmers), if
determinable.
• Expenditures related to system integration, which includes consultant fees and salary,
retirement, and other benefit costs of employees directly associated with the integration
effort. Integration costs must be analyzed to determine the allocation between hardware
and software.
• Travel costs for staff, consultants, or vendors should be capitalized if they are directly
related to the software development.
• Capitalizable costs paid to another Reserve Bank for software development efforts.
Costs incurred during the development stage related to general and administrative expense
and end-user testing and training should be expensed. Post-implementation stage costs
generally should be expensed, except the cost of prepaid maintenance contracts, provided
that the costs meet the FAM thresholds for prepaid assets or deferred charges. Other
non-capitalizable costs include process re-engineering costs, data conversion costs, and
training costs.
When internal use software is purchased and the purchase price includes non-capitalizable
items (e.g. training), the price must be allocated among capitalizable and non-capitalizable
items based on fair value. The costs for web-site development are accounted for in the same
manner as costs of internal use software.
Expenditures made to change existing software assets are considered either improvements
or maintenance. Expenditures to existing software assets that meet the capitalization
thresholds discussed above should be capitalized if the improvement provides additional
capabilities and meets one of the following criteria:
• The quantity of output or operating efficiency of the asset is significantly increased.
• The quality of output is significantly increased.
Improvements should be recorded as separate assets with unique useful lives determined in
accordance with the discussion of useful lives below. When the results of efforts to rewrite
or improve the software are significant enough to be considered a replacement to the
existing software and the expenditures meet the capitalization criteria, the costs should be
capitalized. Because the former software asset is significantly altered, the net book value of
the former software asset is expensed.


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