The FASB Post-Implementation Review (PIR) Process

 

What is the FASB Post-Implementation Review (PIR) Process?

When the FASB issues a final standard, it means the Board has concluded that the benefits derived from the standard—namely, information that is useful to investors and other capital market stakeholders—would justify the incremental cost of preparing and using that information. The Board arrives at this conclusion based on what it learned during its extensive stakeholder outreach, academic and other research, and public discussions and analysis. These activities are the hallmarks of the FASB’s comprehensive standard-setting process.
 
But that process doesn’t end when a final standard is issued—rather, it marks the start of a new, “quality-control” phase known as the post-implementation review (PIR) process. During the PIR process the Board continues its review and evaluation of the final standard. The FASB conducts more stakeholder outreach and other research to monitor implementation progress and obtain an understanding of whether the value of information the standard is providing the capital markets is worth the resources required to deliver it. This extended timeframe gives the FASB the opportunity to identify and address any areas for improvement in a timely manner, effectively creating a process of continuous improvement.

 
Why does the FASB perform PIR evaluations?

An important aspect of the FASB’s mission is to help our stakeholders incorporate new guidance. As stakeholders begin the implementation process, proactive dialogue and other research often provide new or enhanced information regarding the implementation process and costs/benefits. The Board can then review and evaluate such information to determine if there are any areas for improvement. The FASB may then respond with more education, more standard setting, or—if the standard is performing as expected—no additional action.
 
All standard-setting activities are subject to normal due process.

How does the FASB conduct the PIR process?

The FASB conducts the process in three stages.
 
Stage 1: Post-Issuance Implementation Monitoring
 
Stage 1 of the PIR process begins soon after the final standard is issued, but before the date companies and organizations are required to implement it. FASB members and staff who were not involved in the development of the original standard are assigned to conduct surveys and other research to monitor stakeholder progress. This helps the FASB decide if it needs to clarify or address areas of the guidance that pose “stumbling blocks” to successful implementation.
 
Stage 2: Post-Effective Date Costs/Benefits Evaluation
 
This stage begins after companies and organizations have implemented the standard. Its purpose is to determine whether the value of information the standard is providing the capital markets is worth the resources required to deliver it.
 
Activities that might take place during this stage include:

• Surveys/outreach meetings with preparers and auditors and other stakeholders to assess recurring and/or initial startup costs of transitioning to the new standard
• Outreach meetings with FASB advisory and liaison groups, regulators, and other capital market stakeholder groups about their experience with the costs to apply the standard and to gather information about its perceived benefits
• Workshops and/or roundtables with a cross-section of stakeholders
• Initiatives to assess/monitor financial statement user perceptions to understand whether the standard achieved its expected benefits and the value of the information it provides
• Financial statement disclosure reviews to evaluate consistency and transparency (leveraging eXtensible Business Reporting Language, or XBRL, where possible)
• Ongoing reviews of accounting and analyst publications; archival research on financial reports
• Commission academic research to measure achievement of the standard’s objectives. 

Stage 3: Summary of Research and Reporting

In this stage, the FASB publicly discusses the results of its research and prepares a final report for the Financial Accounting Foundation (FAF) Board of Trustees. This stage may result in a report to the FAF Trustees to be posted to the FAF/FASB websites, and/or a memorandum summarizing PIR findings for discussion at a public FASB meeting.
 

What standards are currently under review?

Currently, the FASB is reviewing the following major standards:

• Credit losses
• Leases
• Revenue recognition.

What are examples of standard-setting actions that resulted from the PIR process?

An important aspect of the PIR process is the FASB’s ability to respond through standard-setting action to continuously improve the standard. Below is an overview of how the FASB has improved major standards based on what it learned during the PIR process.
 
Leases

• Issued 5 Accounting Standards Updates improving and simplifying Topic 842
• Issued 2 Accounting Standards Updates deferring Topic 842 for private companies and not-for-profit (NFP) organizations. 

Credit Losses

• Issued 5 Accounting Standards Updates improving and simplifying Topic 326
• Issued 1 Accounting Standards Update deferring Topic 326 for public business entities that do not meet the definition of a U.S. Securities and Exchange Commission (SEC) filer, private companies, and NFP organizations. 

Revenue Recognition

• Issued 4 Accounting Standards Updates to clarify or simplify Topic 606
• Issued 2 Accounting Standards Updates deferring Topic 606, one deferral for all entities and one deferral for certain entities that are not public business entities. 

As part of its ongoing PIR process, the FASB will continue to evaluate the need for additional guidance to either clarify or simplify the guidance or defer effective dates for organizations that have not yet adopted the guidance.

How can I participate in the process?

 
Stakeholder input is critical to a successful PIR process, and all are encouraged to participate. The PIR project page provides team contact information for each of our current projects. Reach out to the PIR team via email if you have any feedback.
 
If you have questions on the guidance, you can access our Technical Inquiry Service here.
 

Who provides oversight of the PIR process?

 
The FAF Board of Trustees provides oversight of the FASB PIR process throughout all three stages.

The FASB reports on the progress of its PIR projects during public meetings of the FAF Board of Trustees. The FASB also reports regularly to the Trustees’ Standard-Setting Process Oversight Committee (SSPOC). 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 FAF Trustees’ May 2020 decision to embed the PIR process in the standard-setting process of the FASB and the GASB can be found on the FAF website.
 

Where can I find more information about the PIR Process?

 
To learn more about the PIR process and stay updated on current projects, visit the FASB’s PIR web portal at FASB.org/PIR.