What Is the Purpose of FASB?
The Financial Accounting Standards Board (FASB) is a nonprofit organization dedicated to setting the guidelines and standards for accounting practices and procedures in the United States. The organization outlines the fundamental principles for the preparation of financial reports so that reporting and accounting procedures are consistent and accurate across all types of industries and financial markets.
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History
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The Financial Accounting Standards Board was established in 1973 in the United States to set standards and guidelines for the use of financial information in both the for-profit and nonprofit sectors. The FASB is a private organization responsible for developing and interpreting the Generally Accepted Accounting Principles (GAAP) in the United States. It serves as the overseeing body for the GAAP, and replaces many of the functions of the Committee on Accounting Procedure of the American Institute of Certified Public Accountants and the Accounting Principles Board.
Significance
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The FASB is a nonprofit organization, but is not affiliated with the United States Government. It is regulated by the Securities and Exchange Commission and the Financial Accounting Foundation (FAF). The FASB also works with the International Accounting Standards Board to ensure that financial statements and documents used in the United States can also be used in global markets without sacrificing the fundamental accounting principles and guidelines.
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Function
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The FASB is responsible for addressing various issues associated with the interpretation of the GAAP and publishing formal statements, reports and bulletins regarding changes in its policies and procedures. The FASB currently issues a set of pronouncements that address the standards, concepts and interpretations in detail for the general public. These pronouncements include: The Statements of Financial Accounting Concepts; Statements of Financial Accounting Standards; the FASB Interpretations and clauses; and FASB Technical Bulletins and Abstracts.
Considerations
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Any principles and guidelines set by the Committee on Accounting Procedure of the American Institute of Certified Public Accountants or the Accounting Principles Board remain in effect unless they have been amended by the FASB. FASB pronouncements are available to the public on the FASB website, and individuals or businesses can contact the FASB directly with any questions or concerns regarding specific accounting practices or procedures. The Board members of the FASB take an objective approach in decision-making, so the standards set forth are fair and take many circumstances and situations into consideration.
Benefits
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The FASB's mission is to improve the reliability and usefulness of financial-reporting practices and ensure that they are consistent in both the for-profit and nonprofit sectors. The organization helps to set current standards and eliminate outdated or irrelevant guidelines and principles; encourage international compliance; and develop processes to resolve accounting misinterpretations and issues resulting from application of the GAAP across different industries. A universal set of guidelines allows companies of all sizes to comply with nationally and internationally accepted rules and regulations, and also minimize disruptions and inaccuracies with their reporting processes.
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