FAF Review Team Concludes GASB Statements on Deposit and Investment Risks Achieve Their Purposes

Norwalk, CT, February 28, 2013—Two accounting standards established to improve the way state and local governments report deposit and investment risks, and repurchase and reverse repurchase agreements have achieved their purpose and provide decision-useful information to creditors and other financial statement users.

That is the overall conclusion of the post-implementation review (PIR) of Governmental Accounting Standards Board (GASB) Statements No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements, and No. 40, Deposit and Investment Risk Disclosures. Both Statements require note disclosures about deposit and investment risks. Additionally, Statement 3 provides accounting guidance for repurchase and reverse repurchase agreements. The review of Statements 3 and 40 was undertaken by an independent Financial Accounting Foundation (FAF) team working under the oversight of the FAF Board of Trustees. The team issued its formal report today.

"The volume, diversity, and quality of the stakeholder feedback we received during our inaugural GASB post-implementation review project was extremely helpful in determining whether GASB Statements 3 and 40 are achieving their intended objectives," said FAF President and CEO Teresa S. Polley. "On behalf of the FAF and the GASB, I want to thank all of the stakeholders who helped the PIR team assess the real-world application, usefulness, and effectiveness of the deposits and investments standards for state and local governments."

GASB Chairman Robert H. Attmore said: "I am pleased to see the post-implementation review of Statements 3 and 40 affirms the overall effectiveness of the standards in providing value to stakeholders of state and local governments. The GASB will carefully consider all of the reported findings and provide our response in the coming weeks. We also are monitoring the Financial Accounting Standards Board´s (FASB) project on repurchase agreements and, when complete, will determine whether the GASB should consider any relevant issues identified in the FASB project."

The PIR team received input from creditors, analysts, citizen and taxpayer groups, and other financial statement users; as well as preparers (state and local governments), auditors, and academics. Based on its research, the review team concluded that:

The Statements 3 and 40 review team concluded that the standard-setting process worked well overall and contributed to a successful standard. They had no significant standard-setting process recommendations.

The FAF also announced today that the PIR team will start a review of GASB Statements No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, and No. 30, Risk Financing Omnibus—an amendment of GASB Statement No. 10, which establish accounting and financial reporting standards for risk financing and insurance-related activities of state and local governments, including public risk pools. Stakeholders who would like the opportunity to participate in PIR surveys on GASB Statements 10 and 30, conducted by an independent survey firm on behalf of the Financial Accounting Foundation, should register online.

The PIR process, which is independent of the standard-setting process of the GASB and the Financial Accounting Standards Board (FASB), is intended to assist the FAF´s Board of Trustees with its ongoing efforts to evaluate the effectiveness of the standard-setting process for both organizations. The FAF Trustees´ oversight responsibility does not extend to recommending standard-setting action, which is the sole, independent responsibility of the GASB and the FASB. More information on the FAF´s PIR process can be found on the FAF website.