FASB and GASB undergo leadership transitions amid coronavirus
The Financial Accounting Standards Board and the Governmental Accounting Standards Board are under new chairmen Wednesday after their long-serving leaders completed their terms.
FASB chairman Russell Golden has chaired the standard-setting board since July 2013 and has been a board member since 2010. He was succeeded Wednesday, July 1, by Richard Jones, a former chief accountant at Big Four firm Ernst & Young. GASB chairman David Vaudt has also been leading his board since July 1, 2013. He is being succeeded by Joel Black, partner-in-charge of the audit practice at Mauldin & Jenkins, a Top 100 Firm.
Golden spoke last month at his last meeting as FASB chair about his experiences shepherding the standard-setter through a variety of challenging projects and FASB’s response to the current COVID-19 pandemic (see story). The meeting was held online so members could stay at a safe distance.
“Before my seven-year term as FASB chairman comes to a close on June 30, I want to offer my heartfelt thanks to all members of the FASB and FASB staff I’ve worked with over the years,” he said. “These are all dedicated professionals who get up every day to support our mission to improve information for our capital markets. I also want to thank the international standard-setting community for working with the FASB to help improve accounting standards worldwide; the commissioners and staff of the U.S. Securities and Exchange Commission for their unwavering support of our mission; and U.S. stakeholders, whose willingness to share their views were critical to our ability to support more transparent capital markets with high-quality accounting standards. I encourage each and everyone one of you to continue that support when Rich Jones takes the reins on July 1, 2020.”
Golden also discussed how the current pandemic is affecting FASB in his final column for the FASB Outlook newsletter. “The effects of the COVID-19 crisis have reverberated throughout the globe — and they’ve required all of us to adjust, quite suddenly, to different ways of living and working,” he wrote. “Like everyone, the FASB has had to adapt. We’ve reassessed our priorities and temporarily paused work on agenda projects in progress that don’t address crisis-related issues. We also postponed our May 18 leases roundtable until further notice. We cleared our decks to focus 100 percent on helping you apply our standards during this unprecedented event. We continue to closely monitor and respond to your questions. We continue to meet publicly online as a board and with our advisory groups to discuss what clarity or relief we can provide, where appropriate.”
Vaudt reflected on his time at GASB in his final column for the GASB Outlook newsletter and discussed how the board had been forced to deal with the COVID-19 pandemic. “Under normal circumstances, the GASB would have continued to move forward focused squarely on setting high-quality standards,” he wrote. “But when the crisis hit, we had to pivot quickly and get to work to meet stakeholders’ immediate needs. If you’re familiar with the Board’s due process, you probably know our work is not designed for the quick pivot. Your openness and input truly helped us to make that shift — more so than any of you probably ever imagined.”
He noted that over the past several weeks, he has been meeting with video chat with the incoming GASB chairman to ease the transition.
At the end of the day Tuesday, the final day of Vaudt’s term, GASB issued a pair of announcements related to state and local government accounting. In one of them, GASB proposed a “concepts statement” to address the concepts for recognition of assets, liabilities, and other elements of state and local government financial statements. The exposure draft, Recognition of Elements of Financial Statements, proposes a framework of interrelated objectives and fundamental principles that can be used by GASB to establish consistent accounting and financial reporting principles for recognition of elements of financial statements.
The recognition concepts deal with two aspects of financial statements: The measurement focus determines what items should be reported in a financial statement. The related basis of accounting determines when those items should be reported in a financial statement.
The exposure draft proposes a recognition framework for both (1) the economic resources measurement focus and accrual basis of accounting and (2) the short-term financial resources measurement focus and accrual basis of accounting. The proposed concepts statement also contains a recognition hierarchy that would be followed when evaluating an item for recognition in financial statements. GASB is asking for feedback on the proposal by Feb. 26, 2021.
GASB has also tentatively scheduled a series of public hearings and user forums to allow its constituents to offer their views directly with the board on the exposure draft along with two related proposals: a forthcoming exposure draft on Financial Reporting Model Improvements (approved by GASB on June 30) and a “preliminary views” document on Revenue and Expense Recognition. More information is available in the exposure draft. The deadline for providing written notice of intent to participate is Feb. 26, 2021.
GASB also issued on Tuesday the preliminary views document on revenue and expense recognition model proposals. It added the project to its technical agenda with the goal of developing guidance applicable to topics for which existing guidance is limited, improving existing guidance that has been identified as challenging to apply, considering inclusion of a performance obligation approach in the GASB’s authoritative literature, and assessing existing and proposed guidance based on the conceptual framework.
The document aims to present GASB’s current thinking about the development of a comprehensive, principles-based model to establish categorization, recognition and measurement guidance that can be applied to a wide variety of revenue and expense transactions. If it’s adopted as standards, it’s expected to improve the usefulness of information that state and local governments report on their revenues and expenses.
GASB introduced in the document a new methodology for categorizing transactions, which is then used as a basis for applying recognition proposals. “Determining the transaction category would be based on the assessment of specific characteristics that a binding arrangement may or may not contain,” said GASB. “This categorization methodology is intended to identify transactions with performance obligations. If a transaction is determined to have a performance obligation based on the categorization characteristics, the associated revenue or expense would be recognized based on the satisfaction of the performance obligation. For transactions that are determined not to have a performance obligation, the Board proposed specific recognition guidance based on the various subcategories of transactions (for example, derived taxes, such as income and sales taxes and imposed taxes, such as property taxes).”
GASB is asking for input on the proposals by Feb. 26, 2021, and plans to hold a series of public hearings and user forums on them.