Financial Accounting Standards Board (FASB)

Definition§

The Financial Accounting Standards Board (FASB) is an independent, private-sector organization designated to establish and improve standards of financial accounting and reporting within the United States. The FASB’s standards are recognized as authoritative by the Security and Exchange Commission (SEC) and the accounting profession. It is responsible for ensuring that financial statements provide useful information to investors, potential investors, and other users.

Examples§

1. Codification of Standards: The FASB’s Codification project successfully gathered all U.S. Generally Accepted Accounting Principles (GAAP) into a single, organized framework. This makes it simpler for companies to ensure they follow appropriate accounting practices.

2. Revenue Recognition: ASC 606, developed by the FASB and the International Accounting Standards Board (IASB), is a comprehensive revenue recognition standard that impacts virtually all industries. The main goal of the standard is to align revenue reporting practices across sectors to improve financial transparency.

3. Leasing Standards: The FASB issued ASC 842, which changes how entities recognize lease assets and liabilities. This standard aimed to provide stakeholders a clearer picture of leasing commitments and their impact on financial statements.

Frequently Asked Questions (FAQs)§

Q1: What is the role of the FASB? A1: The primary role of the FASB is to establish and enhance financial accounting and reporting standards (recognized as GAAP) for use by businesses and non-profit organizations within the United States.

Q2: How does the FASB develop accounting standards? A2: The FASB develops standards using a lengthy due process, including extensive research, public meetings, and exposure drafts to gather stakeholder input before a final standard is issued.

Q3: Are FASB standards mandatory? A3: Yes, FASB standards, recognized as GAAP, are mandatory for public companies’ financial reporting in the United States.

Q4: Does the FASB cooperate with international accounting standards bodies? A4: Yes, the FASB often collaborates with the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards (IFRS) to improve global comparability of financial statements.

Q5: Where can I find updates on ongoing FASB projects? A5: Updates on ongoing projects, exposure drafts, and final ASUs (Accounting Standards Updates) can be found on the official FASB website.

Related Terms§

• GAAP (Generally Accepted Accounting Principles): A common set of accounting principles, standards, and procedures used by companies to compile their financial statements.
• IASB (International Accounting Standards Board): An independent body responsible for establishing IFRS (International Financial Reporting Standards).
• ASC (Accounting Standards Codification): The FASB’s codification of U.S. GAAP into a single, searchable framework.
• ASU (Accounting Standard Update): An update to the FASB Accounting Standards Codification to communicate changes in the accounting standards.

Online References§

1. FASB Official Website: FASB
2. SEC Information on FASB: SEC - Office of the Chief Accountant
3. FASB Codification: FASB Codification
4. Accounting Today - FASB News: Accounting Today

Suggested Books§

1. “Wiley GAAP: Interpretation and Application of Generally Accepted Accounting Principles” by Joanne M. Flood
2. “Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
3. “Financial Accounting Standards Board: The Road Ahead” by Paul Miller and Paul Bahnson
4. “Accounting for Dummies” by John A. Tracy

Accounting Basics: “Financial Accounting Standards Board (FASB)” Fundamentals Quiz§

Thank you for embarking on this journey through our comprehensive accounting lexicon and tackling our challenging sample exam quiz questions. Keep striving for excellence in your financial knowledge!