FAF ISSUES FINAL POLICY ON GASB SCOPE OF AUTHORITYNorwalk, CT, November 19, 2013—The Financial Accounting Foundation (FAF) Board of Trustees today adopted a new policy that clarifies the characteristics of the information 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 new policy, described in GASB Scope of Authority: Consultation Process Policy, is effective immediately. Key elements of the new policy will be included in the GASB’s Rules of Procedure.
The policy outlines a pre-agenda consultation process for the GASB and the FAF’s Standard-Setting Process Oversight Committee to follow in determining whether information the GASB might consider for standard-setting activity is “financial accounting and reporting information” within the scope of the GASB’s standard-setting mission. The GASB’s and the Oversight Committee’s scope considerations will be based on accounting and reporting characteristics currently in the GASB’s Concepts Statements. The consultation will not focus on a specific standard-setting project.
“In our initial proposal, stakeholders were concerned that the proposed process could involve the Trustees inappropriately in the GASB’s agenda setting and interfere with the GASB’s standard-setting process and independence,” said FAF Chairman Jeffrey J. Diermeier. “The consultation policy clarifies that the Trustees’ authority lies in their oversight responsibility, and in their authority to determine whether information constitutes financial accounting and reporting information. Consultation in the pre-agenda phase limits the Trustees’ involvement to advising and counseling the GASB about whether information it is considering for standard-setting activity is within the context of financial accounting and reporting.”
GASB Chairman David A. Vaudt said: “The GASB is pleased that the Trustees addressed stakeholder concerns and established a consultation process based on the GASB’s Concepts Statements. The final policy strikes the right balance by maintaining the independence of the GASB, while ensuring appropriate oversight by the Trustees.”
Under the final policy, the GASB will classify governmental financial information as follows:
- Group 1: Information that the GASB assesses is clearly within its standard-setting authority that meets the objectives, and has the characteristics, of governmental financial reporting currently described in GASB Concepts Statement No. 1, Objectives of Financial Reporting, and GASB Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports That Contain Basic Financial Statements;
- Group 3: Information that the GASB assesses as clearly outside GASB’s standard-setting authority (such as information that has no relationship to information presented in general purpose external financial reporting, or does not meet at least one of the objectives of governmental financial reporting as defined in GASB Concepts Statement 1 and GASB Concepts Statement 3); 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 currently set forth in the GASB’s existing Concepts Statements 1 and 3.
The final, approved policy revised the original proposal so that the GASB would consult with the Oversight Committee in the pre-agenda phase. The policy clarifies that the Trustees’ authority lies in their oversight responsibility, and their authority to determine whether information constitutes “financial accounting and reporting information.” It also reiterates that the Trustees will have no involvement in setting the GASB’s agenda or otherwise being involved in the GASB’s independent standard-setting process.
Previously issued GASB concepts, standards, and guidance are not subject to the additional consultation process unless the GASB expands the scope of existing concepts, or expands or reclassifies the information covered by existing standards or 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.