Financial Accounting Standards Board (FASB)
Introduction to FASB
Short for Financial Accounting Standards Board, FASB is a seven-member independent board comprising of accounting professionals who aim at establishing and communicating standards of financial accounting and reporting in the US. The FASB Standards, commonly known as GAAP (Generally Accepted Accounting Principles), manage the preparation of corporate financial reports and are identified as authoritative by the Securities and Exchange Commission.
As stated by Investopedia, accounting standards are essential in an efficient market, as information needs to be transparent, understandable, and credible. Moreover, the FASB sets out to improve the corporate accounting practices by enhancing guidelines designed for accounting reports, recognizing and resolving issues in a well-timed manner thus creating a uniform standard across the financial markets.
Structure of FASB
The Financial Accounting Standards Board is part of an independent structure which is free of all other business and professional organizations. This structure embraces the Financial Accounting Foundation (FAF), the Financial Accounting Standards Board (FASB), the Financial Accounting Standards Advisory Council (FASAC), the Governmental Accounting Standards Board (GASB), and the Governmental Accounting Standards Advisory Council (GASAC).
Also, the FASB includes seven full time members which are appointed by the Foundation’s Board of Trustees and can serve up to two terms of five years each. The Board is sup[ported by a 60+ person.
Goals of FASB
The main purpose of FASB is “toestablish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information.” To accomplish this purpose, five goals have been set by the FASB. These goals are as follows:
- Perk up the usefulness of financial reporting by focusing on the major characteristics of reliability and relevance, and on the qualities of consistency and comparability.
- Maintain standards up to date to reflect changes in the methods of doing business and in the economy.
- Consider promptly any specific areas of insufficiency in financial reporting that might be improved through standard setting.
- Support international convergence of accounting standards concurrent with the improvement in the quality of financial reporting.
- Develop common understanding of the nature and purposes of info mentioned in financial reports.