From the President’s Desk
It’s summer, a time when a lot of things on TV tend to get repeated. In that spirit, I thought I would repeat a few key facts about the FAF’s Post-Implementation Review (PIR) Process that we recently discussed in the FAF’s May 20 webcast. Titled (appropriately enough) The FAF Post-Implementation Review Process, the webcast featured FASB Chairman Leslie Seidman, FAF PIR Process Leader Mark Schroeder, and me talking about this new process for assessing whether standards set by both the FASB and the GASB are indeed meeting their intended financial reporting objectives. (If you missed the live event, I urge you to check out the archived webcast to learn more about this important initiative).
The FAF Post-Implementation Review Process
During the webcast, we also announced that the FAF had launched a PIR pilot test on one FASB standard—FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes. Why FIN 48? For the pilot test, we wanted to examine a standard that is considered complex, has elicited concerns among some stakeholders, is not currently under review by the FASB, and is not one of the standards on the FASB’s joint “Memorandum of Understanding” projects with the International Accounting Standards Board. A GASB standard for testing will be announced at a later date.
The PIR process has three objectives. First, it seeks to determine that a standard is accomplishing its stated purpose—and that users of financial statements are actually using the information. Second, it evaluates the selected standard’s implementation and continuing costs. Finally, it is designed to provide feedback to provide standard-setting process recommendations (as opposed to recommending standard-setting actions to be taken by the FASB and GASB).
Mark Schroeder, a retired partner with Deloitte & Touche, was brought on board in 2010 to head the FAF PIR review team. The review team includes experienced FASB and GASB staff members who have been seconded by the FAF for two years. It’s important to note that those staff members will not conduct reviews on standards that they helped to develop.
Why has the FAF decided to undertake this project? There are several reasons. First, the post-implementation review of accounting standards is specifically set out in the FAF’s charter as part of the oversight responsibility of its Trustees. In 2008, the FAF established a Standard-Setting Process Oversight Committee that recommended the creation of a formal PIR process as a tool to enhance its efforts in this area. Feedback received during the Trustees’ 2009 “Listening Tour” further underscored the desirability of having a formal process for evaluating standards after they’ve been implemented.
The Trustees’ leadership mission also includes promoting and protecting the independence and integrity of the standard-setting process. From this perspective, separating the standard-setting process from the review process makes sense, ensuring that the process is carried out as objectively as possible.
Finally, while the FASB and GASB monitor their newly-issued standards for issues that arise during implementation, the FAF process focuses on the standards’ effectiveness once the implementation issues have been addressed. During our webcast, Leslie noted that “the PIR process complements FASB’s ongoing process to monitor the implementation of standards,” and is consistent with recommendations made by the SEC Advisory Committee on Improvements to Financial Reporting (CIFR) in 2008 for “periodic assessment of existing standards.”
In closing, I’d like to emphasize the importance of this PIR initiative in helping the FAF fulfill its role in improving the standard-setting process. As always, your greatest contribution to this process is your input. Please join us in this effort by participating in our PIR pilot test survey and provide us with your views and feedback. You’ll not only be helping the FAF and its standard-setting Boards—you’ll also be helping all those with an interest in high-quality financial reporting leading to stronger capital markets.
FAF President and Chief Executive Officer
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