FASB stands for Financial Accounting Standard Board. It was established by Security and Exchange Act in 1973, as an independent, private sector, not-for-profit organization that establishes accounting principles and accounting procedures. The body of this principal and procedures called General Accounting-Accepted Principal (GAAP). FASB regulated by Security and Exchange Commission and the financial Accounting Foundation.
The Financial Accounting Standard Board also works with International Accounting Standard Board to ensure that financial statements and documents used in the United States can also be used in the international market. The FASB has authority to set the Accounting Standards, but not enforce these accounting standards. The enforcement of these accounting standards falls under the jurisdiction of Security Exchange Commission (SEC). When devising and improving Accounting Standard the FASB takes recommendations from the SEC and the AIPA; however it is not required. It also takes the feedback from the business when making changes to the current business.
The financial Accounting Standard Board has a unique position in the accounting process and the main goal of the FASB is to provide leadership for public companies in establishing the accounting methods used to prepare the financial statements. The main purpose of FASB is to establish and improve financial accounting and reporting standard for the public and private companies and not- for-profit organizations. They provide useful information for the guidance and education of the public including auditors, issuers, and users of financial information.
Goals and Functions of FASB
The functions of Financial Accounting Standard Board are such as: maintain the standards up to date to reflect changes in the method of preparing the financial statements and in the economy; considered those specific areas which are insufficiency in the financial areas that might be improved through standard setting; support international convergence of Accounting Standard concurrent with improvement in the quality of financial reporting; describing the usefulness of financial reporting by focusing on characteristics of reliability and relevance; FASB also explain the usefulness of financial reporting by focusing on consistency and comparability.
The goal of the Financial Accounting Standard provides information about the financial statements to stakeholder so he takes the investment decisions on the basis of these honest financial statements. The standards are designed in such a way to promote transparency in the financial reporting. When information is transparent, it is visible and understandable to users of these statements. It will enable the users of these statements (investors and creditors) to make accurate evaluations of the business finance. Financial Accounting Standards Boards also help the board of director of the companies to assess the management’s effectiveness.
The FASB developed the Accounting Standards that directly impact how the business reports items such as inventory cost, assets, debts, revenue, stakeholder’s equity and taxation. The FASB currently issued set of pronouncement in which include; the statement of Financial Accounting Concepts; FASB interpretations and clauses; and the FASB technical Bulletins and abstract and statement of Financial Accounting Standards. The main benefit of the FASB is that it helps to set the current Accounting Standard and eliminate outdated ones. It helps to encourage international compliance and develop the process the resolve the accounting misinterpretations.