What exactly is the Financial Accounting Standards Board?
The Financial Accounting Rules Board (FASB), an independent nonprofit, sets accounting and financial reporting rules for U.S. firms and nonprofits based on generally accepted accounting principles (GAAP). The FASB was established in 1973 to continue the objectives of the Accounting Principles Board. Located in Norwalk, Connecticut
The Function of the Financial Accounting Standards Board (FASB)
The US Financial Accounting Standards Board establishes and interprets GAAP for public, commercial, and nonprofit entities. Businesses, organizations, and governments must adhere to GAAP rules when generating and presenting financial accounts, including related-party transactions.
The Securities and Exchange Commission (SEC) acknowledges FASB as a public company accounting standard setter. State accounting boards, the AICPA, and other organizations recognize it.
The Financial Accounting Standards Board is part of a nonprofit group encompassing the FAF, FASAC, GASB, and GASAC.
The GASB, akin to the FASB, was founded in 1984 to create accounting and financial reporting standards for U.S. state and local governments. The FAF controls FASB and GASB. The two advisory committees advise on their fields.
The organizations aim to enhance financial accounting and reporting standards for investors and other financial report users. The organizations teach stakeholders how to interpret and apply standards.
Seven full-time board members control the FASB and must break their links to their employers before joining. Board members serve five-year terms and up to 10 years, as selected by the FAF’s trustees.
The FAF created the FASB Accounting Standards Codification in 2009 as an online research tool for official, nonprofit, U.S. generally accepted accounting principles. The FAF says the app “reorganizes the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics and displays all topics using a consistent structure.” SEC guidance on such areas is also available on the website. The “basic view” is complimentary, but the “professional view” requires a membership.
IASB vs. FASB
The IASB, established in 2001 to replace an older body, is responsible for the International Financial Reporting Standards (IFRS) used globally. In recent years, the FASB and IASB have been working together to enhance financial reporting and worldwide comparability.
Conclusion
- U.S. public, private, and nonprofit enterprises follow FASB accounting standards.
- The Governmental Accounting Standards Board (GASB) develops state and local government guidelines.
- The FASB and IASB have worked to create global standards in recent years.
