The GASB on January 12, 2021, agreed to draw up a proposal to change the name Comprehensive Annual Financial Report (CAFR) to Annual Comprehensive Financial Report (ACFR) – efforts to eliminate the chords of an offensive slur directed at Black South Africans.
“While we are a U.S. GAAP standard setter, we touch international and international touches us – we’re a global community at this point and particular stakeholders are as well,” GASB Chairman Joel Black said during board discussions. “And there are stakeholders involved with us that have international contracts, particularly even with South Africa where this is of particular importance to them.”
The Comprehensive Annual Financial Report is a set of U.S. government financial statements comprising the financial report of a state, municipal, or other governmental entity that complies with the accounting requirements promulgated by the GASB. The name of the report has been around since 1979.
The change would introduce a new acronym “ACFR” to eliminate “CAFR,” generally pronounced KAFF-ur, which sounds like “kaffir,” a profoundly offensive term directed at Black South Africans. The word “kaffir” was adopted as a derogatory term after 1948 when the Apartheid system was established. It now ranks as perhaps the most offensive term in South African English.
“One of the executive directors I spoke to told me one of his board members is from South Africa and he reached out to him and asked his opinion, and his opinion unsurprisingly is that changing it would be a good thing,” a GASB staff member told the board.
If finalized, the name change would take effect to fiscal years beginning on or after December 15, 2021, with earlier application encouraged, the board agreed.
Governmental entities should not incur any notable costs in making the change as most material is published online and can be easily tweaked, the discussions indicated. Replacing the name would have no impact on the effort required to prepare, audit, or use GAAP-based financial statements.
“Changing the order of the words without adding any other words does help to convey the message that it’s a renaming rather than the changing of the provisions with regard to the content of what exists,” GASB member James Brown said.
A pre-ballot draft of the issue will be discussed in February, and in April the board will vote on the issuance of an exposure draft to get views on the matter from the public, according to the discussions. A pre-ballot is a rough drawing of what will be proposed. A final statement with the change in slated for October this year, the discussions indicated.
The GASB is the nation’s main accounting rulemaking body that establishes accounting and financial reporting standards for U.S. state and local governments that follow GAAP. It is the sister board to the FASB and is overseen by the same trustee organization, the Financial Accounting Foundation (FAF). GASB standards are recognized as authoritative by state and local governments, state Boards of Accountancy, and the American Institute of CPAs.
The discussions come as the FAF has been stepping up its pace to diversify the organization and the standard-setting boards.
Education Only not Enough to Fix
Outreach on the topic to senior leadership among “stakeholder organizations” did not bring unanimous agreement, according to GASB discussions. GASB staff said 11 of 13 leaders at stakeholder organizations agreed that renaming the Comprehensive Annual Financial Report was the way to go, and education alone would not be sufficient.
The board discussed how to approach the topic, i.e., whether to just remove the acronym “CAFR” and hold educational sessions about why it is offensive or whether to actually change the name “Comprehensive Annual Financial Report” to ensure it was eliminated.
GASB staff said changing the name would be the better path because “as long as the terminology remains in the standards, stakeholders will continue to use it because it has the sense of being official because it is in the standards.”
The board agreed that education only would not fix the situation, as the acronym has been around for decades. Accountants typically accidentally fall into using the acronym as it is ingrained in the profession to use acronyms, board members said.
“I just don’t think keeping the name the same and then just trying to educate as to why we don’t want to use that acronym is going to be enough,” GASB member Caroline Smith said. “I’ve been at the beginnings of GASB’s conversations of this and even now when I still see the name as it is, I still say it and then I try to correct myself, and I’m very conscious about the sensitivities of the name and the hurt that it has caused,” she said. “So with that the best approach is to just start with a clean slate – it’s been around for so long we’re going to have to do education.”
The project was added to the GASB’s agenda in December. (See Racial Slur Propels GASB to Mull Renaming Comprehensive Annual Financial Report in the December 30, 2020, edition of Accounting & Compliance Alert.)
This article originally appeared in the January 14, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.
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