While the FASB and the GASB set the standards that constitute Generally Accepted Accounting Principles (GAAP), the FAF works to provide a solid foundation for their success. The FAF Trustees are responsible for providing oversight and promoting an independent and effective standard-setting process. The FAF management is responsible for providing strategic counsel and services that support the work of the standard-setting Boards.

Our collective mission is the establishment and improvement of high-quality financial accounting and reporting standards. A part of that mission is engaging with stakeholders to ensure that the standards work for investors, lenders, donors, citizens, academics, and other financial statement users who need an accurate picture of an organization’s financial condition and performance. The standards should also work for preparers, auditors, and other practitioners, so they can understand and apply the standards properly.

The standard-setting Boards—the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB)—are front and center in making standards work.

Meanwhile, in their stewardship role, the Financial Accounting Foundation (FAF) Board of Trustees makes sure the FASB and the GASB follow an independent and comprehensive standard-setting process. We also identify and appoint highly skilled people to those Boards.

In its support role, the FAF management team provides strategic counsel and ensures the Boards have the infrastructure and resources they need to successfully carry out their missions.

In 2017, both FAF roles were critical to helping the Boards ensure that standards work.

When the FAF Board of Trustees exercises effective oversight, the standard-setting Boards are more successful. That oversight includes ensuring that the Boards’ standard-setting processes work effectively.

For example, in 2017, the Board of Trustees completed its review of the GASB scope of authority consultation process policy. Introduced in 2013, the policy set forth a process for ensuring the GASB was addressing issues within the scope of its standard-setting mission. The Board of Trustees’ review found the policy strikes the right balance by maintaining the independence of the GASB, while ensuring appropriate oversight by the Trustees.

During the Board of Trustees’ quarterly public meetings, FASB and GASB members discuss their activities and progress. These dialogues are important to the oversight process. The robust dialogues provide the FAF Trustees (and stakeholders who attend or watch the meetings online) fresh insights about Board strategy and direction. Several conversations this year centered on the FASB and GASB’s outreach to stakeholders. This provided the Board of Trustees with clear evidence that stakeholder outreach processes in place are working as intended.

In 2017, the Trustees also made several appointments to the FASB, the GASB, and their respective advisory councils. Part of making standards work is understanding that the Boards don’t just need skilled standard setters, they need skilled communicators. We are confident that the appointees have demonstrated leadership in communication and stakeholder engagement—and a commitment to making standards work.

Finally, the Trustees worked hard to promote and protect the independence of the Boards and the standard-setting process. The Trustees make sure that the organizations reach out on an ongoing basis to elected and political leaders to educate them about our ongoing activities and discuss how the Boards can better serve investors and other users of financial statements. In 2017, the Trustees continued the tradition of meeting with key stakeholders on Capitol Hill, in the Administration, and at relevant industry groups.

Our 2017 brand reputation study provided us with valuable insights about stakeholder perceptions of the FASB and GASB’s standard-setting processes. Early in the year, we surveyed thousands of our stakeholders about their perceptions of FAF, FASB, and GASB performance, and how we can improve. More than 1,600 diverse stakeholders responded. The FAF, FASB, and GASB learned much from the study, and the data immediately helped us further improve the way (and what) we are communicating with stakeholders.

On the infrastructure front, the FAF management team continued to make significant progress on a multi-year information technology (IT) transformation project. This initiative is creating the technology tools the standard-setting Boards need to carry out their responsibilities more effectively and efficiently. In 2017, the FAF management team built a customer relationship management platform that helps the Boards better engage with their stakeholders. With FASB and GASB members and staff delivering hundreds of speeches around the country each year, the speaker request portal was also upgraded. Now available through the FASB, GASB, and FAF websites, the portal guides stakeholders, step by step, through the process of requesting FASB, GASB, and FAF speakers.

Lastly, the FAF management team is assessing our publishing and content fulfillment and distribution platforms. Given the age of our current content platform and the changing trends in publishing, this assessment will ensure that our stakeholders continue to get what they need from the FASB and the GASB in an effective, timely, and cost-efficient manner.

Although the FAF, FASB, and GASB each have different roles, we’re all committed to the development of high-quality accounting standards and engaging with stakeholders to ensure that the standards work. On behalf of the FAF, thank you for your interest and involvement in our mission.

Sincerely,

A standard that works provides information that helps investors, lenders, and other users make better-informed decisions. A standard that works can be consistently understood and applied. Financial statement users get real value from a standard that works—value that justifies the cost incurred to implement it.

You may know of, or participate in, the FASB’s time-tested process for developing standards that work. What you may not know is the process begins long before we add a project to our agenda, and continues long after we issue a final standard. We continually engage with all our stakeholders throughout the entire life cycle of a standard—including those who prepare, use, or audit financial statements of public and private companies, not-for-profit organizations, and even employee benefit plans.

Our agenda consultation project in 2017 showcases this approach. Standards that work begin with a strong technical agenda, which requires that the Board identify the right accounting issues to address. In September 2017, after two years of outreach, the FASB added three new agenda projects. They include projects on distinguishing liabilities and equity, a component of the FASB’s financial performance reporting research project, and a narrow-scope project on segment reporting intended to improve aggregation criteria and segment disclosures.

Diverse stakeholders identified these issues as priorities—and the Board felt they could be successfully addressed through standard-setting solutions with our existing resources in a timely manner.

On the other hand, several projects didn’t make the cut. Either they weren’t priorities or lacked what the Boards viewed as viable standard-setting solutions. Knowing when to say “no” to a project is as important as selecting the right projects—especially when time and resources are limited.

In 2017, we also made standards work by supporting your efforts to implement them.

We launched, with some excitement, our first FASB implementation web portal. It’s a “chock-a-block” of information preparers need to implement revenue recognition, credit losses, leases, not-for-profit financial reporting, and other standards. It also features educational videos for investors. Originally suggested by the Financial Accounting Standards Advisory Council (FASAC), the portal is yet another example of the importance of stakeholder input. More than 31,500 page views later, we can safely say it’s been a great success.

Portal visitors can even link directly to our staff specialists through the FASB Technical Inquiry Service. This long-standing resource allows stakeholders to submit technical questions about any of our standards. We rely heavily on this and other tools to shine a light on potential trouble spots that may need additional clarification or even standard-setting action. For example, in 2017, stakeholders expressed concerns around certain aspects of the new leases standard, including land easements and transition approach. The FASB responded by making the guidance less costly and complex to implement. Let me emphasize here that we did this without degrading the quality of information provided to investors.

Finally, in August 2017, we issued a new Derivatives and Hedging standard. To develop it, the FASB considered 60 comment letters, held numerous conference calls with investors and other users of financial statements, and held 2 public roundtables, which included preparers, auditors, regulators, and others. We also met with our Private Company Council to discuss private company hedge documentation issues. The result is a standard that works because all stakeholder audiences were part of the process.

Even so, we didn’t rest on our laurels. When organizations that early adopted the standard had questions about the definition of pre-payable instruments, we clarified it. We also went back to the standard-setting table to update the list of U.S. benchmark interest rates in response to actions taken by the Federal Reserve Board.

In 2018, we will continue to support your success in implementing our standards. We’ll continue to respond to and monitor your questions and—when necessary—resolve issues through more standard setting.

We also will issue a final standard on long-duration insurance contracts, one that will improve financial reporting for those companies in the business of underwriting products like life insurance, disability income, long-term care, and annuities.

Finally, we expect to complete work on our disclosure framework project, meaning we’ll finalize guidelines on how the Board makes decisions. The completed framework promotes consistent decisions by the FASB—over time and regardless of membership—about disclosure requirements, while also guiding reporting organizations in making disclosures.

The FASB is committed to creating standards that work. We encourage you to help us by sharing your views throughout the process, and we thank you for your continued involvement.

Sincerely,

Russell G. Golden, Chairman

Standards that work give citizens, investors, analysts, and others the information they need to be well-informed about the financial health of state and local governments. Helping orient stakeholders on what our standards mean, and how to implement them, also is critical, and we take this work seriously.

Think of it as a journey that we travel together with our stakeholders. We’re by their side when new standards are far off on the horizon—and when they’re fast approaching. We are with them on the day the standard takes effect and remain with them long after new standards are fully applied.

Education in Action
In 2017, GASB members and staff made more than one hundred in-person presentations across the country to help educate preparers, policymakers, auditors, and users about what new standards are on the horizon. This early engagement gives everyone a chance to prepare with significant lead time. Getting ready for the standards around the healthcare benefits governments provide to their retired employees, for example, was a central theme of those discussions—and will continue to be as governments adopt the new standards.

While these presentations can range from high level to highly detailed, they are tailored to give each audience the knowledge it needs now, when future action is required, and how to get more information.

New OPEB Implementation Guides
Among the best sources for answers to questions about the fast-approaching standards on retiree health-care benefits (which we call Other Post-employment Benefits or OPEB) are the Implementation Guides the Board issued last May on OPEB plan reporting and last December on accounting and financial reporting on OPEB for governments.

Together, these guides answer questions we received at presentations, through the website, by email, on the telephone, and in other ways.

These “Q&As” offer details on how to approach a specific issue to comply with a certain area of the standard. Beyond OPEB, we offer authoritative implementation guidance on many topics, all available at no charge on our website.

Implementation Guides on Fiduciary Activities and Leases Underway
Stakeholder feedback is one of the best ways we have to make sure our standards are working, especially after they have taken effect. As a result of comments from stakeholders, in December the GASB started working on guides for two recent standards: fiduciary activities and accounting for leases.

These standards are important in their own right, but also raise a variety of specific stakeholder questions about how to implement them effectively. We’ll be working to develop these Implementation Guides over much of 2018, and plan to issue drafts toward the end of the year and into early 2019.

New Guidance to Fine-Tune and Clarify Existing Standards
The GASB also works to address issues identified by stakeholders about how already-existing standards are operating. In March 2017, the Board issued Statement No. 85, Omnibus 2017, that fine-tunes and clarifies areas of recent guidance, including such issues as fair value reporting, pensions and OPEB, and blending component units. Statement 85 will help reduce uncertainty and enhance consistency in applying the standards—and should improve how useful they are.

GASB Technical Inquiry System Answers Your Questions
I want to emphasize that standards that work can mean different things to different people. Sometimes, despite all the presentations, Implementation Guides, and additional fine-tuning and clarification, questions remain. It’s understandable, because the nation’s nearly 90,000 state and local governments, while having much in common, also are a cornucopia of unique facets and features.

Given the specific facts and circumstances a government faces, understanding what makes a standard work may require a one-on-one conversation with a member of the GASB staff.

Every year, our staff holds well over 1,000 such conversations to talk through just how our standards apply in a particular case. After studying the standards, exploring the implementation guidance and other related accounting literature, if you still cannot resolve your accounting or financial reporting issue, I would encourage you to reach out to the GASB staff for assistance through our Technical Inquiry System.

Thank You—and Let Us Hear from You!
Without question, the rich input our diverse range of stakeholders provides helps shape, guide, and inform the Board’s activities. In the end, the standards that work the best are the ones in which our stakeholders are most involved. Hearing from you throughout our process is critical to developing standards that work. We appreciate and thank you for your ideas, energy, and involvement—and look forward to continuing to work together this year and beyond.

Sincerely,

David A. Vaudt, Chairman

Financial reporting is the language that communicates information about the financial condition and operational results of a company (public or private), not-for-profit organization, or state or local government. Accounting standards determine how those financial statements are prepared. The standards are known collectively as Generally Accepted Accounting Principles—or GAAP.

The Financial Accounting Foundation (FAF) is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut, responsible for the oversight, administration, financing, and appointment of the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB).

The FASB establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations.

The GASB establishes financial accounting and reporting standards for U.S. state and local governments.

The FASB and the GASB are responsible for ensuring that GAAP remains the high-quality benchmark of financial reporting so that investors, lenders, capital providers, and other users of financial statements have access to the information they need to make better-informed decisions.

Our Mission

The collective mission of the FASB, the GASB, and the FAF is to establish and improve financial accounting and reporting standards so they provide useful information to investors and other users of financial reports and to educate stakeholders on how to most effectively understand and implement those standards.

The FASB, the GASB, the FAF Trustees, and the FAF management contribute to the collective mission according to each one’s specific role:

• The FASB and the GASB are charged with setting the highest-quality standards through a process that is robust, comprehensive, and inclusive.
• The FAF management is responsible for providing strategic counsel and services that support the work of the standard-setting Boards.
• The FAF Trustees are responsible for providing oversight and promoting an independent and effective standard-setting process.