FAF REVIEW CONCLUDES GASB STANDARDS ON RISK FINANCING AND INSURANCE-RELATED
ACTIVITY ACHIEVE THEIR PURPOSES
Norwalk, CT, August 20,
2013—Two accounting standards established to improve the consistency
and comparability in reporting U.S. state and local governments´ insurance
activities achieve their purpose.
That was the overall conclusion of the
Post-Implementation Review (PIR) of Governmental Accounting Standards Board
(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. The Statements 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 Financial Accounting Foundation
(FAF), the parent organization of the GASB and the Financial Accounting
Standards Board (FASB). The team´s formal report is available at http://www.accountingfoundation.org/.
FAF President and CEO Teresa S. Polley said: "On behalf of the FAF and
the GASB, I´d like to thank the stakeholders who helped the PIR team assess the
real-world application, usefulness, and effectiveness of the insurance and risk
financing standards for state and local governments."
GASB Chairman David
A. Vaudt said: "The post-implementation review report on Statements 10 and 30
identified many positive aspects of the insurance and risk financing standards,
including their decision-usefulness to users.
"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
purpose. In particular, their research indicates:
- 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.
Update On Other PIR
Activities
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. Statement 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. It 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 Financial Accounting Foundation, should register
online.
For more information on the PIR process, visit the FAF
website.
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, http://www.gasb.org/.