FREQUENTLY ASKED QUESTIONS ABOUT
FAF’S POST-IMPLEMENTATION REVIEW (PIR) PROCESS

1. What is the Post-Implementation Review (PIR) Process?

The PIR process was initiated by the Financial Accounting Foundation’s (FAF) Board of Trustees (Trustees) as part of the FAF’s oversight responsibilities for its two standard-setting bodies—the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). The PIR process is intended to assist the Trustees with their ongoing efforts to evaluate the effectiveness of accounting standards as well as the standard-setting process for both the FASB and the GASB. The FAF designed the PIR process to be independent of the standard-setting processes of the FASB and the GASB.

2. Who conducts the reviews?

The PIR process is performed by a dedicated PIR team supervised by the PIR director. The PIR director reports to the FAF President and CEO and to the FAF Trustees’ Standard-Setting Process Oversight Committee. The PIR team includes experienced FASB and GASB staff members who have been released to the FAF to devote full-time efforts to the PIR function.

3. How is a standard chosen for review?

U.S. Generally Accepted Accounting Principles (U.S. GAAP) comprises many accounting standards with varying degrees of complexity and relevance. As a practical matter, not every standard can be reviewed. The FAF Trustees have directed the PIR team to focus its review efforts on significant standards. A significant standard is one that has resulted in substantial changes in financial reporting or a considerable amount of stakeholder input suggesting that a standard might not be meeting its stated objectives. To be eligible for review under the PIR process, standards must have been issued for at least two to three years. The PIR team will not review a standard that is currently under reconsideration by the FASB or the GASB.

The following factors are considered when determining which standards to review:
  • Whether significant post-implementation guidance has been requested
  • Whether there has been inconsistent reporting of similar transactions
  • Whether the standard has been misapplied or misinterpreted
  • Whether there has been a significant number of financial statement restatements
  • Whether the standard is or was controversial to stakeholders
  • Whether the standard may cause significant transaction structuring
  • Whether the standard covers a high volume of transactions
  • Whether the standard affects a wide range of industries
  • Whether the standard required significant costs to implement or significant systems changes and maintenance
  • Whether the standard affects numerous financial statement elements
  • Whether other standard setters are reviewing the standard.
4. What are the objectives of the PIR process?

The PIR process has the following three broad objectives:
  1. To determine whether a standard is accomplishing its stated purpose
  2. To evaluate the standard’s implementation and continuing compliance costs and related benefits
  3. To provide feedback to improve the standard-setting process (as opposed to recommending standard-setting actions).
To determine whether a standard is accomplishing its stated purpose, the PIR team will assess whether:
  • The standard resolved the issues underlying its need
  • Decision-useful information1 is being reported to, and being used by, investors, creditors, and other users of financial statements
  • The standard is operational: that is, the standard is understandable, stakeholders are able to apply the standard as intended, and preparers are able to report the information reliably2
  • Any significant unexpected changes to financial reporting or operating practices resulted from applying the standard
  • Any significant unanticipated consequences resulted from applying the standard.
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1 To be decision-useful, information should be: relevant and representationally faithful [FASB PIR (FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, Chapter 3)] understandable, reliable, relevant, timely, consistent, and comparable [GASB PIR (GASB Concepts Statement No. 1, Objectives of Financial Reporting)].
2 The term reliably is used with its general meaning, rather than in a specific accounting or technical sense. Reliable means able to be believed – likely to be true or correct” (Merriam-Webster; accessed online).

To evaluate the selected standard’s implementation and continuing compliance costs and related benefits, the PIR team assesses whether:
  • Implementation and continuing compliance costs are consistent with the costs that the Board considered and stakeholders expected
  • Benefits are consistent with what the Board intended and stakeholders expected.
To provide feedback to improve the standard-setting process, the PIR team assesses whether the results of our review suggest that improvements are needed.

The PIR process does not result in standard-setting recommendations.

5. How long will post-implementation reviews take?

The PIR team expects a review of a selected standard to take approximately eight months, but the length of the review is determined partly by the complexity of the standard. The PIR team reviews one FASB standard and one GASB standard at a time.

6. What are the post-implementation review procedures that the PIR team follows?

The procedures that the PIR team follow in reviewing a standard vary depending on the circumstances.

Typically, the PIR team conducts a review of the project archives and academic and other research. The team also solicits confidential input from stakeholders directly in interviews and possibly through surveys or questionnaires.

The PIR team forms conclusions on whether the standard under review has met the PIR objectives using its judgment, considering all the input received, and striving to be objective and balanced. The team looks to the appropriate Standards Board’s conceptual framework as much as possible to provide a basis for its judgments and conclusions. PIR reports on reviewed standards do not include standard-setting recommendations, only process recommendations.

After completing its research, the PIR team compiles its procedures, research results, and preliminary conclusions into a detailed Findings document. The PIR Team reviews the Findings with the FAF President and CEO and the FAF Trustees’ Standard-Setting Process Oversight Committee. The team also reviews the Findings with the chairman of the FASB or the GASB, as appropriate, and obtains their views on preliminary conclusions and recommendations. Factual differences are resolved and clarified.

The PIR team then drafts its PIR Report which summarizes its key findings and conclusions. The team reviews its PIR Report with the Oversight Committee and the Trustees.

7. Will the post-implementation review Findings or Report be made public?

After all reviews are complete, the FAF Trustees accept the final PIR Report and post it to the FAF website.

8. What if the PIR team finds that a standard under review may not be meeting all of its objectives?

The purpose of the FAF’s PIR process is to help the Trustees with their ongoing efforts to evaluate the effectiveness of accounting standards as well as the standard-setting process. PIR activities are independent from the activities of the Standards Boards. The FAF by-laws require that standard setting be independent and objective, including independence from the Trustees’ influence. Thus, PIR reports on reviewed standards will not include standard-setting recommendations, only process recommendations. The decision to take standard-setting action in response to findings in a PIR report is solely in the purview of the FASB/GASB. Stakeholders should not expect the FASB/GASB to take any standard-setting action as a result of a PIR.

After the FASB/GASB has reviewed and considered the public PIR Report and the PIR team’s detailed Findings, the FASB/GASB is expected to respond in writing to the FAF Trustees’ Standard-Setting Process Oversight Committee and other FAF Trustees about the matters discussed in the Report and Findings.
The Trustees expect the FASB/GASB to do the following with respect to research findings, conclusions, and recommendations described in PIR Reports:
  • Consider all standard-setting process recommendations.
  • Consider PIR findings that relate to the effectiveness or operationality of a standard as another source of information they receive as part of their ongoing monitoring of financial reporting issues.
  • If the FASB/GASB plan to research issues raised in PIR Reports, they should inform the FAF Trustees’ Standard-Setting Process Oversight Committee of their intent and report back to the Oversight Committee on the outcome of that research.
9. Why should stakeholders participate in the PIR process?

The PIR process provides a unique opportunity for stakeholders to be heard regarding standards in actual day-to-day use. Stakeholder input is critical to assessing whether standards are effective in providing decision-useful information to users of financial statements. Stakeholder input should improve the ability of the standard-setting process to provide decision-useful information.

10. How can stakeholders participate in the PIR process?

A stakeholder who is interested in participating in the research aspect of future post-implementation reviews (such as interviews or surveys on specific standards) can register by using the link on the FAF website.

11. If stakeholders have a question on an accounting standard being reviewed by the PIR team, should they contact the PIR team or FASB/GASB?

An accounting standard-related question should be directed to the FASB or the GASB’s technical inquiry system.

A question related to the post-implementation review process should be directed to the respective FASB/GASB PIR team members.