Financial Accounting Standards Board definition
/What is the Financial Accounting Standards Board?
The Financial Accounting Standards Board (FASB) is an organization that creates accounting standards for use within the Generally Accepted Accounting Principles (GAAP) framework. It does not provide accounting standards for governmental accounting - that task is handled by the Governmental Accounting Standards Board.
The FASB is the successor to the Accounting Principles Board, and has been functioning since 1973. Its accounting standards govern the manner in which non-governmental businesses present information within their financial statements. These standards are crucial for ensuring that financial information is presented in a consistent manner across industries.
The accounting standards issued by the FASB are recognized by the Securities and Exchange Commission (SEC) as being authoritative, and so must be followed by publicly-held companies filing reports with the SEC. These standards have been aggregated into the Accounting Standards Codification, which is designed to make the standards more searchable.
How is the Financial Accounting Standards Board Organized?
The Financial Accounting Standards Board is structured as a nonprofit private entity; it is not an extension of any government entity. It is overseen by the Financial Accounting Foundation. Both entities are located in Norwalk, CT.
Responsibilities of the Financial Accounting Standards Board
The responsibilities of the FASB include the following items:
Develop accounting standards. Involves the creation of Generally Accepted Accounting Principles (GAAP) for public and private companies and not-for-profit organizations.
Maintain existing standards. Involves the periodic review of existing accounting standards to reflect changes in the business environment, financial practices, and economic conditions.
Promote convergences with international standards. The FASB works closely with the International Accounting Standards Board (IASB) to align U.S. GAAP with International Financial Reporting Standards (IFRS) where possible.
Engage with stakeholders. The FASB solicits input from a broad range of stakeholders, including businesses, investors, auditors, academics, and regulators, through public comments, hearings, and roundtable discussions.
Improve financial reporting. The FASB strives to enhance the usefulness of financial statements for investors, creditors, and other users.
By fulfilling these responsibilities, the FASB plays a critical role in maintaining the integrity and efficiency of financial markets.