Definition
The Financial Accounting Standards Board (FASB) is a non-governmental organization that establishes and improves standards of financial accounting and reporting for private companies and non-profit organizations in the United States. The standards set by the FASB are critical for ensuring financial transparency, consistency, and accuracy.
Overview
- Founded: 1973
- Headquarters: Norwalk, Connecticut, USA
- Responsibility: Development and issuance of Generally Accepted Accounting Principles (GAAP)
- Regulatory Affiliation: Close relationship with the Securities and Exchange Commission (SEC)
The FASB’s mission is to establish and improve financial accounting and reporting standards to provide decision-useful information to investors and other users of financial statements.
Examples of Key Standards
- Revenue Recognition (ASC 606): Establishes how and when revenue should be recognized.
- Lease Accounting (ASC 842): Provides guidelines on accounting for leases.
- Financial Instruments (ASC 825): Addresses how financial instruments should be accounted for and disclosed.
Frequently Asked Questions (FAQs)
What is the role of FASB?
The FASB’s role is to create and improve financial accounting and reporting standards to provide useful information for investors, creditors, and other users of financial statements.
What is Generally Accepted Accounting Principles (GAAP)?
GAAP is a common set of accounting principles, standards, and procedures that companies must follow when they compile their financial statements. These principles are issued by the FASB.
How does the FASB relate to the SEC?
The FASB works closely with the SEC, which enforces adherence to the standards issued by the FASB for publicly traded companies.
Who must follow FASB standards?
Public companies, private companies, and non-profit organizations operating within the United States must follow FASB standards to ensure that their financial reports provide consistent and transparent information.
How can I access FASB standards?
FASB standards can be accessed through the FASB website FASB.
Related Terms
Securities and Exchange Commission (SEC)
A U.S. government agency responsible for regulating the securities markets and protecting investors. It enforces standards issued by the FASB for publicly traded companies.
Certified Public Accountant (CPA)
A designation given to accounting professionals who have passed the CPA exam and met additional state certification and experience requirements. CPAs are expected to follow standards issued by the FASB.
Statements of Financial Accounting Standards (SFAS)
The specific declarations of standards issued by the FASB, which establish GAAP in the United States.
Online Resources
- Financial Accounting Standards Board (FASB)
- Securities and Exchange Commission (SEC)
- The American Institute of CPAs (AICPA)
Suggested Books for Further Study
- Financial Accounting Theory and Analysis: Text and Cases by Richard G. Schroeder, Myrtle W. Clark, and Jack M. Cathey
- Intermediate Accounting by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
- GAAP Guidebook: 2021 Edition by Steven M. Bragg
- Cost Accounting: A Managerial Emphasis by Charles T. Horngren, Srikant M. Datar, and Madhav V. Rajan
Accounting Basics: “Financial Accounting Standards Board (FASB)” Fundamentals Quiz
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