ACC 305 Intermediate Accounting
The Role of FASB
After the Stock Market Crash of 1929, many believers felt the crash was a result of inadequate and misleading financial statements which contributed to overstated stock prices, causing the crash and an the eventual depression. The Stock Market Cash proved the necessity for accounting standards. “Investors and creditors use financial information to make their resource allocation decisions. It’s critical that they be able to compare financial statements and related notes.” (Spiceland, Sepe, Tomassini pg 9). For these reasons the Financial Accounting Standards Board (FASB) was created to establish and improve standards of financial accounting and reporting. The FASB uses many different techniques to accomplish, establish and improve these standards. As a result of the Stock Market Crash of 1929 Congress passed the 1933 Securities Act and the 1934 Securities Exchange Act, which also created the Securities and Exchange Commission (SEC). The SEC was granted power and responsibility for implementing financial accounting reporting standards. The SEC has delegated the responsibility of setting accounting standards to the private sector, while still retaining the approving authority of such standards. Throughout the years there have been many subsequent committees’ and boards created by the private sector in attempts to create accounting standards. In 1973 the FASB was created as a part of an independent structure comprising the, FASB, the Financial Accounting Standards Advisory Council (FASAC), and the Financial Accounting Foundation (FAF). The FASB’s is responsible for “establishing
standards of financial accounting and reporting. These standards govern the preparation of financial reports. They are officially recognized as the authoritative by the Securities and Exchange Commission”. The FASAC consults the FASB on the technical issues on the Board’s agenda, project priorities, task force selection and...
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