MAJOR PROJECTS
For each major project
on its technical agenda, the Board appoints an advisory task force of outside
experts, studies existing literature on the subject and conducts or commissions
such additional research as may be necessary, publishes a discussion document
setting forth the issues and possible solutions as the basis for public
comment, conducts a public hearing, and gives broad distribution to an
Exposure Draft of the proposed Statement for public comment.
Significant steps in the
process are announced publicly. The Board's meetings are open to public
observation and a public record is maintained.
The
Task Force
Soon after a major
project is placed on the Board's technical agenda, a task force of approximately
15 persons is appointed, including preparers, auditors, and users of financial
information who are knowledgeable about the subject matter. Experts from
other disciplines also may be appointed. Care is taken to ensure that various
points of view on the issues involved are represented on the task force.
The task force meets with
and advises the Board and staff on the definition and scope of the project,
the nature and extent of any additional research that may be needed, and
the preparation of a discussion document and related material as a basis
for public comment. Task force meetings are open to public observers.
Task forces play an important
role in the standard-setting process by providing expertise, a diversity
of viewpoints, and a mechanism for communication with those who may be
affected by proposed standards.
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The
Discussion Document
<--click
for illustration
As a basis for both written
comment and oral presentations at a public hearing, a Discussion Memorandum
or other discussion document is prepared by the FASB staff with the advice
and assistance of the task force. The discussion document generally sets
forth the definition of the problem, the scope of the project, and the
financial accounting and reporting issues; discusses research findings
and relevant literature; and presents alternative solutions to the issues
under consideration and the arguments and implications relative to each.
A discussion document
specifies a deadline for written comments and generally contains a Notice
of Public Hearing. It is distributed broadly to interested parties. In
some circumstances, an Exposure Draft may provide the basis for a public
hearing, either initially or at a later stage in the project.
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The
Public Hearing
A public hearing is held
to provide an opportunity for the Board and staff to ask questions about
information and points of view offered by respondents. The Board announces
its intent to hold a public hearing generally 60 days or more before the
earliest hearing date.
Any individual or organization
may request to be heard at a public hearing and the FASB attempts to accommodate
all such requests. Hearings are conducted by the Board plus the staff
project manager and other staff personnel assigned to the project. Public
observers are welcome.
Most oral presentation
time is reserved for questions from Board and staff members. Questions
are based on written material submitted prior to the hearing as well as
on oral comments. The hearing transcript and written comments, including
those from persons who do not choose to make oral presentations,
become part of the public record.
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Analysis
of Oral and Written Comments
The staff makes an exhaustive
analysis of all comments, both oral and written. This is a search for information
and persuasive arguments regarding the issues; it is not intended to be
simply a "nose count" of how many support or oppose a given point of view.
In addition to studying this analysis, Board members read the comment letters
to help them in reaching conclusions. After available input is absorbed,
formal Board deliberations begin.
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Meetings
of the Board
The Board meets as many times
as necessary to resolve the issues. All meetings are open to public
observers, although observers do not participate in the discussions. The
agenda for each meeting is announced in advance.
The staff is required
to present written material, including analysis and recommendations, to
the Board members in advance as the basis for discussion in a Board meeting.
The meeting format calls for oral presentation of a summary of the written
materials by the staff, followed by Board discussion of each issue presented,
and questioning of the staff on the points raised. When the Board has reached
conclusions on the issues, the staff is directed to prepare a proposed
Exposure Draft for consideration by the Board. After further discussion
and revision, a vote is taken. Five votes of the seven-member Board are
required to approve an Exposure Draft for issuance.
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The Exposure Draft<--click
for illustration
The Exposure Draft sets forth
the proposed standards of financial accounting and reporting, the proposed
effective date and method of transition, background information, and an
explanation of the basis for the Board's conclusions.
At the end of the exposure
period, generally 60 days or more, all comment letters and position papers
again are analyzed by the staff, and again Board members read or refer
to them. When analysis and review are completed, the Board is ready to
resume deliberation leading to issuance of a final Statement.
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Further
Deliberation of the Board
As in earlier stages of the
process, all Board meetings are open to public observation. The Board considers
comments received on the Exposure Draft and often incorporates suggested
changes in the final Statement. If substantial modifications appear to
be necessary, the Board may decide to issue a revised Exposure Draft for
additional public comment. In such cases, the Board also
may determine that a second public hearing is necessary. When the Board
is satisfied that all reasonable alternatives have been considered adequately,
a vote is taken on the final Statement. Five votes are required for adoption
of a pronouncement.
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Statements
of Financial Accounting Standards<--click
for illustration
Like the Exposure Draft,
the Statement sets forth the actual standards, the effective date and method
of transition, background information, a brief summary of research done
on the project, and the basis for the Board's conclusions, including the
reasons for rejecting significant alternative solutions. It also identifies
members of the Board voting for and against its issuance and includes comments
of dissenting members in support of their dissents.
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Statements
of Financial Accounting Concepts<--click
for illustration
Statements of Concepts
do not establish new standards or require any change in the application
of existing accounting principles, but are intended to provide guidance
in solving problems. Because of their long-range importance, Statements
of Concepts are developed under the same extensive due process the FASB
must follow in developing Statements of Financial Accounting Standards
on major topics.
Concepts statements are issued to guide the
FASB in setting standards, to guide practitioners in dealing with unresolved
issues, and to help educate nonaccountants.
They are intended to establish the fundamentals
on which financial accounting standards are based. They do not create GAAP.
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IMPLEMENTATION AND PRACTICE PROBLEMS
Depending on their nature,
implementation and practice problems may be dealt with by the Board in
Statements or Interpretations, or by the staff in Technical Bulletins.
When a Statement is to
be developed to amend an existing standard or establish a new standard
on a relatively narrow subject, the Board may determine that it is appropriate
to proceed without appointing a task force, issuing a discussion document,
or holding a public hearing. However, the Rules of Procedure require that
an Exposure Draft of the proposed Statement be issued for public comment,
generally for at least 60 days but a minimum of 30 days.
Written comments are analyzed
and considered to the same extent as on a major project. Board deliberations
are open to public observation and a public record is maintained.
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Interpretations<--click
for illustration
The Board issues Interpretations to clarify,
explain, or elaborate on existing FASB Statements of Financial Accounting
Standards or the effective pronouncements of its predecessors, the Accounting
Principles Board and the Committee on Accounting Procedure of the american
Institute of Certified Public Accountants.
Under the Rules of Procedure,
proposed Interpretations must be exposed for comment for a period of not
less than 30 days.
Written comments on proposed
Interpretations constitute a part of the FASB's public record.
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Technical
Bulletins<--click
for illustration
Technical Bulletins issued
by the FASB staff may address issues not directly covered by existing standards
and may provide guidance that differs, for particular situations, from
the general application required by existing pronouncements. Generally,
guidance can be provided in a Technical Bulletin if it is not expected
to cause a major change in practice for a significant number of companies;
the cost of implementation is not expected to be significant; and the guidance
does not conflict with a broad fundamental accounting principle or create
a novel accounting practice. Proposed Technical Bulletins must be discussed
by the Board in a public meeting prior to distribution for public comment.
The comments received on proposed Bulletins must be discussed by the Board
in a public meeting prior to the issuance of a final Technical Bulletin.
A Bulletin may not be issued if more than two of the Board members object
to the guidance in it or object to communicating that guidance by means
of a Technical Bulletin.
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THE PUBLIC
RECORD
Transcripts of public hearings,
letters of comment and position papers, research reports, and other relevant
materials on projects leading to issuance of pronouncements become part
of the Board's inspection in the public reference room at FASB headquarters
inNorwalk, Connecticut. Copies of public records also may be purchased
at prices that vary according to the volume of material that has to be
copied.
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AVAILABILITY
OF PUBLICATIONS
To encourage public comment,
Discussion Memorandums and Exposure Drafts are distributed widely through
the FASB's established mailing plans. Single copies are available without
charge during the comment period to all who request them. Statements of
Standards, Statements of Concepts, and Interpretations also are
distributed broadly when published through
FASB subscription plans and may be purchased separately.
The FASB strives to keep
the public informed of developments on its projects through a newsletter
(Status Report) and a weekly notice of upcoming Board meetings and their
agendas with brief summaries of actions taken at previous meetings (Action
Alert).
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Adapted from FASB Homepage
http://www.rutgers.edu/Accounting/raw/fasb/