THE USER ROLE IN IMPROVING FINANCIAL REPORTING
WHY ARE GASB STANDARDS IMPORTANT TO USERS?
Financial reporting is a communication between governments and financial report users. The GASB’s goal is to set accounting standards that yield information that users need to assist them in making decisions about a government and to assist them in assessing whether it has been accountable for the resources that have been entrusted to it.
While we believe sound financial reporting helps financial report users to make informed decisions, it is important to note that the GASB always carefully weighs the cost of making changes against the benefit of those changes to users.
|The Importance of GAAP|
Please take a look at the Financial Accounting Foundation’s (FAF)
2016 Annual Report, “Better standards. Better-informed decisions.”
|Why GASB Standards are Important|
WHY DOES THE GASB NEED THE USER PERSPECTIVE?Serving the user is at the heart of nearly everything the GASB does. In order to improve GAAP, the Board needs to hear directly from the users of governmental financial reports about the types of information they need. This input helps the GASB set standards that result in more complete, accurate, and clear information.
The Board wants to know what users think on a variety of issues. Specifically, the GASB wants to know:
- How current standards are functioning in terms of meeting user needs
- How standards might be changed to better meet those needs
- Whether financial reporting improved as expected after governments have implemented new standards
- Whether important financial reporting information needs remain unmet.
WHAT KINDS OF FINANCIAL REPORT USERS DOES THE GASB WANT TO HEAR FROM?Different financial report users have different informational needs. Therefore, the GASB seeks to hear from the full spectrum of those in the user community.
This broad array of users includes:
- Municipal analysts from rating agencies, mutual funds, insurance companies, banks, and underwriters
- Taxpayers and taxpayer groups
- Citizens and good government groups
- Elected and appointed public officials and their staffs
- Academics and governmental research organizations
- Professional associations’ primary members.
HOW DOES THE GASB CONSIDER USER PERSPECTIVES?Accounting standards are the result of judgments made by the seven-member Board about, among other factors:
- The usefulness of information and the potential benefits that would result from its use
- The expected costs that governments will incur to provide the information
- The expected costs of not providing the information.
WHAT RESOURCES DOES THE GASB PROVIDE FOR USERS?The GASB understands that users often speak a different language than accountants.
Users approach the information that results from GASB standards from the perspective of someone who needs it to evaluate accountability and financial health. The GASB staff prepares and makes available written documents designed for users including:
- The User Guide Series
- Plain-language summaries of proposals and new standards
- Fact sheets on GASB topics
- Seminars describing what the information in financial reports means, where it can be found, and how it can be used.
HOW DOES THE GASB OBTAIN USER PERSPECTIVES?Ultimately, decisions about accounting standards are made after weighing a variety of factors, including usefulness and the cost of providing that information. The Board strives to obtain a complete picture of user perspectives by considering the input it receives from various sources.
The GASB has created many different channels of communication through which the broad spectrum of users can provide their views. Those include:
- Research activities: All major GASB projects are informed by extensive research with stakeholders, including users. The GASB gathers user input through research efforts such as roundtables, interviews, and surveys.
- Governmental Accounting Standards Advisory Council: The GASB’s advisory council consisting of users, preparers, and auditors. The group meets three times a year to provide input to the GASB on various issues, including:
- Projects on the Board’s current technical agenda
- GASB research activities
- Possible new agenda items, and
- Project priorities.
- Project-specific user outreach: Board members and staff often contact users directly to solicit their views on financial reporting issues, such as to get input on the relative usefulness of alternative approaches to solving particular reporting problems. Project task forces include a variety of types of users, along with preparers and auditors of financial reports.
- Input on proposals: A main feature of the Board’s due process is the exposure of proposals for public comment. The exposure process allows anyone interested in financial reporting, including users, to provide their views on proposed standards. For major proposals, the Board conducts public hearings and may hold user forums or user webinars to obtain information from interested individuals and organizations about the issues raised.
- Developments in the field: GASB staff routinely contact users to seek their feedback on the information they are seeing as new pronouncements are being implemented by governments and to answer their questions about the information. Users are encouraged to contact the GASB with questions and to bring issues to its attention.
- Post-Implementation Review (PIR): The FAF Board of Trustees (which provides oversight to the GASB) reviews major GASB standards after they have been in effect for at least three years to see if the financial reporting objectives underlying those standards are being met. User input is critical to assessing whether GASB standards are effective in providing financial statement users with useful information. Learn more about the PIR process.