By Anne Rosivach
Quoted material is taken from the FAF President and CEO, Teresa Polley's, September "From the President's Desk" column.
Listening is central to the mission of the Financial Accounting Foundation (FAF), the oversight board of the two accounting standard-setting bodies, the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB).
"Keeping our ears open to the concerns of all of our stakeholders – investors, taxpayers, preparers, auditors, lenders, donors, analysts, bondholders, company executives, and government officials, to name a few – enables the FASB and the GASB to develop higher-quality and more useful accounting standards for companies, public and private, nonprofits, and state and local governments."
A series of hearings and roundtables scheduled by the standard-setting boards during October will address two controversial issues: (1) the GASB proposals on accounting for government pensions, and (2) standard setting for private companies and nonprofit entities. These meetings will give stakeholders an excellent opportunity to make their voices heard.
"Listening is a critical part of the process that the FAF, the FASB, and the GASB follow to ensure that their decisions are well-informed and cognizant of the needs and views of all their constituents. But listening is effective only when interested parties speak."
The GASB pension accounting proposals
The GASB will hold public hearings in New York, San Francisco, and Chicago beginning in early October that will focus on two new proposals intended to improve the calculation and reporting of costs and obligations associated with government employee pensions.
"We do not expect these hearings to be without controversy. The first of the two Exposure Drafts – Accounting and Financial Reporting for Pensions – primarily relates to financial reporting by governments that provide pensions to their employees. The second – Financial Reporting for Pension Plans – addresses financial reporting by the pension plans that administer the pension benefits."
"GASB's proposals would make the financial reporting of pensions more transparent, comparable, and decision-useful to citizens, legislators, and analysts of municipal and state bonds. As an example, the first new pension proposal would require governments to report their net pension liability – that is, the difference between the total pension liability and the value of the investments they have set aside to pay the pension benefits. It also would provide for immediate recognition of more components of pension expense than now required."
The final standards will be announced next year. Information on the GASB pension project is available on the GASB Web site.
The FASB and the FAF initiatives on private company standard setting
The FASB will sponsor two in-depth roundtables in October (one in Chicago, the other in San Francisco) "to talk with preparers, auditors, and users of private company financial statements about their concerns with existing generally accepted accounting principles (US GAAP) and their thoughts on how the FASB can better consider their needs when setting standards."
"The roundtables are part of larger and separate initiatives that both the FAF and the FASB have undertaken in an effort to better understand the issues associated with setting standards for private companies. For example, in July the FASB staff released an initial analysis identifying six specific ways in which use of financial statements for private companies differs from that of public companies. That work eventually will become the foundation of a new set of decision-making criteria that will help the FASB identify whether and when to make exceptions or modifications to US GAAP for private companies."
The FAF created a Working Group to study issues related to the standard-setting process for private companies and the Blue Ribbon Panel's recommendation to create a separate standard-setting board.
The Working Group has engaged in extensive outreach, meeting with practitioners, including representatives of CPA firms with substantial private company and not-for-profit client bases, as well as with lenders, investors, sureties, regulators, donors, and others, to obtain user perspectives on private company and not-for-profit financial reporting issues. They also have participated in discussions with the FASB's advisory groups, including the Financial Accounting Standards Advisory Council, the Private Company Financial Reporting Committee, the Not-for-Profit Advisory Committee, and the Small Business Advisory Committee.
The FAF has received an enormous amount of feedback on the private company standard-setting process, including "a large number of letters from interested parties commenting further on the Blue Ribbon Panel recommendations." Using this feedback, the FAF Trustees will develop an informed proposal about the future of the standard-setting process for non-public entities.
The FAF Trustees anticipate issuing a proposal document for public comment in the coming weeks.