The Financial Accounting Foundation intends to conduct post-implementation reviews of several business and government accounting standards pertaining to business combinations, reportable operating segments, deposits, investments, and repurchase agreements, to see how well they have worked in practice.

John Brennan

The post-implementation reviews follow upon the heels of the FAF’s first post-implementation review, of FIN 48, “Accounting for Uncertainty in Income Tax Positions,” the results of which it released last month (see Accounting Standard for Uncertain Income Tax Positions Needs Tweaking). FASB plans to provide a written response to the post-implementation review report on FIN 48 in the coming weeks.

The FAF said it would now focus on doing post-implementation reviews of several standards from the Financial Accounting Standards Board and the Governmental Accounting Standards Board, both of which it oversees. For FASB, it will conduct reviews of both Statements 141R and 131, and for GASB, it will examine Statements 3 and 40.

FASB Statement No. 141R, Business Combinations (FAS 141R), requires an acquiring organization to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired organization at the acquisition date, measured at their fair values as of that date, with limited exceptions.

FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information (FAS 131) requires that public companies report financial and descriptive information about their reportable operating segments.

In connection with those reviews, the FAF is coordinating with the International Accounting Standards Board on its reviews of the corresponding IFRS 8 (Operating Segments) and IFRS 3 (Business Combinations) standards.

GASB Statements No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements, and No. 40, Deposit and Investment Risk Disclosures, require note disclosures about deposits and investments, including related credit risks. In addition, Statement 3 provides accounting guidance for repurchase and reverse repurchase agreements.

The post-implementation review process is intended to assist the FAF’s Board of Trustees with their ongoing efforts to evaluate the effectiveness of the standard-setting process for both the FASB and the GASB. The FASB reviews mostly pertain to businesses, while the GASB statements are for state and local government entities. The process is designed to be independent of the standard-setting process of FASB and the GASB. The FAF review staff reports to the trustees and FAF president and CEO Terri Polley, but members are drawn from experienced FASB and GASB staff to promote a collaborative review process aimed at improving the standard-setting process.

“The FASB and GASB standards selected for post-implementation review represented significant and important accounting changes when issued and continue to provide important information today to investors, stakeholders, and other users,” said FAF chairman John J. Brennan in a statement. “We look forward to assessing whether the intended financial reporting objectives underlying these standards are being met, while also obtaining stakeholder feedback on the application, usefulness, and effectiveness of these standards set by our boards.”

More information on the FAF’s post-implementation review process can be found on the FAF Web site. Stakeholders who would like to participate in PIR surveys conducted by the Financial Accounting Foundation should register online here.