In what can be termed a shift in placement, the Governmental Accounting Standards Board and the American Institute of CPAs are proposing that certain guidance in the latter's literature belongs in the literature of the former.
One item ready for the shift is the hierarchy of generally accepted accounting principles for state and local governments. It established the levels of authority of accounting pronouncements that have been issued by various bodies, including GASB, the Financial Accounting Standards Board, the AICPA's Accounting Standards Executive Committee, the Auditing Standards Board and the Federal Accounting Standards Advisory Board.
The hierarchy has resided in the AICPA's literature for many years, and it had functioned perfectly well there. But it would be more suitable under GASB's purview, GASB and the AICPA agree, so they have proposed moving it over to where it belongs.
FASAB is expected to propose a similar shift of the hierarchy to its literature by the end of the year. However, it would apply only to federal accounting standards.
"There's absolutely no controversy from our perspective," said Chuck Landes, vice president of the institute's professional standards and services team, "because we believe it's best that the accounting standard-setters address the hierarchy, rather than having it addressed in auditing literature, so we're happy to have GASB - and FASAB, if they follow suit - pull that hierarchy over to their shelves."
GASB and the AICPA are also proposing that certain guidance relating to financial reporting be pulled from the literature of the Auditing Standards Board and codified as a GASB standard. The guidance, which relates to related-party transactions, going-concern considerations, and subsequent events, has been present in auditing literature for the purpose of helping auditors understand what to look for in audits of financial reports. In that GASB literature has been silent on these issues, the auditing standards have by default served as de facto financial reporting standards.
FASAB executive director Wendy M. Payne said that her board was working on exposure drafts similar to that of the GASB proposal, but that the situation at the federal level is a little more complicated.
"There are some federal entities that adopted FASB standards before FASAB came into existence, so we need to codify guidance for them as to whether they need to continue to consider FASB-standards GAAP," Payne said. "We haven't determined whether it is cost-beneficial to make a change after so many decades of using FASB standards after the users have become accustomed to it."
Payne said that the board planned to discuss the issue at its October meeting and hoped to issue an exposure draft by the end of the year that would likely establish a first tier for use of FASB standards. A second stage of the project might then be initiated to address issues that are inherently federal, such as the receipt of direct federal funding.
FASAB also is considering adoption of the three reporting issues, Payne said, but is likely to wait to see the responses to GASB's proposal. She said that an exposure draft might be possible in the first half of 2009.
GASB senior technical advisor Ken Schermann said that GASB did not plan to make any changes to the AICPA standards besides minor edits aimed at making the standards more clearly and directly applicable to governmental reporting. The standards are proposed as a single statement.
"There shouldn't be any implementation issues," Schermann said. "Technically, governments should already be aware of these standards and should be following them. It's just about the geography of where you find the guidance."
Schermann said that he didn't know of any other governmental financial reporting standards that should be incorporated into GASB guidance. He did not expect any controversy over the exposure draft, and said that if there is none by the end of the comment period, Oct. 30, 2008, the board is likely to approve the documents at its next meeting.
They would go into effect upon approval.
Landes said that once GASB and FASAB have established the guidelines within their own standards, the AICPA would delete it from its own guidance, though related auditing guidance would naturally remain.
