Accounting Principles Board (APB)

Overview

The Accounting Principles Board (APB) was an authoritative body established by the American Institute of Certified Public Accountants (AICPA) from 1959 until 1973. The APB issued a series of opinions which formed a substantial component of what is known as Generally Accepted Accounting Principles (GAAP). Following its dissolution, its responsibilities were transferred to the Financial Accounting Standards Board (FASB).

Examples

APB Opinion No. 22: Issued in 1972, this opinion provides guidelines on the disclosure of accounting policies to ensure clarity in financial statements.
APB Opinion No. 16: Pertaining to business combinations, this opinion discusses the accounting methods that should be applied, including the pooling of interests and purchase methods.

Frequently Asked Questions (FAQs)

Q1: What was the primary purpose of the Accounting Principles Board (APB)?

A1: The purpose of the APB was to develop and issue opinions that defined and established Generally Accepted Accounting Principles (GAAP). Through these opinions, the APB aimed to standardize accounting practices and improve the clarity of financial reporting.

Q2: How many opinions did the APB issue?

A2: The APB issued a total of 31 opinions during its existence from 1959 to 1973.

Q3: Why was the APB dissolved in 1973?

A3: The APB was dissolved due to criticisms regarding its lack of efficiency and ineffectiveness in addressing complex accounting issues. It was replaced by the Financial Accounting Standards Board (FASB), which was believed to be better equipped to address the rapidly evolving accounting landscape.

Q4: What replaced the APB after it was dissolved?

A4: The APB was replaced by the Financial Accounting Standards Board (FASB), which continues to be responsible for establishing accounting standards.

Q5: What are some notable opinions issued by the APB that are still referenced in accounting practices today?

A5: Notable opinions include APB Opinion No. 16 on business combinations and APB Opinion No. 22 on the disclosure of accounting policies.

American Institute of Certified Public Accountants (AICPA): A professional organization for Certified Public Accountants in the United States that played a key role in standardizing accounting practices.
Financial Accounting Standards Board (FASB): An organization created to establish and improve financial accounting and reporting standards in the U.S.
Generally Accepted Accounting Principles (GAAP): A framework of accounting standards, principles, and procedures that companies in the U.S. must follow when compiling their financial statements.
International Accounting Standards Board (IASB): An independent body 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.
- This book provides an in-depth understanding of accounting principles, including topics formerly covered by APB Opinions.
“Accounting Theory and Practice in the Malaysian Context” by Samir M. El-Gazzar, Nor Zalina Mohamad Ahmad, and Salmia Mahmood.
- This text covers the evolution and applications of accounting standards, both domestically and internationally.
“Financial Accounting and Reporting” by Barry Elliott and Jamie Elliott.
- A comprehensive guide linking theory and practice, giving insights into APB’s contributions to accounting standards.

Fundamentals of Accounting Principles Board (APB): Accounting Basics Quiz

### What was the main role of the APB? - [x] To develop and issue opinions that established GAAP - [ ] To regulate financial audits - [ ] To enforce tax laws - [ ] To provide individual accounting services > **Explanation:** The main role of the APB was to develop and issue opinions that formed the basis of Generally Accepted Accounting Principles (GAAP). ### Which entity replaced the APB in 1973? - [ ] IASB - [ ] SEC - [x] FASB - [ ] AICPA > **Explanation:** The APB was replaced by the Financial Accounting Standards Board (FASB) in 1973. ### How many opinions did the APB issue during its existence? - [ ] 21 - [ ] 15 - [x] 31 - [ ] 18 > **Explanation:** The APB issued a total of 31 opinions from its inception to its dissolution. ### Why was the APB criticized leading to its dissolution? - [ ] Inefficiency and ineffectiveness - [x] Lack of efficiency and effectiveness in addressing complex accounting issues - [ ] Too rapid and overly proactive - [ ] Collaboration with the IRS > **Explanation:** The APB was criticized for its lack of efficiency and ineffectiveness in dealing with complex accounting issues. ### What significant opinion did APB No. 16 address? - [ ] Inventory management - [ ] Revenue recognition - [x] Business combinations - [ ] Depreciation methods > **Explanation:** APB Opinion No. 16 addressed accounting for business combinations. ### What was the companion piece to APB Opinion No. 16, focusing on the disclosure of accounting policies? - [ ] Opinion No. 12 - [ ] No opinion is related - [ ] Opinion No. 27 - [x] Opinion No. 22 > **Explanation:** APB Opinion No. 22 was the companion piece to APB No. 16, focusing on the disclosure of accounting policies. ### Which body is responsible for establishing International Financial Reporting Standards (IFRS)? - [ ] APB - [ ] FASB - [x] IASB - [ ] AICPA > **Explanation:** The International Accounting Standards Board (IASB) is responsible for establishing International Financial Reporting Standards (IFRS). ### Which organization initially set the pathway for the establishment of FASB? - [ ] SEC - [x] APB - [ ] PCAOB - [ ] IRS > **Explanation:** The APB's dissolution set the pathway for the establishment of the FASB. ### Which accounting standard primarily focuses on the clarity of financial reporting through guidelines? - [x] GAAP - [ ] IFRS - [ ] SOX - [ ] APB > **Explanation:** Generally Accepted Accounting Principles (GAAP) focuses on the clarity and standardization of financial reporting guidelines. ### Where can one generally find more comprehensive accounting standards after the APB era? - [ ] CPA exam guidebooks - [x] FASB publications - [ ] Local CPA office - [ ] IRS forms > **Explanation:** After the APB era, more comprehensive accounting standards are found in FASB publications.

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