Episode Transcript
Episode 4—GASB Post-Implementation Review Process (PIR Process) with Alan Skelton, Director of Research and Technical Activities
Eileen Foley [00:00:07] Hi everyone. Welcome to Bridging the GAAP, a podcast brought to you by the Governmental Accounting Standards Board with our host, Matt Broder, Vice President of Communications at the Financial Accounting Foundation. I'm Eileen Foley, Senior Manager of Digital Operations, and I'm excited to be here with GASB Chair Joel Black to introduce the first part of our two-part series covering GASB's Post Implementation Review Process. Welcome back, Joel.
Joel Black [00:00:34] Thanks, Eileen. Always great to be with you for another episode of Bridging the GAAP. Very excited for a two-part series.
Eileen Foley [00:00:41] So am I, Joel. So, as the first part of this series, we're going to be covering the overview of GASB’s Post Implementation Review Process. And I understand that's an important part of the standard setting process for GASB. Can you explain a little more to our listeners about the process, and also who Matt will be speaking with today?
Joel Black [00:01:01] Sure. The Post Implementation Review or PIR Process is an important part of the standard setting process because it's where we review a standard after it's been effective for a number of years so that we can evaluate if it’s meeting its objectives. Today, Alan Skelton, who is GASB’s Director of Research and Technical Activities, will be providing an overview of that process.
Eileen Foley [00:01:24] Wow, I'm excited to hear more about that. Alright, so let's go ahead and listen in as Matt welcomes Alan to today's episode. Thanks, Joel!
Matt Broder [00:01:32] Thank you, Joel and Eileen. I'm really delighted to be here today with Alan Skelton, who is the Director of Research and Technical Activities at the GASB. Alan joined the GASB in 2021. He moved up to Connecticut from the state of Georgia, where he was the State Accounting Officer. That's a gubernatorial appointment. So, he was really a very important player in this in the state finance world there in Georgia for quite a while. And he was at Ernst and Young prior to entering public service. Alan, it's great to have you here. And I'm going to start with, maybe a higher-level question. So, I know we're very fond of acronyms here, and one of the acronyms that you hear often around this building is PIR, which is shorthand for Post Implementation Review. Before we dive into the details, maybe you could just talk a little bit about where the PIR falls in the overall standard setting process, and what the GASB hopes to achieve by dedicating time and resources to its post implementation reviews.
Alan Skelton [00:02:42] Thank you Matt. It's great to be here. Actually, I think this is our fourth podcast and the first one that I've been a part of. And so, it's really awesome to be here today. PIRs, as you mentioned, fall at the end of our standard setting process and they really begin after the Board has approved a new statement. There are three main objectives with a PIR. The first one is to determine whether a statement is accomplishing its stated purpose. The second one is to evaluate the statements implementation and continuing compliance costs and the related benefits. And then the third one is to provide feedback to improve the overall standard setting process.
Matt Broder [00:03:14] Okay. Well, it doesn't surprise me that there's a structure to it. And maybe now what we'll do is just dive a little bit deeper into that. You talked about three objectives. What are the three, sort of stages, if you will, of a post implementation review?
Alan Skelton [00:03:33] Thank you. There are, you're right, three stages and stage one is what we call post issuance date implementation monitoring. Stage two is post effective date evaluation of cost and benefits. And the third one is the summary of research and reporting. I'll go through each stage a little bit separately so we can talk about them a little more. Stage one really, as we mentioned, is the post issuance date implementation monitoring and really that's us, the staff, engaged in multiple activities. We actively monitor practice and stakeholders and talking to them about what they see and what their concerns are as they're trying to implement the standard. It's responding to technical inquiries. Technical inquiries are a process we have at GASB where stakeholders call us with questions, talk to the staff and say, “Hey, I've got these facts and circumstances. How would I apply the new statement in relation to those facts and circumstances?” And we give them an answer. It's not authoritative, but it does provide them with some information that might help them implement the standard. We develop and assimilate implementation guidance and education materials. We do a lot of GASB updates at conferences and talk to people about what the statement is, what's in it, what are the risks or the recognition criteria, the measurement criteria. It's interesting that in this process, for us, a couple things could happen. It's not unlikely where the Board might, through this stage one part of this process, realize there's something they need to do, and we need to adjust the standard. It might be issuing what we call implementation Q and A's, which for us are exactly that. It's a question and answer to something we think needs to be clarified in a standard. We can do that, and it is authoritative. The Board can also issue new statements and it happens. It happened within the pension scenario where before we got done with the PIR process, we'd already issued three new standards really related to pensions. And, so that can happen even in stage one or stage two throughout the process. Stage two is when we really look at the effectiveness of the cost and benefits. We're trying to understand, for instance, the costs the governments have incurred applying the standards, as well as the cost of financial statement users. People sometimes wonder about the cost for preparers, and they don't realize users have to adjust their process too. They have cost to actually implement the new standards. We talk about understanding the benefits of the standards to the users. We talk about monitoring the ongoing application of the standards. And then we talk about that we actually do some of what we call archival research, which is really that we go pull information out of financial reports of governments and look at the data and look at the information being reported and stage three really is what it sounds like. It's us publishing a report of the findings.
Matt Broder [00:06:02] So that's that sounds really clear. Oddly, I was thinking, when preparing for this conversation, Alan, about the sport of curling. If you're familiar with curling, right, they toss this stone down the ice, and then there's these two guys who are like sweeping in front of the stone and they're sort of trying to adjust the trajectory of the stone as it goes along, trying to kind of hit the target. And it sounds to me like that's a little bit of what the GASB is doing here. You issue a standard, you throw it down the ice, and then you spend time, even before people are ready to implement the standard, getting feedback and kind of hearing and trying to maybe course correct a little bit as people prepare to implement the standard. Is that a fair comparison?
Alan Skelton [00:06:49] It is. I get your comparison. I hadn't thought about that comparison before because curling is not a sport I've dealt with a lot in my life.
Matt Broder [00:06:55] Not a lot of curling down in Georgia?
Alan Skelton [00:06:57] I do think that it's true that it's essential to us. If you think about our process, it is essential for us to periodically validate that we get the expected benefit perceived cost equation correct. The Board talks about it, every time we do a standard right? We want the expected benefit to exceed the perceived costs but when you issue a standard that’s what they are, they are expected benefits, the perceived costs. And so it's important for us, since we take the standard setting process very, very seriously, it's important periodically to ask ourselves, “Well, did we get the expected benefits? Did we get the perceived costs?” And part of that is about the idea that, you know continuous improvement to us is important and I think the PIR process allows us to better understand whether we got it right and if we need to improve the standard setting process. So, it's an important process.
Matt Broder [00:07:39] Yeah. So, you've talked about the different stages and they're very clearly laid out. But when you actually go out and talk to stakeholders, what kinds of questions are you asking to determine if the new statement is actually doing what it's supposed to do?
Alan Skelton [00:07:56] That's a great question. And I'm going to highlight a couple of things we ask because obviously there's a long list but I'll highlight some obvious ones and some things we ask. So, in other words, we're trying to determine whether a statement accomplishes its purpose, for instance, did we accomplish the purpose? We asked things like “Has a statement resolved the issues underlying the need for the standard?” In other words, we thought there were issues in financial reporting that we needed to address, do we think the statement has? We talk about “Is decision useful information being reported to and provided by users?”, whether it be investors or citizens or academics or oversight bodies or legislative bodies. We ask “Is it operational?” That's really us asking can prepares and the auditors in the world take what's in a standard and actually apply it and apply it consistently. That is a typical place where sometimes we'll do these Q&A’s we talk about where we find out there's something that they're having a hard time operationalizing, and a Q&A that helps them with that. When you talk about the statements implementation and continue compliance and we talk about costs and benefits, what are some questions there? Well, are the implementation continuing compliance costs consistent with what the Board expected and stakeholders thought? In other words, we try to get real cost information. It's not about perceived costs anymore. Now it's about what did it really cost. We try to get that from stakeholders. We ask questions like, “Are the benefits consistent with the Board's intent and stakeholder expectation?” We talk to users and say, well, this is what we thought the benefits were. What do you see the benefits as? And so, we're trying to go from expected benefits and perceived cost to real benefits and real costs.
Matt Broder [00:09:26] Put some hard data behind the assumptions that you have formerly worked with.
Alan Skelton [00:09:29] Right.
Matt Broder [00:09:30] You've used the word stakeholders a lot. Where do stakeholders actually fit into all this activity? I mean, how is it that you engage with them and maybe more to the benefit of our listeners, how is it a stakeholder who wants to be involved, how can they let you know what their perspectives are?
Alan Skelton [00:09:49] It's really all about feedback. It's about getting folks just to give us their feedback. There are some ways they can do that. They can participate in roundtables. When we get folks in a room, we sit down and talk to them about issues and get their thoughts on benefits and cost. They can participate in staff outreach. That's just, you know, when folks call and ask them questions, you know, please answer the phone, talk to our staff. They can respond to surveys. We issue surveys and for us it's always about getting as many people as we can to respond to those surveys. And the last thing is just send us questions. You know, that technical inquiry service we talked about earlier, it's an important process in our step and if you have a question, submit it to the staff. Let them provide the answer because that's how we accumulate whether or not we need to address something in, let's say a Q and A, is when people submit TIs and so that's important.
Matt Broder [00:10:32] This all sounds frankly like a huge effort. And it really seems like maybe you spend almost as much time evaluating the effectiveness of a new standard as you did to develop the standard in the first place. So, because resources are limited, and you have to make choices, the fact that you spend so much time on this suggests that it's pretty important. And I guess my question is why? Why is it so important to all of you to spend so much time working on a standard after it's been issued?
Alan Skelton [00:11:00] Well, it's a lot going back to your curling example a minute ago. It's about the fundamental belief that this cost benefit equation is essential to our process, and the PIR process allows us to get a sense and an understanding of whether or not we had those notions correct when we passed the standard.
Matt Broder [00:11:17] Well, I know you passed some standards that are, you know, big and sweeping and far ranging, maybe others that are maybe more narrow in scope. Do all projects go through post implementation review?
Alan Skelton [00:11:30] That's a very interesting question because on one hand I would say no, they don't. We'll talk in a minute about the number of PIR projects we have ongoing. It's five. The difference is, on the other hand, I'll tell you they do, because if you go back to talk about stage one, we talked about stage one and some of the things we do post issuance, right. We talk about monitoring practice issues with stakeholders. We talked about answering TIs. We talked about doing GASB updates. We talked about doing Q and A's. We do that for everything. Every standard we ever do has that stuff happen. Stage two we start talking about this analysis of cost and benefit. That's the stuff we're only doing for the stuff that goes through a PIR process. And it tends to be, there's not a hard and fast rule to this, but it tends to be the bigger, more comprehensive or major products that do the PIR, whereas the more practice issue ones probably only have the stage two activities happening and not all three of the stages.
Matt Broder [00:12:20] Yeah. And you mentioned that there are five projects that are currently going through post implementation review. What are those? What's on that list?
Alan Skelton [00:12:29] There are five. And when I name them, they probably won't surprise you based on the context we just laid out: pensions, which is 67 and 68, OPEB, which would be statements 74 and 75, Fair Value statement 72, Fiduciary Funds, which was statement 84, and then finally Leases, which was statement 87.
Matt Broder [00:12:46] Okay. Well, that's a pretty long list. Which one will stakeholders see first?
Alan Skelton [00:12:52] Matt, it won't surprise people that pensions GASB 67 and 68 have been around the longest and that'll be the first report we will see. We presented that to the trustees at their May 2024 meeting, and it's available on our website.
Matt Broder [00:13:03] So, thanks, Alan. Last question for you. After all this work, and I think I maybe know what the answer to this question is, but I'll ask it anyway. Does the PIR process ever result in the Board making changes to its statements? I mean, does the Board ever sort of say “Yeah, we kind of missed the boat on this piece of this statement” and go back and open a project to make a change?
Alan Skelton [00:13:26] That's a great question, actually. So the PIR report itself does not recommend, is not intended to recommend, standards setting activities. So you won't read the PIR report and say “the staff believes the Board should do X, Y, or Z.” With that said, and we've kind of talked about it a little bit in the stage activities, even in stage one or stage two, the Board might decide during the PIR process as a whole to issue some Q and A's. That is standard setting. They might decide to issue some new standards. We have. We issued statements 71 and 78 and 82. We’ve issued all three of those since pensions was issued but before clearly this PIR report was issued. So it happens but it's not direct. The report itself won't recommend standard setting activities.
Matt Broder [00:14:10] Got it. Thank you. So, Alan, this has been a great conversation. I've learned a lot about your post implementation reviews and how the GASB works on this. I'd like to thank you for joining us. Alan Skelton, the Director of Research and Technical Activities at the GASB.
Alan Skelton [00:14:25] Thank you. Matt, it was a pleasure being here. We mentioned a minute ago that the pension PIR report is on our website. Interestingly enough, the next podcast you'll see coming out of the GASB will be a podcast on that exact topic. We're going to do a podcast on the pension PIR report. What's in it, how we did it, you know, the process we went through to give you a little more in-depth and understanding of what's actually in that report.
Matt Broder [00:14:46] Great. I look forward to it.
Eileen Foley [00:14:53] Thank you all so much for tuning in with us to this episode of Bridging the GAAP. We hope you'll join us again, and please be sure to visit GASB.org/podcast to subscribe and to stay updated on future episodes. You can also follow the GASB on LinkedIn, Facebook, and Twitter. Bridging the GAAP is a production of the Financial Accounting Foundation, produced by myself, Eileen Foley and brought to audio visual life by Patrick Dorsman. So until next time, keep balancing those books, crunching those numbers, and embracing the art of financial reporting.
