Research at the Standards Boards AAA-Government & Nonprofit Midyear Meeting Speakers: Dean Mead, Kim Petrone, and Cullen Walsh Moderator: Terry Patton March 28, 2014 The views expressed in this presentation are those of the presenters. Official positions of the FASB and GASB on accounting matters are determined only after extensive due process and deliberation. 1

 Introduction to research at the FASB, GASB, and FAF  Research interactions with academia and other stakeholders  Questions and answers Overview 2

Research at the FASB 3

 Pre-agenda research -What is the financial reporting issue? -Is the issue pervasive? -Can we identify the proper scope? -Are there one or more cost-effective solutions that would be acceptable to the Board and stakeholders?  Active project research -Gather evidence about costs and benefits Research Objectives 4

Research Types 5 Academic studies Other studies/surveys Periodicals SEC filings (10-Ks, comment letters) XBRL Archival/ Empirical Analysis Individual or group meetings with stakeholders Advisory Groups Project specific resource groups Surveys Comment letters Roundtables Outreach Field work, which can take various forms Experiments

Characteristics of Research Useful to FASB 6 Timely Ability to connect research immediately and directly to the topic at hand…before standards setter needs to make a decision Comprehensive Comprehensive analysis of the entire issue all at once…rather than only focusing on a narrow aspect of a broader issue Conclusive Conclusions that are free from qualifications or multiple interpretations Presentation Emphasis on answering the question…rather than emphasis on the process used to arrive at the answer Challenge = Understandability of research by non-academics 6

Research at the GASB 7

 Research serves the GASB’s overall mission of setting standards that support decision making and accountability GASB Research Activities 8 Evaluation of emerging issues Pre-agenda research Additional research during deliberations

 How pervasive is the issue among governments? -Number and types of governments affected -Magnitude of the transactions  How have other standards setters dealt with the issue? -What has been the experience with those standards?  What are the major facets of the issue? -What are the potential solutions?  What information do users need? -How pervasive is that need? -How would they use the information? GASB Research Questions in General 9

Emerging Issues Pre-Agenda Research During Deliberations Archival Literature review Surveys Interviews Group discussions Case studies GASB Research Methods 10

 Gil Crain Memorial Research Grant Program -One or more grants each year -Research to be completed within approximately one year -Potential topics are suggested in the request for proposals, but the GASB is open to considering other topics  GASB involvement in other research efforts Leveraging the Work of the Academics 11

Research at the FAF’s Post- Implementation Review 12

 Help determine whether standard accomplish stated purpose -Did the standard resolve the issues underlying its need? -Is decision-useful information being reported to and used by users of financial statements? -Is the standard operational? -Did any significant unexpected changes to reporting or operating practices result? -Did any significant unanticipated consequences result? PIR Research Objectives 13

 Review project archives (pre and post-issuance)  Interview stakeholders, Board members, project staff  Survey stakeholders  Review academic literature  Other -Financial statements -Technical inquiries -Firm guides -Analyst reports -SEC comment letters, restatements PIR Research Procedures 14

 Resolve underlying need? -FAS 131: Increase in reported segments  Providing decision useful information? -FAS 109: Income tax information is value relevant -FAS 131: Improved investors’ ability to value companies with significant foreign operations -FAS 141R: market incorporates fair value of contingent consideration  Unanticipated consequences? -FIN 48: Change in company tax strategies Findings from Academic Literature Reviews 15

 Academic consultant -Provides expertise on topic -Provides an independent and objective perspective -Helps develop unbiased survey questions -Summarizes academic research and relationship to PIR objectives -Assists in data analysis  Participation in PIR surveys  Register to participate on FAF website Role of Academics in PIR Process 16

Research Interactions with Academia and Other Stakeholders 17 Questions from the Moderator

Open Q&A 18