What is Financial Accounting Standards Board (FASB)?
In the business sector, the Financial Accounting Standards Board (FASB) is an autonomous institution in charge of developing financial reporting accounting standards.
Understanding Financial Accounting Standards Board (FASB)
The Financial Accounting Standards Board is responsible for establishing and interpreting Generally Accepted Accounting Principles (GAAP) for small and large businesses as well as charitable programs. GAAP is a set of guidelines that businesses, organizations, and authorities must comply with while generating and reporting financial accounts, along with any financial transactions.
Functions of the Financial Accounting Standards Board
Let’s take a look at the major functions of the FASB listed below -
- Develop reporting guidelines
- Enhance accounting practices
- Make sure that information is clear and useful to investors.
- Develop new accounting standards
- Make accounting standards education available to the general public.
The Securities and Exchange Commission (SEC) recognizes the FASB's accounting policies as official, and publicly-held corporations submitting papers with the SEC must adhere to them. These rules have been compiled into the Accounting Standards Codification, which is intended to make them easier to find.
The Financial Accounting Standards Board is a private charitable organization that is not affiliated with any authority and the Financial Accounting Foundation is in charge of it. Both are based in Norwalk, Connecticut in the USA.
Since 1933, several separate groups, including the American Principles Board, have produced US accounting standards. The SEC established the FASB as the only entity in the USA to produce private industry accounting standards and practices in 1973. The aim of the Financial Accounting Standards Board (FASB) is to "create and develop financial reporting that supports financials by nongovernmental businesses that offer decision-useful information to the market and other financial statements."
The FASB now has seven members on its board and is linked with the Financial Accounting Foundation (FAF) and the Financial Accounting Standards Advisory Council (FASAC).
- The FASB's main purpose is to make sure that accounting professionals and other financial data facilitators produce comprehensive information.
- The FASB has been collaborating with the International Accounting Standards Board (IASB) to develop globally consistent standards.
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