Guidelines for responding to proposed accounting and auditing standards: the GFOA Executive Board recently approved specific principles for responding to proposed accounting and financial reporting standards and to proposed auditing standards.

• Author: Gauthier, Stephen J.
• Position: The Accounting Angle - Government Finance Officers Association

The Government Finance Officers Association (GFOA) routinely responds to proposed new guidance from the Governmental Accounting Standards Board (GASB), such as exposure drafts, preliminary views documents, and invitations to comment. Over the years, the GFOA has informally adopted a number of basic concepts and positions to which it has frequently appealed in responding to various GASB initiatives. These concepts and positions have allowed the GFOA to take principled positions that have remained consistent over time.

This past June, the GFOA's standing Committee on Accounting, Auditing, and Financial Reporting concluded that it would be beneficial to develop these informal principles into a set of formal guidelines that the GFOA could both use itself and share with state associations that might desire help in crafting their own responses to GASB proposals. The product was a draft set of guidelines that was sent to the GFOA's Executive Board for its consideration. At its fall meeting in Chicago, the GFOA's Executive Board formally approved the proposed guidelines, which have been separately communicated to each state association.

The 12 specific principles that the GFOA's Executive Board has promulgated for responding to proposed accounting and financial reporting standards are as follows.

1. Accounting is a means to an end, not an end in itself. Accounting standards should always be justifiable on the grounds that they provide information that is of practical use to decision makers. This practical use should be demonstrated.

2. Willingness to accept something for free is not sufficient evidence of genuine demand. Users of financial statements virtually always can be expected to support requirements for additional disclosure since they do not have to bear the related costs. A positive response from users to a proposed new disclosure is not, of itself, sufficient evidence of real demand.

3. Less often is more. The sheer volume of financial reporting can be a significant obstacle to users and potential users of financial statements and needs to be minimized, especially in the case of note disclosure.

4. Unnecessary differences with private-sector standards should be avoided for accrual presentations. Differences in the accrual treatment of transactions and events should always be based on significant underlying environmental differences (i.e., transactions and circumstances unique to the public sector), not just the conflicting preferences of...