Accounting: the Financial Accounting Standards Board (Fasb)

The FASB Accounting Standards Codification® is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities.

The FASB is an agency of the federal government that has the broad powers to prescribe accounting standards to be employed by companies that fall within its jurisdiction.

The American Institute of Certified Public Accountants (AICPA) is a professional accounting organization whose members are certified public accountants (CPAs).

The FASB mission statement states, “that it is to establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities and provides decision-useful information to investors and other users of financial reports. That mission is accomplished through a comprehensive

The FASB Accounting Standards Codification® is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied to nongovernmental entities.

In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).

The field of accounting is constantly evolving. This is true not only for the theory of accounting itself but also the entities that govern its theory and practice. Presently, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are faced with some of the biggest challenges to date. To understand the significance of these two boards, it is necessary to understand their histories, relations between the boards, and the standards that they set. Also how the knowledge of these boards and the field they lead, gained through the masters of science in accountancy

The FASB process includes five steps to develop generally accepted accounting principles. The first step involves meeting and issuing a discussion memorandum. “A discussion memorandum is a document intended to encourage discussion and debate amongst accounting and financial professionals in regards to a current issue relating to the accounting industry” (“Discussion Memorandum”, n.d.). These are the ideas that will harm or benefit accountants. Next, they will obtain responses to this memorandum. After this is done FASB will create an exposure draft. Exposure drafts are basically an open blog about the new changes FASB is trying to implement. “The FASB issues a variety of different types of exposure documents to solicit input on its standards-setting

FASB is largely organized 7 members as full-time job. The mission of the FASB is to establish and improve standards of financial accounting and reporting that tries to provide decision-useful information to investors and other users of financial reports in terms of nongovernmental entities. The U.S. Securities and Exchanges Commission (SEC) authorizes FASB setting accounting standards. The

The AICPA in the auditing standards-setting process has the responsibility to set the standards for the audits needing to be performed of nonpublic entities. These audits are performed by the AICPA through the issuance of Statements of Auditing Standards. The Statements of Auditing Standards were established to address any issues or concerns of its standards throughout the audit process. As a result of the Sarbanes-Oxley Act, the PCAOB was established for setting standards for the audits of public entities. The PCAOB performs all of their public audits through the issuance of Auditing Standards. The Auditing Standards are reviewed and approved by the SEC (Securities and Exchange Commission). In contrast to the AICPA and PCAOB, the SEC

In order to overcome the differences between national accounting practices, a lot of national standards bodies have jointly agreed and adopted a series of International Financial Reporting Standards

For nonpublic companies auditing guidance are issued by the American Institute of Certified Public Accountants, AICPA. Prior to PCAOB, AICPA served as the primary governing body of public accounting profession. Since the roles have changed with PCAOB regarding the auditing standards for public companies, the AICPA is still developing standards for the nonpublic companies. The organization has developed four fundamental principles that govern an audit conducted in accordance with GAAP. The principles are:

There are general rules and concepts that preside over the field of accounting. These general rules, known as basic accounting principles and guidelines, shape the groundwork on which more thorough, complex, and legalistic accounting rules are based. The Financial Accounting Standards Board (FASB) uses the basic accounting principles and guidelines as a foundation for their own comprehensive and complete set of accounting rules and standards.

The International Accounting Standards Board (IASB) is an independent body which approves and develops International Financial Reporting Standards (IFRS). They work under the oversight of the IFRS. The IASB was formed back in 2001 to replace the International Accounting Standards Committee. (www.iasplus.com,2015)

The existing Conceptual Framework of IASB’s was developed by its predecessor body IASC (International Accounting Standards Committee) in 1989. The material on the objective of financial reporting was first revised by the IASB in 2010 with the US national standard-setter, the Financial Accounting Standards Board (FASB). This ED sets out the proposal for a revised Conceptual framework. It has been developed on the behalf of responses received on (‘the Discussion Paper) which was published in July 2013. (IFRS, May 2015)