Statement of Financial Accounting Standards (SFAS)

Definition: Statement of Financial Accounting Standards (SFAS)

The Statement of Financial Accounting Standards (SFAS) are formal documents that provide detailed guidance on specific accounting and financial reporting requirements as established by the Financial Accounting Standards Board (FASB) in the United States. These standards form part of the generally accepted accounting principles (GAAP) and serve as authoritative guidance for accountants responsible for the preparation of financial statements.

Examples

SFAS No. 115: “Accounting for Certain Investments in Debt and Equity Securities” details how companies should account for and report investments in debt and equity securities.
SFAS No. 133: “Accounting for Derivative Instruments and Hedging Activities” provides guidelines for accounting for derivative instruments and hedging activities.
SFAS No. 157: “Fair Value Measurements” outlines how companies should measure and disclose fair value in financial statements.

Frequently Asked Questions (FAQs)

What is the purpose of SFAS?

SFAS serves to provide a standardized set of guidelines for financial accounting and reporting to ensure consistency, reliability, and comparability across financial statements issued by different entities.

How does SFAS impact financial statements?

SFAS impacts financial statements by stipulating how various transactions and events should be recognized, measured, presented, and disclosed, ensuring uniformity and adherence to GAAP.

Who is responsible for issuing SFAS?

The Financial Accounting Standards Board (FASB) is responsible for issuing SFAS.

Are SFAS still in use today?

While SFAS documents have been integrated into the FASB Accounting Standards Codification since 2009, their foundational concepts continue to influence current accounting standards.

How does SFAS differ from IFRS?

SFAS are specific to the United States and form part of GAAP, while IFRS (International Financial Reporting Standards) are used internationally. There are some differences in how various elements are reported and recognized in GAAP versus IFRS.

Financial Accounting: The field of accounting that focuses on the preparation of financial statements for external users in accordance with standardized accounting principles.
Financial Accounting Standards Board (FASB): An independent private sector organization responsible for establishing and improving financial accounting and reporting standards in the USA.
Generally Accepted Accounting Principles (GAAP): A set of accounting standards that are widely accepted as being authoritative and guide financial accounting and reporting practices in the USA.
Financial Statements: Structured reports that present an entity’s financial position, performance, and cash flows, including the balance sheet, income statement, and statement of cash flows.

Online References

Suggested Books for Further Studies

“Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield: Offers comprehensive coverage of financial accounting and reporting principles.
“Financial Reporting and Analysis” by Lawrence Revsine, Daniel W. Collins, W. Bruce Johnson, and Fred Mittelstaedt: Provides insights into financial reporting and the use of SFAS in financial accounting.
“Accounting Standards: Yellow Book with Wiley CPAexcel Exam Review” by Wiley: Acts as a practical guide for understanding and applying GAAP, including SFAS.

Accounting Basics: Statement of Financial Accounting Standards (SFAS) Fundamentals Quiz

### What organization is responsible for issuing SFAS? - [ ] Securities and Exchange Commission (SEC) - [ ] International Accounting Standards Board (IASB) - [x] Financial Accounting Standards Board (FASB) - [ ] Internal Revenue Service (IRS) > **Explanation:** The Financial Accounting Standards Board (FASB) is the organization responsible for issuing the Statements of Financial Accounting Standards (SFAS). ### Are SFAS documents still issued today? - [x] No, they have been integrated into the FASB Accounting Standards Codification. - [ ] Yes, new SFAS documents are issued annually. - [ ] Only for newly emerging accounting issues. - [ ] They were replaced by IFRS. > **Explanation:** SFAS documents were integrated into the FASB Accounting Standards Codification in 2009 and are no longer issued in the same format. ### Which piece of reporting guidance is provided by SFAS No. 115? - [ ] Revenue recognition - [x] Accounting for investments in debt and equity securities - [ ] Fair value measurement - [ ] Lease accounting > **Explanation:** SFAS No. 115 provides guidance on accounting for certain investments in debt and equity securities. ### What are Generally Accepted Accounting Principles (GAAP)? - [ ] A global set of accounting standards used in over 120 countries. - [x] A set of accounting principles widely accepted in the USA. - [ ] Standards issued by the World Bank. - [ ] Guidelines from the Internal Revenue Service. > **Explanation:** Generally Accepted Accounting Principles (GAAP) are a set of accounting standards that are widely accepted and adhered to in the USA. ### In what year were SFAS documents integrated into the FASB Accounting Standards Codification? - [ ] 2000 - [ ] 1995 - [ ] 2010 - [x] 2009 > **Explanation:** In 2009, SFAS documents were integrated into the FASB Accounting Standards Codification. ### Which SFAS number pertains to fair value measurements? - [x] SFAS No. 157 - [ ] SFAS No. 123 - [ ] SFAS No. 131 - [ ] SFAS No. 115 > **Explanation:** SFAS No. 157 outlines how entities should measure and disclose fair value. ### What is one primary benefit of the standardization provided by SFAS? - [ ] Increased market volatility - [ ] Greater investment risk - [x] Consistency and comparability in financial statements - [ ] Higher regulatory costs > **Explanation:** The primary benefit of SFAS standardization is the consistency and comparability it brings to financial statements across different entities. ### How often are financial statements prepared using SFAS guidelines? - [x] Quarterly and annually - [ ] Every two weeks - [ ] Once a decade - [ ] Upon company request > **Explanation:** Financial statements are typically prepared quarterly and annually using SFAS guidelines in accordance with standard reporting schedules. ### Which of the following is not an example of financial statements guided by SFAS? - [ ] Balance Sheet - [ ] Income Statement - [x] Performance Appraisal - [ ] Statement of Cash Flows > **Explanation:** Performance appraisals are internal management tools and do not fall under financial statements guided by SFAS. ### Before integration into the Accounting Standards Codification, SFAS documents were a foundation for what accounting system? - [ ] International Financial Reporting Standards (IFRS) - [ ] Tax Accounting - [x] Generally Accepted Accounting Principles (GAAP) - [ ] Governmental Accounting Standards > **Explanation:** SFAS documents were a foundational component of the Generally Accepted Accounting Principles (GAAP) in the USA.

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