The Financial Accounting Standards Board (FASB) is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States in the public's interest. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. It was created in 1973, replacing the Committee on Accounting Procedure (CAP) and the Accounting Principles Board (APB) of the American Institute of Certified Public Accountants (AICPA).

Mission statement[link]

The FASB's mission is "to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information."^[1] To achieve this, FASB has five goals^[1]:

• Improve the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability, and on the qualities of comparability and consistency.
• Keep standards current to reflect changes in methods of doing business and in the economy.
• Consider promptly any significant areas of deficiency in financial reporting that might be improved through standard setting.
• Promote international convergence of accounting standards concurrent with improving the quality of financial reporting.
• Improve common understanding of the nature and purposes of information in financial reports.

Description[link]

The FASB is not a governmental body. The SEC has legal authority to establish financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. Throughout its history, however, Commission policy has been to rely on the private sector for this function to the extent that the private sector demonstrates ability to fulfill the responsibility in the public interest.^{[citation needed]}

The FASB is part of a structure that is independent of all other business and professional organizations. Before the present structure was created, financial accounting and reporting standards were established first by the Committee on Accounting Procedure of the American Institute of Certified Public Accountants (1936–1959) and then by the Accounting Principles Board, also a part of the AICPA (1959–73). Pronouncements of those predecessor bodies remain in force unless amended or superseded by the FASB.

The FASB is subject to oversight by the Financial Accounting Foundation (FAF), which selects the members of the FASB and the Governmental Accounting Standards Board and funds both organizations. The Board of Trustees of the FAF, in turn, is selected in part by a group of organizations including:

• American Accounting Association
• American Institute of Certified Public Accountants
• CFA Institute
• Financial Executives International
• Government Finance Officers Association
• Institute of Management Accountants
• National Association of State Auditors, Comptrollers and Treasurers
• Securities Industry Association

The FASB's structure is very different from its predecessors in many ways. The board consists of seven full-time members. ^[2] These members are required to sever all ties to previous firms and institutions that they may have served prior to joining the FASB. This is to ensure the impartiality and independence of the FASB. All members are selected by the FAF. They are appointed for a five year term and are eligible for one additional five year term.^[1] The current members are (with current term end dates indicated)^[1]:

• Leslie F. Seidman, Chairman (2013)
• Daryl E. Buck (2015)
• Russell G. Golden (2012)
• Thomas J. Linsmeier (2016)
• R. Harold Schroeder (2015)
• Marc A. Siegel (2013)
• Lawrence W. Smith (2012)

In additional to the full-time members, there are approximately 68 staff members. These staff are, "professionals drawn from public accounting, industry, academe, and government, plus support personnel."^[1]

In 1984, the FASB formed the Emerging Issues Task Force (EITF).^[1] This group was formed in order to provide timely responses to financial issues as they emerged. This group includes 15 people from both the private and public sectors coupled with representatives from the FASB and an SEC observer.^[2] As issues emerge, the task force considers them and tries to reach a consensus on what course of action to take. If that consensus can be reached, they issue an EITF Issue and FASB doesn't get involved. An EITF Issue is considered just as valid as a FASB pronouncement and is included in the GAAP.^[2]

Creation of the Codification[link]

On July 1, 2009, the FASB announced the launch of its Accounting Standards Codification, declaring it to be "the single source of authoritative nongovernmental U.S. generally accepted accounting principles." The Codification organizes the many pronouncements that constitute U.S. GAAP into a consistent, searchable format. ^[3] The Codification is not to be confused with the FASB's Conceptual Framework, a project begun in 1973 to develop a sound theoretical basis for the development of accounting standards in the United States.

Norwalk Agreement[link]

FASB is pursuing a convergence project with the International Accounting Standards Board (IASB) and International Financial Reporting Standards (IFRS). On Sept. 18, 2002, in Norwalk, Connecticut, FASB and IASB met and issued a Memorandum of Understanding.^[4] This document outlined plans to converge IFRS and US GAAP into one set of high quality and compatible standards. As part of the project, FASB has begun moving from the principle of historical cost to fair value.^{[citation needed]}

Independence[link]

In June 2009, FASB was criticized by an advisory panel of investors after making changes on mark-to-market accounting in response to political pressure. Lobbyists had obtained its permission for banks to apply a special accounting treatment for toxic assets.^[5]

FASB pronouncements[link]

In order to establish accounting principles, the FASB issues pronouncements publicly, each addressing general or specific accounting issues. These pronouncements are:

• Statements of Financial Accounting Standards
• Statements of Financial Accounting Concepts
• FASB Interpretations
• FASB Technical Bulletins
• EITF Abstracts

FASB 11 Concepts[link]

• Money measurement
• Entity
• Going concern
• Cost
• Dual aspect
• Accounting period
• Conservation
• Realization
• Matching
• Consistency
• Materiality

References[link]

See also[link]

• International Public Sector Accounting Standards
• International Financial Reporting Standards
• FASB 133
• FIN46

Current issues[link]

• Stock option expensing
• FASB 157 Mark-to-Market Fair Value Accounting

Related associations[link]

• International Accounting Standards Board

External links[link]

• FASB Official Website
• FASB and IASB: Dependence Despite Independence
• Lawrence A. Cunningham, Private Standards in Public Law (Article on FASB's Policy of Copyrighting and Selling its Materials Despite Being Funded by Public Company Fees), Michigan Law Review (2005)
• CFO Summary: The Implications of the FASB Pension Disclosure Guidelines