Definition
The Financial Accounting Standards Board (FASB) is an independent, private-sector organization that is tasked with the establishment and interpretation of Generally Accepted Accounting Principles (GAAP) in the United States. Established in 1973, FASB succeeded the Accounting Principles Board (APB) to ensure consistency and clarity in financial accounting and reporting standards.
Examples
-
Revenue Recognition Standard (ASC 606): One of FASB’s significant contributions, this standard provides guidelines on how and when to recognize revenue in financial statements, ensuring consistency across different industries.
-
Leases Standard (ASC 842): This guideline mandates the accounting treatments for leases and requires companies to recognize all leases on their balance sheets, improving transparency of financial obligations.
Frequently Asked Questions (FAQs)
What is the primary role of the FASB?
The primary role of the FASB is to establish and maintain financial accounting and reporting standards in the United States that ensure accurate and consistent financial reporting, which provides useful information to investors and other stakeholders.
How is the FASB different from the APB?
The Accounting Principles Board (APB) was the predecessor of the FASB. While both organizations aimed to establish accounting standards, the APB was criticized for lack of independence and slow responses, leading to the formation of the more independent FASB.
Who oversees the FASB?
The FASB operates under the Financial Accounting Foundation (FAF), a private-sector body that oversees the activities of both the FASB and the Governmental Accounting Standards Board (GASB).
What is the impact of FASB standards?
FASB standards are crucial for ensuring coherent, transparent, and trustworthy financial reporting among publicly traded corporations and other organizations in the United States, which supports investor confidence and market stability.
How does the FASB interact with the IASB?
The FASB collaborates with the International Accounting Standards Board (IASB) to foster convergence between U.S. GAAP and International Financial Reporting Standards (IFRS), aiming for globally accepted accounting standards.
Related Terms
-
Generally Accepted Accounting Principles (GAAP): A set of accounting standards and principles that companies must follow in their financial reporting.
-
International Accounting Standards Board (IASB): An independent organization that develops and approves International Financial Reporting Standards (IFRS).
Online References
Suggested Books for Further Studies
- “Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield.
- “Wiley GAAP 2023: Interpretation and Application of Generally Accepted Accounting Principles” by Joanne M. Flood.
- “Financial Accounting Theory and Analysis: Text and Cases” by Richard G. Schroeder and Myrtle W. Clark.
Fundamentals of Financial Accounting Standards Board: Accounting Basics Quiz
Thank you for diving deep into the foundation of accounting principles. Continue exploring and understanding the critical standards that govern financial reporting.