Two GASB Insurance-Related Standards Receive Good Review
by Terri Eyden on
By Jason Bramwell
A post-implementation review (PIR) of two accounting standards that were established to improve the consistency and comparability of reporting US state and local governments' insurance activities concluded that the standards achieve their purposes, the Financial Accounting Foundation (FAF) stated on August 20.
The two standards introduced by the Governmental Accounting Standards Board (GASB) – Statement 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, and Statement 30, Risk Financing Omnibus, an amendment of Statement 10 – establish accounting and financial reporting standards for risk financing and insurance-related activities of state and local governments, including public risk pools.
The review of statements 10 and 30 was undertaken by an independent team of the FAF, the parent organization of the GASB, and the Financial Accounting Standards Board (FASB).
"The PIR report on statements 10 and 30 identified many positive aspects of the insurance and risk-financing standards, including their decision-usefulness to users," GASB Chairman David Vaudt said in a written statement. "We are considering the reported findings and will provide our initial response in the coming weeks. Additionally, the FASB is working on a project to amend its guidance for insurance activities. The GASB is actively monitoring that project and, when complete, will determine whether action by the GASB is appropriate."
The PIR team received input from analysts and other financial statement users as well as from preparers and auditors. Based on its research, the review team concluded that, overall, statements 10 and 30 are accomplishing their stated goals. In particular, their research indicated the following:
- Statements 10 and 30 resolve the issues underlying their need.
- Preparers and experienced practitioners are able to understand and apply the standards as intended.
- The standards have increased consistency and comparability across governments' insurance activities.
- The resulting information is reliable and decision-useful for those who use it.
- The standards did not result in significant unexpected changes to financial reporting or operating practices, nor did they have any significant unanticipated consequences.
- The implementation and continuing application costs appear to be consistent with the costs that the GASB considered and stakeholders expected, and the benefits appear to be consistent with what the GASB intended.
The PIR team for statements 10 and 30 also concluded that the standard-setting process worked well overall and contributed to successful standards. The PIR team had no significant standard-setting process recommendations as a result of the review.
Other PIR Activities at a Glance
The PIR team is currently reviewing FASB Statement 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In September, the team will survey stakeholders about the application and effectiveness of Statement 157.
Later this year, the PIR team will start a review of FASB Statement 123(R), Share-Based Payment, that focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.
The statement establishes standards for the accounting for transactions in which an organization exchanges its equity instruments for goods or services. It also addresses transactions in which an organization incurs liabilities in exchange for goods or services that are based on the fair value of the organization's equity instruments or that may be settled by the issuance of those equity instruments.
Stakeholders who would like the opportunity to participate in upcoming PIR surveys, conducted by an independent survey firm on behalf of the FAF, should register online.