Accounting Principles Board (APB)

Accounting Principles Board (APB)

Definition

The Accounting Principles Board (APB) was an authoritative organization responsible for developing and issuing standards on accounting principles in the United States before the establishment of the Financial Accounting Standards Board (FASB). Formed in 1959 by the American Institute of Certified Public Accountants (AICPA), the APB aimed to advance the quality and reliability of financial reporting. Between 1959 and 1973, the APB issued 31 Opinions that significantly contributed to the development of Generally Accepted Accounting Principles (GAAP).

Examples

1. APB Opinion No. 16: Business Combinations

   • This opinion provided guidance on the accounting treatment of business mergers and acquisitions, including the use of the purchase method and the pooling of interests method.

2. APB Opinion No. 21: Interest on Receivables and Payables

   • This opinion dealt with the imputation of interest on receivables and payables, emphasizing the effective interest rate method of amortizing discounts or premiums.

3. APB Opinion No. 9: Reporting the Results of Operations

   • This opinion established guidelines for presenting the results of operations, including the reporting of unusual and infrequent items.

Frequently Asked Questions (FAQs)

Q1: What was the primary purpose of the Accounting Principles Board (APB)?

• A1: The primary purpose of the APB was to advance the quality and reliability of external financial reporting standards through the issuance of authoritative opinions on accounting principles.

Q2: How many opinions did the APB issue?

• A2: The APB issued a total of 31 Opinions between 1959 and 1973.

Q3: Why was the APB replaced?

• A3: The APB was replaced by the Financial Accounting Standards Board (FASB) in 1973 due to criticisms regarding its part-time structure, lack of independence, and perceived lack of responsiveness to rapidly changing business environments.

Q4: Which organization established the APB?

• A4: The APB was established by the American Institute of Certified Public Accountants (AICPA) in 1959.

Q5: Do any of the APB Opinions still hold relevance today?

• A5: Yes, several APB Opinions still form part of the Generally Accepted Accounting Principles (GAAP) and are referenced in practice today.

Related Terms

• Financial Accounting Standards Board (FASB):

  • The organization that succeeded the APB in establishing accounting standards in the U.S.

• American Institute of Certified Public Accountants (AICPA):

  • A professional organization that established the APB.

• Generally Accepted Accounting Principles (GAAP):

  • A comprehensive set of accounting rules and standards followed in financial reporting.

• Accounting Standards:

  • Authoritative guidelines governing financial accounting and reporting practices.

Online References

• FASB - About Us
• AICPA
• GAAP

Suggested Books for Further Studies

1. Intermediate Accounting by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
2. Financial Accounting Theory by William R. Scott
3. Accounting Standards: Theories and Practices by Bhattacharyya
4. Principles of Accounting by Belverd E. Needles and Marian Powers
5. Financial Accounting: An Introduction to Concepts, Methods, and Uses by Clyde P. Stickney and Roman L. Weil

Accounting Basics: “Accounting Principles Board (APB)” Fundamentals Quiz

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