Message from the FAF Chair and FAF Executive Director

At the conclusion of our annual report letter last year, as the coronavirus pandemic spread across the world, we offered this thought to our stakeholders:

Looking back on the tumultuous events of 2020, we are proud of the remarkable leadership the FASB and the GASB showed. They moved rapidly to adjust effective dates for new standards, provided swift guidance for pressing accounting issues arising from the pandemic, and, with FAF’s help, created dedicated landing pages to give stakeholders easy access to essential information needed for time-sensitive accounting decisions. These actions highlighted a year in which both Boards made extraordinary efforts to stay ever more closely connected to stakeholders.

The new chairs of the FASB and the GASB, Richard R. Jones and Joel Black, officially began their terms of service in July. We subsequently welcomed two new technical directors, Hillary H. Salo (FASB) and, in early 2021, Alan Skelton (GASB). All four of these new leaders bring a wealth of knowledge from the public and private financial sectors. Interestingly, all four have previously contributed their time and expertise to the standard-setting process, either as a member of our key advisory councils or, in Hillary’s case, her early career stint as a FASB postgraduate technical assistant. We are fortunate to have them in their new roles.

We also bid farewell to David R. Bean who recently retired as GASB director of research and technical activities after more than 30 years of service in that critical role. One metric suffices to highlight Dave’s influence on our organization: he personally helped shape 90 of the 97 standards issued by the GASB since its inception. We will miss Dave’s thoughtful insight, tenacious leadership, and wise mentoring of a generation and more of GASB staff members.

We also acknowledge the profound loss of a dear colleague who passed away earlier this year: FAF Trustee David C. Villa. David was a dedicated public servant for the state of Wisconsin and a member of the FAF Board of Trustees since 2018. He was a warm and kind person who brought great thoughtfulness and keen insight to the Board. He was deeply committed to his family and his community and sought to honor his upbringing as a child of educators by giving back. We will miss his inquisitive and purposeful approach to the work of the Board.

In 2022, the FAF will recognize its 50th year. As we look to the future, we remain committed to ensuring we are able to effectively achieve our mission. Among the important tasks ahead, we must successfully implement a new technology platform that will modernize the systems we use to write and publish our standards. We must continue to identify and appoint highly qualified leaders to our Boards and advisory councils. We must also redouble our efforts to become an organization that lives the values of diversity, equity, and inclusion that are vital to our present and future success.

In closing, we would like to express our gratitude to the FAF Trustees whose terms ended last year: Charles M. Allen, Christine M. Cumming, Eugene Flood Jr., Kenneth B. Robinson, and Diane M. Rubin. We also welcome our new Trustees – Timothy L. Christen, Lynnette Kelly, Richard N. Reisig, Sarah E. Smith, and Robin L. Washington. We are so grateful to everyone who shares their talent with us. Whether for a year, or several decades, every person, every perspective has added value to our organization.

We could not be more proud of the employees and leaders of the FASB, GASB, and FAF. Their commitment to our standard-setting mission sustained us through a very challenging year. All of us look forward to returning to the office, holding in-person meetings, traveling, and resuming, with renewed appreciation for face-to-face conversation, the work of serving our stakeholders.

Sincerely,

Kathleen L. Casey, Chair

John W. Auchincloss, Executive Director

Message from the
FASB Chair

In 2020, the COVID-19 pandemic had a profound effect on many of our stakeholders. As we work together to overcome its challenges, we look forward with optimism to what the future holds.

2020 also saw the departure of our past chairman, Russ Golden, as well as the addition of our new technical director, Hillary Salo. Russ leaves behind a strong organization and we thank him for all he has done. Hillary has already made great strides in identifying and implementing ways to further strengthen our organization to fulfill our mission.

When I became FASB chair on July 1, 2020, one of my first priorities was to engage in as much active listening as possible. Initially, I was concerned that, due to the demands of the COVID-19 crisis, our stakeholders would lack the bandwidth to participate in our standard-setting process.

My concerns were unfounded. Despite many challenges, you continue to actively engage with us. Over the past year, I’ve participated in almost-daily virtual meetings with many diverse stakeholder groups. Thanks to your feedback at these meetings, we’ve been able to learn what’s most important to you—which, in turn, helps us determine what our medium and long-term priorities should be.

For example, your input proved critical to our ability to efficiently identify and address pandemic-related accounting issues. Consequently, we delayed certain effective dates for small public and private companies and organizations. We extended comment deadlines for key exposure documents and provided educational resources to help stakeholders apply accounting guidance on rent holidays, debt restructurings, and other pandemic-related issues. And we continued all year to monitor your questions submitted through our technical inquiry service.

My Board colleagues and I are sensitive to the fact that we’ve just emerged from a period of major accounting change, driven by recent guidance on revenue recognition, leases, and credit losses. While these standards made GAAP even stronger, I believe that, with more than 11,000 pages in our Codification, there are few issues not already addressed in accounting literature. But there’s always room for improvement. We’ll continue to seek opportunities to provide better, more useful information to investors, reduce unnecessary cost and complexity, and ensure accounting literature remains relevant as businesses and our economy evolve.

With that in mind, one of my goals as chair is to focus on “achievable standard setting.” Starting in mid-2020, we parsed through our extensive agenda, finished the projects we could, set a path forward for successful completion of others, and removed projects our Board judged would not present an achievable path to standard setting. At this writing, we’ve completed almost 90% of that review. We expect to cover the remaining projects by the end of 2021.

We also launched a new agenda consultation—our first in five years—to determine what issues we should tackle next. We expect to issue an Invitation to Comment on potential agenda projects in midyear 2021, which will give you the opportunity to help set our priorities.

Another area of focus is our post-implementation review (PIR) of major standards on revenue recognition, leases, and credit losses. The PIR process is the “quality control” part of standard setting that allows us to examine whether standards are performing as originally intended. We rely on outreach with investors, preparers, and practitioners to help us identify areas of improvement not only with those standards but also with our standard-setting process.

Finally, the FASB continues to complete two major projects that have been in flight for several years: efforts to improve goodwill and segment reporting. On goodwill, we are currently pursuing an “impairment test with amortization” model that would reflect that what is acquired and initially ascribed to goodwill decreases in value over time. Although the Board has not yet deliberated specific changes to the impairment model, I expect that an impairment test will remain as part of the model. We expect to issue an Exposure Draft for comment in early 2022.

Our project on segment reporting would provide investors with more information about how a company’s various operating segments perform. We’re currently focused on a consistent “chief operating decision-maker approach” and expect to issue an exposure document for public comment in early 2022.

Your support of the FASB’s activities through these difficult times reminds me that independent standard setting is a great asset and a great privilege. It’s a great asset because it allows us to solicit and incorporate diverse views into our process, providing investors and other financial statement users with relevant, unbiased information in the most cost-effective way possible. It’s a privilege because the FASB must continually earn the right to set standards. We are judged by how well we execute the standard-setting process, and we always welcome your views on how we could improve.

My outstanding colleagues at the FASB are committed to earning your trust every day. We look forward to serving you in 2021 and beyond.

Sincerely,

Richard R. Jones, Chair

Message from the
GASB Chair

In any given year, it is challenging to make sure our stakeholders have the resources they need from us to prepare, audit, and interpret GAAP financial reports. New dimensions were added to this challenge in 2020, including the global pandemic, changes in leadership, and redefining future priorities to meet evolving stakeholder needs.

COVID-19 Relief Measures
State and local governments became overstretched as the pandemic took hold, so the Board took action to provide a variety of tools to help ease their accounting burdens. Last spring, the GASB posted a COVID-19 resource center on its website as a one-stop location for stakeholder resources.

Almost immediately, we offered an emergency toolbox to help stakeholders quickly identify specific guidance relevant in the current circumstances—even if they had never applied it previously. It also let them know who on our staff to talk to about questions.

Soon after, the Board acted to postpone the effective dates of more than a dozen recent standards, including leases and fiduciary activities, by a year or more. The Board also issued a document providing answers to specific stakeholder questions about accounting for the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

GASB leadership and staff addressed other issues stakeholders raised in outreach meetings, and at dozens of virtual educational presentations at conferences and other events. In 2020, the Board and staff also answered hundreds of other individual stakeholder questions arising from the pandemic.

Changes in Leadership
The past year marked two major changes in GASB’s leadership ranks.

Concluding his term in June, former GASB Chairman David Vaudt left us a more modern organization with stronger stakeholder relationships than ever before. Once the FAF Trustees selected me as incoming chair early last year, I had the privilege of working closely with Dave until my term began in July, greatly easing the entire transition process.

David Bean, who served as GASB’s director of research and technical activities for more than 30 years, retired in spring 2021. His impact on governmental accounting cannot be overstated. No one has done as much or devoted more time and expertise to improving what we do. He led, grew, and nurtured the GASB family for three decades; that is Dave’s true legacy.

Following a national search, we selected Alan Skelton, the former Georgia state accounting officer, as Dave Bean’s successor. I have known Alan professionally for many years and worked with him closely on our advisory council, the Governmental Accounting Standards Advisory Council, where we served together. He shares my passion for the evolution of the organization as we look ahead together.

Current Priorities and the Future
A trio of related projects launched by Dave Vaudt will redefine the future of financial reporting for governments. Our current efforts on the financial reporting model look at what information future financial reports should present. At the same time, we are evaluating how revenues and expenses should be recognized within that model, and what disclosures would provide a more informed understanding of financial statements overall.

The Board published documents on these efforts in 2020 to learn stakeholders’ views and gain their insights. Last fall, we offered a series of educational webinars on these projects to help bring everyone up to speed and then held a series of virtual events this spring so stakeholders could share their thinking directly with the Board. Their ideas help us to improve governmental financial reporting.

These projects show how, with strong stakeholder input and ideas, governmental accounting and financial reporting remain vital. Technology will continue to be a part of the evolution. We are mindful of how technology affects our stakeholders, affects us as a standard setter, and creates opportunities for further improvements in our process and in government financial reporting.

With my fellow Board members, I am excited to carry on the GASB’s important work in 2021 and beyond. I look forward to the opportunity to meet with stakeholders in person when that becomes possible again. I am committed to continuing the dialogue we have begun. Working together, I know we will continue to make important strides forward in improving accounting and financial reporting for state and local governments in the United States.

Sincerely,

Joel Black, Chair