Post-Implementation Review

What is the Post-Implementation Review (PIR) process?

The PIR process is an evaluation of whether standards are achieving their objectives, including whether they provide financial statement users with relevant information in ways that justify the cost of providing it. It is an important quality control mechanism built into the GASB’s standards-setting process that begins after the issuance of certain Statements. During the PIR process, the Board solicits and considers diverse stakeholder input and other research to evaluate the standards that are issued and whether there are areas of improvements the Board should address.
 

PIR Projects

Standards that result from a comprehensive or major standards-setting project normally are subject to PIR.
 
Currently, the GASB is reviewing the following:
  • Fair value measurement and application
  • Fiduciary activities
  • Leases
  • Other postemployment benefits
  • Pensions.
More information on guidance that is in the process of being reviewed can be found here.
 
PIRs previously completed by the FAF can be found here.
 

PIR Process

The PIR process comprises three stages:
 
Stage 1. Post-issuance date implementation monitoring
Stage 2. Post-effective date evaluation of costs and benefits
Stage 3. Summary of research and reporting.
 
The commencement of a PIR and opportunities to participate in PIR activities will be announced publicly to stakeholders. The following is a summary of each stage.
 
Stage 1: Post-Issuance Date Implementation Monitoring
 
This stage begins after issuance of the Statement and continues until at least three years after the latest effective date of that Statement. During the post-issuance date implementation monitoring period (and before the effective date), at a macro level the Board will:
  1. Actively monitor practice as stakeholders prepare for initial implementation of the standards.
  2. Develop and disseminate implementation guidance and educational material.
  3. Communicate and perform outreach with stakeholder organizations, including outreach with the academic community (leveraging the GASAC and other groups when appropriate) to generate interest in research activities associated with the Statement that is the subject of the PIR process.
After the effective date of the Statement, the Board will perform an archival review of financial reports and survey financial statement preparers.
 
Stage 2: Post-Effective Date Evaluation of Costs and Benefits
 
This stage begins after the effective date of the Statement and continues for approximately three to five years. Stage 2 activities consist of:
  1. Understanding the costs that a government incurred in applying the standards, as well as the costs that financial statement users incurred in analyzing and interpreting the information that results from applying the standards
  2. Understanding the benefits of the standards to users
  3. Monitoring the ongoing application of the standards. 
In this stage, the Board may consider sponsoring academic research to assess certain aspects of the standards to provide information to the Board on their effectiveness.
 
Stage 3: Summary of Research and Reporting
 
Following the completion of Stages 1 and 2, the Board summarizes their research in a final report. The final report is a culmination of previous reports and describes the activities conducted and actions taken to address any identified issues. In addition, a memorandum summarizing the PIR findings is prepared and discussed by the Board at a public meeting.
 

PIR Objectives

The PIR process has three main objectives:
  1. To determine whether a Statement is accomplishing its stated purpose
  2. To evaluate the Statement’s implementation and continuing compliance costs and related benefits
  3. To provide feedback to improve the standards-setting process.
To determine whether a Statement is accomplishing its stated purpose, the PIR team assesses whether:
  1. The Statement resolved the issues underlying its need
  2. Decision-useful information is being reported to, and used by, investors and creditors, legislative and oversight bodies, and citizens
  3. The Statement is operational; that is, stakeholders can apply the standards as intended, the standards are understandable, and preparers are able to report the information reliably
  4. Any significant unexpected changes to financial reporting or operating practices resulted from applying the standards
  5. Any significant unanticipated consequences resulted from applying the standards.
To evaluate the selected Statement’s implementation and continuing compliance costs and related benefits, the PIR team assesses whether:
  1. Implementation and continuing compliance costs are consistent with the costs that the Board considered and stakeholders expected
  2. Benefits are consistent with what the Board intended and stakeholders expected.
To provide feedback to improve the standards-setting process, the PIR team assesses whether the results of the review suggest that improvements are needed.
 

Examples of PIR Process Activities

Stage 1: Post-Issuance Date Implementation Monitoring
 
Public accountability is a hallmark of the PIR process. The commencement of the post-issuance date implementation monitoring stage of PIR for a Statement and opportunities to participate in PIR activities are announced publicly to stakeholders. To ensure the independence of the PIR process, evaluative activities of Stage 1, such as archival and survey research, are directly conducted by staff members who were not involved in the development of the Statement being reviewed. The following are examples of the activities in this stage:
  1. Collect implementation questions from stakeholders following issuance of the final Statement; assemble a consultative group of knowledgeable stakeholders to identify implementation issues and advise the development of implementation guidance; consider requesting questions from stakeholders; and develop answers to the questions for possible inclusion in implementation guidance or for standards-setting consideration.
  2. Discuss the implementation of the standards with the GASAC, other groups, and stakeholder organizations.
  3. Monitor technical inquiries to identify major emerging issues arising from implementation of the standards.
  4. Incorporate major implementation issues into presentations at conferences and meetings.
  5. Conduct archival research on the financial reports using a random sample and other volunteer entities (for example, entities that participated in field tests or field studies).
Stage 2: Post-Effective Date Evaluation of Costs and Benefits
 
The following steps are examples of the activities in this stage:
  1. Conduct archival research on financial reports.
  2. Review financial statement disclosures for consistency and transparency.
  3. Conduct surveys to assess the cost of transition to the new standards, differentiating between those costs that will be nonrecurring compared with costs that will be recurring.
  4. Conduct surveys of users to assess the benefits of the information resulting from the new standards for making decisions and assessing accountability.
  5. Solicit feedback from the GASAC, other groups, and stakeholder organizations about their experience with the costs to apply the standards and to analyze the resulting information and the benefits of that information.
  6. Conduct roundtables to discuss benefits and costs with a cross-section of stakeholders.
  7. Assess and monitor financial statement user perceptions to understand whether the standards achieved their expected benefits and the information utility to financial statement users.
  8. Monitor accounting and professional publications, as well as general media coverage.
  9. Sponsor academic research on the achievement of the Statement’s objectives. 
Stage 3: Summary of Research and Reporting
 
In this stage, the GASB publicly discusses the results of its research and prepares a final report for the FAF’s Board of Trustees. The following steps are examples of the activities in this stage:
  1. Prepare a report for discussion with the FAF’s Board of Trustees. Post the report to the public website.
  2. Prepare a memorandum summarizing the research findings and discuss with the GASB members in a public meeting.

Potential Standards-Setting Action

PIR could result in the need for the GASB to take standards-setting action to address (1) areas of the standards that are not understandable, (2) unintended consequences that were not foreseen during development of the standards, or (3) unexpected costs (either one time or ongoing) based on the actual results observed as compared with the expectations documented in the Statement’s Basis for Conclusions. Like all aspects of the Board’s standards-setting activities, actions resulting from PIR are subject to the Board’s normal due process.
 
One of the primary benefits of having the PIR process embedded within the overall standards-setting process is that it is a more efficient and effective way to continually improve the standards-setting process and the resulting standards. For example, if it becomes evident during PIR that portions of a given Statement are not understandable or that unexpected costs arise during implementation, the Board can address those issues on a timely basis and any needed improvements to standards can be immediately achieved through due-process activities.
 
More information on GASB standards and any potential standards-setting action can be found here.
 

Oversight of the PIR Process

The PIR process is subject to FAF Board of Trustees oversight throughout all three stages.
 
The GASB reports on the progress of PIR projects during their public meetings and report regularly to the Standard-Setting Process Oversight Committee (SSPOC) of the FAF Board of Trustees. The final PIR report is reviewed by the SSPOC and published on the FAF website.
 
Information on the history of the PIR Process and the Trustee decision in May 2020 to embed the PIR process into the standards-setting process can be found on the FAF’s website here.