The Financial Accounting Standards Board and the Governmental Accounting Standards Board will begin using a majority vote, instead of relying on the board chairman’s decision alone, to establish project plans and agendas, and decide on the priority of projects.
The board of trustees of the Financial Accounting Foundation, the parent organization overseeing FASB and GASB, approved a key change Tuesday in the governance and standard-setting process of the two boards, whose chairmen are both departing in June. No successors have yet been named to FASB chair Leslie Seidman and GASB chair Robert Attmore. Seidman's term ends in June, and Attmore has announced his intention to retire in June of this year, although his term ends in June 2014
The FAF trustees voted to end the “leadership agenda process,” in which the FASB and GASB chairs were vested with the authority to make these decisions, at the suggestion of both Seidman and Attmore. Going forward, all agenda decisions will be voted on by the boards in public meetings.
“The trustees and the board chairs believe that submitting agenda decisions for vote in a public setting brings greater transparency to the standard-setting process,” FAF president and CEO Teresa S. Polley said in a statement. “It will provide stakeholders with greater insight into the considerations that go into agenda decisions, including stakeholder feedback, the urgency of certain issues, and the availability of board resources.”
Post-Implementation Reviews
In other actions, the FAF trustees accepted the post-implementation review report on GASB Statements No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements, and No. 40, Deposit and Investment Risk Disclosures. Both statements 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 PIR review concluded that the standards are largely functioning as intended. The final PIR report will be issued publicly on Thursday, Feb. 28, accompanied by a detailed press release.
[IMGCAP(1)]The FAF also announced that the PIR team will begin its review of GASB Statements No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, and No. 30, Risk Financing Omnibus—an amendment of GASB Statement No. 10, which establish accounting and financial reporting standards for risk financing and insurance-related activities of state and local governments, including public risk pools.
Stakeholder Input Requested for GASB
Separately, the FAF board of trustees asked for feedback from stakeholders on the proposed changes in the agenda-setting process for GASB to help them assess the scope of GASB’s standard-setting activity.
The trustees are not asking on the changes at FASB, according to spokesman John Pappas. Those changes are effective immediately.
The proposal for GASB is the result of discussions between the trustees and GASB leaders following the completion of an independent academic study that documented GASB stakeholders’ views on the scope of GASB’s standard-setting activities and authority. The study revealed a lack of consensus about the appropriate scope of GASB’s activities and involvement in government accountability reporting.
[IMGCAP(2)]“The FAF trustees believe modifying GASB’s agenda-setting process to allow early stakeholder input is the best way to address scope of authority issues,” said FAF chairman Jeffrey J. Diermeier. “Assessing a project to be “in scope‟ early in the agenda-setting process would allow appropriate trustee oversight while preserving the GASB’s standard-setting independence. We are seeking stakeholder input to help determine whether the proposed changes will help resolve these issues.”
GASB’s current agenda setting process involves three principal phases: 1) issue identification; 2) research, and 3) current technical agenda development. GASB has classified governmental financial information into three categories:
• Group 1 – Information that GASB assesses as clearly within its standard-setting authority. Included in Group 1 are items recognized in basic financial statements, notes to the basic financial statements, current required supplementary information, and other supplementary information for historical context.
• Group 2 – Information that GASB believes is within its standard- setting authority, but that is not clearly in Group 1. Included in Group 2 are notes to the basic financial statements containing non-traditional information, current required supplementary information providing operational or economic context, and other general purpose financial reports.
• Group 3 – Information clearly recognized as being outside GASB’s standard-setting authority. Included in Group 3 is information outside general purpose external financial reporting.
[IMGCAP(3)]The FAF trustees are proposing the following modifications to the GASB’s agenda-setting process that address the three groups of governmental financial information:
• GASB would follow its established agenda-setting process without modification for Group 1 financial information projects.
• Consistent with current practice, GASB will not conduct research on Group 3 financial information projects and will not add Group 3 projects to the research or technical agendas.
• For Group 2 financial information projects, GASB will modify its established agenda-setting process as follows:
o In the issue identification phase, GASB will provide an expanded project proposal to the FAF’s Standard Setting Oversight Committee. The Oversight Committee may conduct, or request the GASB to conduct, additional stakeholder outreach on the proposed project. The Oversight Committee will then make a recommendation to the Trustees about whether the project is within the GASB’s scope of authority for financial accounting and reporting guidance. If the trustees decide that the project is within the GASB’s scope, GASB will update its project descriptions in the technical plan and continue with its established agenda process.
[IMGCAP(4)] o At the end of the research phase, the Oversight Committee may ask to review the project prospectus. Factors that may lead to Oversight Committee review would include project scope changes and additional stakeholder input. If the Oversight Committee reviews the project prospectus, it may decide to obtain additional stakeholder input. The Oversight Committee will reevaluate the trustees' previous determination of whether the project is within the GASB‟s scope of authority, based on any new information. It will make a final recommendation to the Trustees. If the trustees determine the project still is within the GASB‟s scope, the GASB will update the project prospectus and continue with its established agenda process.
The trustees’ priority will be to ensure that GASB’s standard-setting processes are independent, and free from undue influence or special interests. Therefore, the revised agenda-setting processes will be part of the Trustees‟ GASB oversight, not an appeals process for GASB standard setting.
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Marc Siegel Re-appointed to FASB
Separately, the FAF board of trustees on Tuesday said they had re-appointed Marc A. Siegel to a second five-year term as a FASB member, beginning July 1, 2013.
[IMGCAP(5)]“During his first term with the FASB, Marc’s expertise in the field of forensic accounting brought a strong investor perspective to the FASB’s deliberations of some of the most critical financial reporting issues of our time,” said Diermeier in a statement. “We look forward to continuing to reap the benefits of his considerable experience and insight during his upcoming term.”
Siegel began his first term as a member of the FASB in October 2008. As a member of FASB, he has played a key role in enhancing investor outreach, initiating dialogue with investors on key FASB projects, providing regular updates to investors on those projects, and facilitating forums, roundtables, and other activities to solicit investor perspectives.
Prior to joining FASB, Siegel led the Accounting Research and Analysis team at the RiskMetrics Group in Rockville, Md. A recognized expert in forensic accounting with over 20 years of experience in global industries including technology, media, telecommunications, healthcare, retail, and insurance, Siegel served on the FASB Investor Technical Advisory Committee from January 2007 until his appointment to FASB.
