In a letter dated March 20, Leslie Seidman prefaces the FASB’s formal response to the inaugural Post-Implementation Review conducted by the Financial Accounting Foundation on FIN 48, which was released in January.  The 5-page FASB response summarizes some key aspects that were deliberated during the process of promulgating FIN 48 and offers interesting context surrounding some decisions made by the Board.  It provides alternative perspectives that were considered by the Board and reasons why these alternatives were rejected.

The PIR report provides recommendations to the FASB for improving the standard setting process.  Two of these recommendations are:

Recommendation: We recommend the FASB continue its efforts to improve user input in the agenda and early deliberation phases to evaluate alternatives addressing user needs.

Recommendation: The FASB should clearly describe its processes for evaluating a new standard’s cost-benefit relationship. We recommend that the FASB include in each standard a thorough discussion of the new guidance’s benefits and beneficiaries, the associated costs to affected principal stakeholders, and how benefits and costs are evaluated and assessed. The discussion should explain cost and benefit elements considered, including the effects on operating practices.

The FASB report discusses some initiatives recently adopted by the FASB to address effective outreach to constituents and more effective assessment of costs/benefits of standards.  Relatedly, a recent post on this blog discussing costs/benefits of standards (here) was prompted by one of these new initiatives.  The FASB report provides a specific response by the FASB to each recommendation in the PIR report.

With the inaugural PIR report completed in January, the FAF is continuing its commitment to review other important standards issued by both the FASB and GASB.  The FAF believes that the learning curve to conduct these reviews is steep, and that they are now better able to conduct the reviews going forward.  The next FASB standards to be reviewed are those related to segmental disclosures (FAS 131) and business combinations (FAS 141R).  While the inaugural report on FIN 48 took over a year to complete, the FAF is targeting this summer for the release of the next PIR reports.