FASB: Financial Accounting Standards Board

FASB: Financial Accounting Standards Board

Introduction

FASB stands for the Financial Accounting Standards Board. Its main purpose is to develop the generally accepted accounting principles in the United States known as GAAP. The Securities and Exchange Commission established FASB in 1973 replacing the Accounting Principles Board and the Committee on Accounting Procedure of the American Institute of Certified Public Accountants. The previous standards set by the prior boards are still in place unless they have been amended or superseded by FASB.

Discussion

FASB is not part of the United States government, but a private not for profit organization whose mission is “to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and user of financial information.” Fees paid by different companies to the Securities and Exchange Commission fund it. The Securities and Exchange Commission has the authority to overrule FASB decisions. The members of FASB consist of seven professionals who are appointed onto the board by the Financial Accounting Foundation. They are full time and are not part of any other company when serving on the board. The board tries to be diverse by having 3 CPA's from public practice, 2 Preparers, 1 Academic and 1 User. The maximum amount a member can serve on the Board is 2 five-year terms. They are chosen based on specific criteria, which are knowledge of financial accounting and reporting, communication skills, ability to work with others, awareness of the financial reporting environment and high level of intellect. The staff of FASB consists of 3 directors, 4 Senior Technical Advisors, 18 Project Managers, 9 Project Technical Assistants, 14 fellows, which rotate every 2 years, and 9 Postgraduate Technical Assistants, which rotate every year, for a total of 57 Research and Technical Activities Staff members. FASB develops broad accounting principles and also sets standards for financial reporting. It provides guidance on implementation of standards. FASB standards are important for the proper functioning of the economy. Investors, auditors, creditors and others rely on credible financial information to make sound business decisions. The accounting concepts are useful to guide the board “in establishing standards and in providing a frame of reference, or conceptual framework for resolving accounting issues.” The standards and concepts are based on research done by the Board and also involve foreign national and international accounting standard setting bodies.

FASB operating procedures ...