In 2025, the need for accurate and transparent financial reporting is more critical than ever. The Federal Credit Reform Act of 1990 established present value cost estimates for credit programs in the federal budget, with a goal to better reflect the lifetime cost of loans and guarantees and improve policymakers’ allocation of budgetary resources. Some believe that fair value cost estimates that represent the estimated market price for loans or loan guarantees would be better, as they are a more comprehensive estimate of the cost.
In today’s environment, with more than $36.5 trillion in federal debt and over 14% of the annual budget going to interest costs, people are looking very closely at all aspects of federal spending. The question of fair value accounting practices for federal credit has become prevalent once again, driven by the demand for greater accountability and precision in the management of public funds. In this paper, we explore the implications of applying fair value accounting for the budgeting of federal loan programs.
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