QuickMBA / Accounting / Standards
Financial Accounting Standards
Accounting standards are needed so that financial statements will fairly and consistently describe financial performance. Without standards, users of financial statements would need to learn the accounting rules of each company, and comparisons between companies would be difficult.
Accounting standards used today are referred to as Generally Accepted Accounting Principles (GAAP). These principles are "generally accepted" because an authoritative body has set them or the accounting profession widely accepts them as appropriate.
Securities and Exchange Commission (SEC)
The Securities and Exchange Commission is a U.S. ...view middle of the document...
GAAP essentially arose from the opinions of the APB.
The APB was criticized for its structure and for several of its positions on controversial topics. In 1971 the Wheat Committee (chaired by Francis Wheat) was formed to evaluate the APB and propose changes.
Financial Accounting Standards Board (FASB)
The Wheat Committee recommended the replacement of the Accounting Principles Board with a new standards-setting structure. This new structure was implemented in 1973 and was made up of three organizations:
* Financial Accounting Foundation (FAF)
* Financial Accounting Standards Board (FASB)
* Financial Accounting Standards Advisory Council (FASAC).
Of these organizations, FASB (pronounced "FAS-B") is the primary operating organization.
Unlike the APB, FASB was designed to be an independent board comprised of members who have severed their ties with their employers and private firms. FASB issues statements of financial accounting standards, which define GAAP. The AICPA issues audit guides. When a conflict occurs, FASB rules.
International Accounting Standards Committee (IASC)
The International Accounting Standards Committee (IASC) was formed in 1973 to encourage international cooperation in developing...