Fasb and the Standard

Topics: Financial Accounting Standards Board, Governmental Accounting Standards Board, International Financial Reporting Standards Pages: 5 (1391 words) Published: December 6, 2012
FASB and the Standard-Setting Process
Toni Waddell
October 15, 2012
Marina Layvand, CPA

In every organization there are certain accounting standards that have to be followed. They are established to ensure the usefulness of accounting information to users. So organizations should have an understanding of those standards, their objectives and the ethical roles that are required of their Accountants. Therefore, in this paper we will review the standard-setting process, the authoritative sources of accounting information, the objectives of financial reporting and their role in the economy, and the role of ethics in financial reporting. The Standard-Setting Process, Organizations and Responsibilities

In 1973 the Financial Accounting Standards Board (FASB) was created. They are currently governed by the Financial Accounting Foundation (FAF). It is a small board that consists of seven members, with a sixty plus personnel staff. FASB mission is “to establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision-useful information to investors and other users of financial reports” (www.fasb.org). The SEC and the American Institute of CPA recognizes those standards as authoritative and important to the proficient functioning of the economy. Furthermore improvements to those standards are achieved through a comprehensive and independent process.

The other organizations that are included in FASB’s independent structure includes the “Financial Accounting Foundation (FAF), the Financial Accounting Standards Advisory Council (FASAC), the Governmental Accounting Standards Board (GASB), and the Governmental Accounting Standards Advisory Council (GASAC)” (www.fasb.org). Each organizations duties and responsibilities are listed below: * FAF – oversees, administrates, and funds all the other structures (FASB, GASB, FASAC & GASAC). They “protect the independence and integrity if the standard-setting process and appointing members of FASB, GASB, FASAC, and GASAC” (www.fasb.org). * FASAC – directs the FASB in technical issues on the agenda which includes but are not limited to new items, the priorities of projects, procedural matters, and other issues pertaining to FASB or the chairman. * GASB - focuses on the standards of the state and local government units * GASAC – their duties are the same as FASAC with FASB. The only difference is that GASAC directs GASB and not FASB. The standard-setting process of FASB is accomplished “through a comprehensive and independent process that encourages broad participation, objectively considers all stakeholder vies, and is subject to oversight by the FAF’s Board of Trustees” (www.fasb.org). There are normally seven steps that are involved in this process. However, it is subject to change depending upon the nature and scope of the issue. The seven general steps are as follows; 1) “issue is identified, 2) FASB Chairman decides on whether or not to add the project to the agenda after consultant with FASB members, others and FAF’s Board of Trustees, 3) deliberation begins at various public meetings, 4) an Exposure Draft is issued to solicit broad stakeholder’s input, 5) a public roundtable meeting is held on the Exposure Draft, if needed, 6) the staff analyzes comment letters, public roundtable discussion, and any other information obtained through the due process activities. Re-deliberation takes place on the proposed provisions, and 7) the Accounting Standard Update is issued describing the amendments to the Accounting Standards Codification” (www.fasb.org). Authoritative Sources of Accounting Information

In the beginning FASB had two original pronouncements, the Statements of Financial Accounting Standards (SFASs) and the Interpretations. However, “the FASB established two new series of releases: (1) Statements of Financial Accounting Concepts (SFACs) and (2) Technical...
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