The Financial Accounting Foundation’s board of trustees is changing the process for doing post-implementation reviews of the effectiveness of accounting standards, shifting the leadership of the reviews from the FAF staff to the Financial Accounting Standards Board and the Governmental Accounting Standards Board.
The FAF oversees both FASB and GASB, along with the Private Company Council. Up to now, the FAF staff has been responsible for conducting post-implementation reviews of how well older accounting standards have performed after a few years’ time, with support from FASB from GASB. Going forward, the reviews will be led by FASB and GASB, with oversight from the FAF.
The change is not expected to have any immediate impact, as there aren’t any post-implementation reviews being conducted right now, and there haven’t been any in some time. The FAF trustees thought this would be a good time to make the transition. A number of major accounting standards have been taking effect in recent years, including revenue recognition, leases and hedging, while others are due to take effect after some deferrals, such as long-duration insurance and credit losses. The chairmanship of both FASB and GASB is also undergoing a transition at the end of June.
Under the new approach, the post-implementation review (PIR) process will now be embedded in the boards’ overall standard-setting process. Field data gathered as part of FASB’s and GASB’s existing extensive post-issuance and post-implementation activities with stakeholders will be integrated directly into the PIR process. FASB and GASB will report on the progress of PIR projects during their public meetings and will report regularly to the FAF board of trustees’ Standard-Setting Process Oversight Committee (SSPOC). The final PIR report will be reviewed by the committee and published on the FAF website. The FAF said the new approach would enhance transparency and eliminate duplicative research and field work.
“Post-implementation reviews are a vital part of FAF oversight, but in the spirit of continuous improvement we should always ask ourselves if we can be more efficient without compromising integrity,” said FAF chair Kathleen L. Casey in a statement Wednesday. “We think this change meets those criteria.”
The FAF staff and standard-setting boards spent over a year re-examining the PIR process before they proposed changes to the FAF trustees. After their proposals were reviewed by the SSPOC and additional consultation with stakeholders represented on the Financial Accounting Standards Advisory Council and the Governmental Accounting Standards Advisory Council, the proposed process change was submitted to the full FAF Board of Trustees for approval Wednesday.
The FAF created post-implementation reviews a decade ago to see whether important standards met their goal of improving financial reporting for investors and other users of financial statements. To date, there have been a total of 14 completed PIRs covering FASB and GASB standards.
There are no active PIRs underway at this time, which made this a good opportunity to introduce a process change, according to Casey. The improved process will be used on future reviews.
