FAF ISSUES REVISED PROPOSAL ON GASB SCOPE OF AUTHORITYNorwalk, CT, August 20, 2013—The Financial Accounting Foundation (FAF) Board of Trustees today issued for comment a revised proposal to clarify the characteristics of information that the Governmental Accounting Standards Board (GASB) may incorporate into the financial accounting and reporting concepts, standards, and guidance that it issues for state and local governments.
The proposal, GASB Scope of Authority: Consultation Process–Revised Proposal, outlines a revised process through which the GASB would consult with the FAF Trustees’ Standard-Setting Process Oversight Committee to determine whether certain information that the GASB might consider for standard-setting activity is “financial accounting and reporting information” within the scope of the Board’s standard-setting mission.
“In comments we received on the original proposal, many stakeholders expressed concern that the Trustees were stepping into the GASB’s standard-setting role,” said FAF Chairman Jeffrey J. Diermeier. “The new proposal would maintain the GASB’s independence by moving the Oversight Committee’s involvement from the agenda-setting process to a pre-agenda consultation. It also would clarify the FAF Trustees’ role in advising and counseling the GASB as it determines whether information to be used in standard setting constitutes ‘financial accounting and reporting information.’”
GASB Chairman David A. Vaudt said: “The GASB is pleased that the Trustees have proposed a revised process based upon the GASB’s concept statements and focused on pre-agenda consultation. The revised proposal strikes a balance that should maintain the GASB’s independence while affording the FAF Trustees the appropriate oversight to ensure that the GASB is operating within its scope of authority.”
FAF President and CEO Teresa S. Polley said: “In May 2013, we formed a working group that included the GASB and the FASB chairs to review the original proposal and analyze the relationship between the FAF and the GASB. The working group and the Trustees developed a revised proposal that all of us believe would maintain the independence of the GASB and ensure appropriate oversight authority by the Trustees.”
Under the revised proposal, the GASB would classify governmental financial information as:
- Group 1: Information that GASB assesses as clearly within its standard-setting authority (such as items recognized in basic financial statements and notes to basic financial statements);
- Group 3: Information clearly recognized as being outside GASB’s standard-setting authority (such as information that has no relationship to information presented in general purpose external financial reporting); and
- Group 2: Information that does not clearly possess the characteristics of Groups 1 or 3, but that meets at least one of the objectives of governmental financial accounting set forth in the GASB’s existing Concept Statements.
Under the original proposal, the GASB, when considering a project containing Group 2 information, would have provided the Oversight Committee with an expanded project proposal during the GASB’s agenda-setting (project-selection) process. The Oversight Committee would have made recommendations to the Trustees on whether the project was within the GASB’s scope of authority.
The revised proposal changes the Oversight Committee’s involvement from the GASB’s agenda-setting process to a pre-agenda consultation, as follows:
- The GASB and the Oversight Committee would consult only to discuss whether the Group 2 information appropriately constitutes “financial accounting and reporting information” in the context of the GASB’s mission. The FAF Trustees would not vote on specific projects for GASB agenda consideration and would not be involved in the GASB’s agenda-setting process.
- If the GASB and the Oversight Committee agree that the Group 2 information is financial accounting and reporting information, the GASB would be free to include it in a standard-setting project.
- If the Oversight Committee is not satisfied that the GASB has demonstrated the Group 2 information is financial accounting and reporting information, it may ask the GASB to engage in further research and stakeholder outreach, or the Oversight Committee may refer the matter for FAF Trustees’ discussion.
- If the Trustees are satisfied that the GASB has demonstrated that the Group 2 information is financial accounting and reporting information, the GASB would be free to include the information in its standard-setting activities. If the Trustees are not satisfied, the GASB would exclude the Group 2 information from its standard-setting activities.
- The GASB’s existing concepts, standards, and guidance would not be subject to the consultation process unless the GASB expects to expand the scope of existing concepts, or expects to expand or reclassify the information covered by existing standards and guidance.
About the Financial Accounting Foundation
The FAF is responsible for the oversight, administration, and finances of both the Governmental Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB). The Foundation is also responsible for selecting the members of both Boards and their respective Advisory Councils.
About the Governmental Accounting Standards Board
The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board’s diverse constituency, including preparers and auditors of government financial statements, users of those statements, and members of the academic community. More information about the GASB can be found at its website, www.gasb.org.