Financial accounting standards Board - wikipedia Financial accounting standards Board Financial Accounting Standards Board Founded 1972 ( Operational in 1973 ) Location Norwalk, Connecticut Slogan Serving the investment public through transparent information resulting from high - quality financial reporting standards, developed in an independent, private - sector, open due process. Website fasb.org Accounting Historical cost Constant purchasing power Management Tax Major types Auditing Cost Forensic Financial Fund Governmental Management Social Tax Key concepts Accounting period Accrual Constant purchasing power Economic entity Fair value Going concern Historical cost Matching principle Materiality Revenue recognition Unit of account Selected accounts Assets Cash Cost of goods sold Depreciation / Amortization Equity Expenses Goodwill Liabilities Profit Revenue Accounting standards Generally - accepted principles Generally - accepted auditing standards Convergence International Financial Reporting Standards International Standards on Auditing Management Accounting Principles Financial statements Annual report Balance sheet Cash - flow Equity Income Management discussion Notes to the financial statements Bookkeeping Bank reconciliation Debits and credits Double - entry system FIFO and LIFO Journal Ledger / General ledger T accounts Trial balance Auditing Financial Internal Firms Report People and organizations Accountants Accounting organizations Luca Pacioli Development History Research Positive accounting Sarbanes -- Oxley Act Business portal The Financial Accounting Standards Board ( FASB ) is a private, non-profit organization standard setting body whose primary purpose is to establish and improve generally accepted accounting principles ( GAAP ) within the United States in the public 's interest. The Securities and Exchange Commission ( SEC ) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. The FASB replaced the American Institute of Certified Public Accountants ' ( AICPA ) Accounting Principles Board ( APB ) on July 1, 1973. In 2009 Reuters, the Wall Street Journal, USA Today and others claimed that the FASB succumbed to `` political pressure '' and lobbyists and tweaked mark - to - market accounting to accommodate `` banks with toxic assets on their books. '' Since 2009 the FASB added the disclosure framework project to its conceptual framework in order to make financial statement disclosures `` more effective and coordinated and less redundant. '' As part of this process, in September 2015 the FASB issued a controversial proposal regarding `` the use of materiality by reporting entities '' and an amendment of the definition of the legal concept materiality. Materiality is `` a mainstay of corporate financial disclosure that determines what a company must tell investors about its operations and results. '' Harvard professor, Karthik Ramanna and lawyer, Allen Dreschel claim FASB 's proposed revised definition of materiality `` could put the economy at greater risk of another huge accounting fraud, like Enron or Lehman Brothers '' by weakening disclosure which is `` the cornerstone of fair and efficient markets. '' For example, if the new proposal is enacted -- a pharmaceutical company would be allowed to not disclose to its investors that its new drug in the pipeline performed poorly in drug trials because there is a `` substantial likelihood '' that the information could sway investment decisions. Some Fortune 500 companies and the United States Chamber of Commerce argue that investors and companies suffer from `` disclosure overload. '' Contents 1 Mission 2 Description 3 Structure 4 Oversight 5 History 6 Financial Crisis Advisory Group ( FCAG ) 7 Accounting Standards Codification 2009 7.1 Conceptual Framework 8 Norwalk Agreement 9 Independence 10 FASB pronouncements 11 FASB 11 concepts 12 See also 12.1 Current issues 12.2 Related associations 13 References 14 External links Mission The FASB 's 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. '' The FASB accomplishes its mission `` through a comprehensive and independent process that encourages broad participation, objectively considers all stakeholder views, and is subject to oversight by the Financial Accounting Foundation 's Board of Trustees. '' Description The FASB is not a governmental body. The SEC has legal authority to establish financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. Throughout its history, however, Commission policy has been to rely on the private sector for this function to the extent that the private sector demonstrates ability to fulfill the responsibility in the public interest. Structure The FASB is part of a structure that is independent of all other business and professional organizations. Before the present structure was created, financial accounting and reporting standards were established first by the Committee on Accounting Procedure ( 1936 -- 1959 ) of the American Institute of Accountants and then by the Accounting Principles Board ( 1959 -- 73 ), a part of the American Institute of Certified Public Accountants. Pronouncements of those predecessor bodies remain in force unless amended or superseded by the FASB. The FASB 's structure is very different from its predecessors in many ways. The board consists of seven full - time members. These members are required to sever all ties to previous firms and institutions that they may have served prior to joining the FASB. This is to ensure the impartiality and independence of the FASB. All members are selected by the Financial Accounting Foundation ( FAF ). They are appointed for a five - year term and are eligible for one additional five - year term. The current members are ( with current term end dates indicated ) : Russell G. Golden, Chairman ( current term as chairman expires in 2017 ; eligible for a 3 - year extension beyond 2017 ) James L. Kroeker, Vice Chairman ( 1st term expires in 2018 ) Christine Ann Botosan Harold Monk, Jr. R. Harold Schroeder ( 2nd term expires in 2020 ) Marc A. Siegel ( 2nd term expires in 2018 ) Lawrence W. Smith ( 2nd term expires in 2017 ) In addition to the full - time members, there are approximately 68 staff members. These staff are, `` professionals drawn from public accounting, industry, academe, and government, plus support personnel. '' Oversight The FASB is subject to oversight by the Financial Accounting Foundation ( FAF ), which selects the members of the FASB and the Governmental Accounting Standards Board and funds both organizations. The Board of Trustees of the FAF, in turn, is selected in part by a group of organizations including : American Accounting Association American Institute of Certified Public Accountants CFA Institute Financial Executives International Government Finance Officers Association Institute of Management Accountants National Association of State Auditors, Comptrollers and Treasurers Securities Industry Association History In 1973 the FASB began their Conceptual Framework project to develop a sound theoretical basis for the development of accounting standards in the United States. In 1984, the FASB formed the Emerging Issues Task Force ( EITF ). This group was formed in order to provide timely responses to financial issues as they emerged. This group includes 15 people from both the private and public sectors coupled with representatives from the FASB and an SEC observer. As issues emerge, the task force considers them and tries to reach a consensus on what course of action to take. If that consensus can be reached, they issue an EITF Issue and FASB does n't get involved. An EITF Issue is considered just as valid as a FASB pronouncement and is included in the GAAP. On September 18, 2002 in Norwalk, Connecticut the FASB met with the International Accounting Standards Board ( IASB ) and together issued a Memorandum of Understanding on a convergence project. regarding International Financial Reporting Standards ( IFRS ) outlining plans to converge IFRS and US GAAP into in the `` development of the highest quality compatible accounting standards that could be used for both domestic and cross-border financial reporting. '' As part of the project, FASB began to move away from the principle of historical cost to fair value. In 2006 the FASB -- the United States `` accounting standard setter '' -- implemented SFAS 157 which established new standards for disclosure regarding fair value measurements in financial statements. Critics argued that it contributed to the crisis. According to the Wall Street Journal, the Securities and Exchange Commission 's ( SEC ) and the FASB eased the mark - to - market accounting rule in the United States to allow executives to use their own financial models if no market exists. This was due to pressure from banks who were complaining that the `` strict application of mark - to - market rules has forced them to write down mortgage - related securities. '' In August 2008 the U.S. Securities and Exchange Commission ( SEC ) published a `` proposed `` Roadmap '' for the adoption of International Financial Reporting Standards ( IFRS ) for U.S. companies, to replace U.S. GAAP ( Generally Accepted Accounting Principles ) on a timetable that established several milestones to be achieved by 2011 as the basis for moving ahead toward a transition to IFRS beginning in 2014. '' In 2009 the international Financial Crisis Advisory Group that investigated the implications of the financial crisis of 2007 -- 2010 on standards setting, tabled their report in which they found that the FASB and SEC had been pressured by politicians and banks to change accounting standards to protect banks from the impact of their toxic mortgages. In July 2009 the FASB announced that their Accounting Standards Codification was the authoritative accounting standards in the United States. In May 2015 the SEC acknowledged that `` investors, auditors, regulators and standard - setters '' in the United States did not support mandating International Financial Reporting Standards Foundation ( IFRS ) for all U.S. public companies. There was `` little support for the SEC to provide an option allowing U.S. companies to prepare their financial statements under IFRS. '' However, there was support for a single set of globally accepted accounting standards. The IFRS -- a nonprofit accounting organization -- develops and promotes the International Financial Reporting Standards ( IFRSs ) through the International Accounting Standards Board ( IASB ), which it oversees. For ten years the FASB and IASB collaborated on a `` common objective not only to eliminate differences between IFRS and U.S. GAAP wherever possible, `` but also to achieve convergence in accounting standards that stood the test of time. '' By 2015 FASB and International Accounting Standards Board ( IASB ) were again planning meetings after a hiatus of several years. The United States has little interest in adopting the IFRS standards as was the original plan in 2002. The US FASB already uses GAAP as a rate regulation standard. By 2016 there was concern that FASB 's proposed amendments to the definition of materiality and its use by reporting entities would put the economy at risk of fraud on the scale of Enron 's. For example, if the new proposal is enacted -- a pharmaceutical company would be allowed to not disclose to its investors that its new drug in the pipeline performed poorly in drug trials because there is a `` substantial likelihood '' that the information could sway investment decisions. Some Fortune 500 companies and the United States Chamber of Commerce argue that investors and companies suffer from `` disclosure overload. '' Financial crisis Advisory group ( FCAG ) The FASB and the International Accounting Standards Board created the Financial Crisis Advisory Group in 2008 -- an international group of standard - setting bodies -- that coordinated responses `` on the future of global standards in light of '' the financial crisis of 2007 -- 2010. The FCAG was composed of 15 -- 20 senior leaders in finance and chaired by Harvey Goldschmid and Hans Hoogervorst with a mandate to investigate financial reporting issues uncovered by the global financial crisis. FCAG members included Stephen Haddrill and Michel Prada -- a member of the International Centre for Financial Regulation ( ICFR ) and co-chair of the Council on Global Financial Regulation was a member of the Financial Crisis Advisory Group. Haddrill who was the only UK representative on the FCAG, is CEO of the Financial Reporting Council ( FRC ) in the United Kingdom and has a close interest in accounting standards. Just prior to the FCAG 's report to the G20 in April 2009 meeting, and in reference to the political pressure placed on standards setters `` to make changes to fair value accounting rules over suggestions that it exacerbated the financial crisis '' Haddrill cautioned, `` Who do we want to set accounting standards ? Not politicians, that 's clear. But neither do we want experts vacuum - packed in a world of their own. '' -- Stephen Haddrill FCAG February 2009 Accounting standards Codification 2009 On July 1, 2009, the FASB announced the launch of its Accounting Standards Codification, declaring it to be `` the single source of authoritative nongovernmental U.S. generally accepted accounting principles. '' The Codification organizes the many pronouncements that constitute U.S. GAAP into a consistent, searchable format. The Codification is not to be confused with the FASB 's 1973 Conceptual Framework project. Conceptual Framework FASB and the International Accounting Standard Board are working closely together to develop a common Conceptual Framework. The goal is develop standards that are objectives - based, internally consistent, and internationally converged. Currently Statement of Financial Accounting Concepts No. 8 `` Conceptual Framework for Financial Reporting '' is being used in the United States. The Conceptual Framework include : measurement attributes used to measure and report economic transactions, events, and arrangements in financial statements ; and accounting principles and assumptions that guide recognition, derecognition, and disclosure, as well as the classification and presentation of information in financial statements. Fundamental qualitative characteristics, relevance and faithful representation allow for decision usefulness. Information that is capable of making a difference in decisions made by financial statement users is relevant. The three components of relevance are : Predictive Value -- information that should help users form expectations about the value Confirmatory Value -- information that provides feedback to confirm or correct prior predictions and expectations Materiality -- refers to the nature and magnitude of an omission or misstatement of accounting information that would influence the judgment of a reasonable person relying on that information Faithful representation is when the words and numbers accurately predict the economic substance of what they purport to represent. The three components of faithful representation are : Complete representation -- provides a user with full disclosure of all information necessary to understand the information being reported, with all necessary facts, descriptions, and explanations Neutral representation -- not biased, slanted, emphasized or otherwise manipulated to achieve a pre-determined result or to influence users ' behavior in a particular direction Free from error -- the information is measured and described as accurately as possible, using a process that reflects the best available inputs Norwalk Agreement Main article : Norwalk Agreement In 2002 FASB began to work with convergence project with the International Accounting Standards Board ( IASB ) and International Financial Reporting Standards ( IFRS ), the independent, accounting standard - setting body of the IFRS Foundation on a convergence project. They met on September 18, 2002, in Norwalk, Connecticut to sign a MoU which `` committed the boards to the development of high quality compatible accounting standards with a common solution. '' This document outlined plans to converge IFRS and US GAAP into one set of high quality and compatible standards. By 2015 FASB and IASB were planning meetings to discuss `` business combinations, the disclosure framework, insurance contracts and the conceptual framework. '' Independence In June 2009, FASB was criticized by an advisory panel of investors after making changes on mark - to - market accounting in response to political pressure. Lobbyists had obtained its permission for banks to apply a special accounting treatment for toxic assets. FASB pronouncements Main article : List of FASB Pronouncements In order to establish accounting principles, the FASB issues pronouncements publicly, each addressing general or specific accounting issues. These pronouncements are : Statements of Financial Accounting Standards Statements of Financial Accounting Concepts FASB Interpretations FASB Technical Bulletins EITF Abstracts FASB 11 concepts Money measurement Entity Going concern Cost Dual aspect Accounting period Conservation Realization Matching Consistency Materiality See also International Public Sector Accounting Standards International Financial Reporting Standards FASB 133 FIN46 Current issues Stock option expensing FAS 157 Mark - to - Market Fair Value Accounting Related associations International Accounting Standards Board References ^ Jump up to : Ramanna, Karthik ; Dreschel, Allen ( 26 April 2016 ). `` The Quiet War on Corporate Accountability ''. The New York Times. Retrieved 26 April 2016. ^ Jump up to : `` Investor group says FASB is compromised '', Accountancy Age, June 23, 2009, retrieved April 26, 2016 Jump up ^ Amadeo, Kimberly. `` Mark to Market ''. About News. Retrieved August 16, 2015. Jump up ^ `` Mark to market accounts '', Bloomberg, May 2, 2012, retrieved 26 April 2016 Jump up ^ Williamson, E., Scannell, K., Burns, J., & Holmes, E. ( October 2, 2008 ), `` Momentum Gathers to Ease Mark - to - Market Accounting Rule '', Wall Street Journal via Ebsco access - date = requires url = ( help ) CS1 maint : Uses authors parameter ( link ) `` The article reports on a proposal by banks to ease mark - to - market accounting rules in the U.S. A proposal in the revised financial - rescue bill reaffirms the Securities and Exchange Commission 's ( SEC ) authority to suspend mark - to - market accounting. Banks have complained that the strict application of mark - to - market rules has forced them to write down mortgage - related securities. A clarification of rules by the SEC and the Financial Accounting Standards Board ( FASB ) allows executives to use their own financial models if no market exists. '' ^ Jump up to : McGinty, T ( July 29, 2009 ), `` Panel Assails Meddling Into FASB Rules Making '', Wall Street Journal via EBSCO access - date = requires url = ( help ) `` The article focuses on a report issued by the Financial Crisis Advisory Group which encourages U.S. Financial Accounting Standards Board ( FASB ) to refrain from the intervention by some politicians and interest groups that led such agency to ease regulations for determining the value of troubled bank assets in 2009. It says that the objection of the report to political pressure could support the board as it seeks a new proposal to mandate firms to show all financial instruments on their balance sheets. It states how the advisory group was established. '' ^ Jump up to : Pallavi, Gogoi ( April 3, 2009 ), `` Accounting rule that put banks in a bind dumped '', USA Today via EBSCO access - date = requires url = ( help ) ^ Jump up to : `` Disclosure framework '', FASB, Norwalk, Connecticut, nd, retrieved April 26, 2016 ^ Jump up to : `` FASB Disclosure Framework Exposure Drafts on Materiality '', FASB, Norwalk, Connecticut, September 2015, retrieved April 26, 2016 ^ Jump up to : Morgenson, Gretchen ( January 2, 2016 ), FASB Proposes to Curb What Companies Must Disclose, retrieved April 26, 2016 ^ Jump up to : Financial Accounting Standards Board ( 2014 ). Facts About FASB. Retrieved on May 6, 2014. Jump up ^ Accounting Series Release ( ASR ) No. 4 ( April 1938 ) and ASR No. 150 ( December 1973 ) ; Reaffirmed by SEC Policy Statement Release Nos. 33 - 8221 ; 34 - 47743 ; IC - 26028 ; FR - 70 available at https://www.sec.gov/rules/policy/33-8221.htm ^ Jump up to : Spiceland, David ; Sepe, James ; Nelson, Mark ; & Tomassini, Lawrence ( 2009 ). Intermediate Accounting ( 5th Edition ). McGraw - Hill / Irwin. p. 10. ISBN 978 - 0 - 07 - 352687 - 4. Jump up ^ http://www.fasb.org/faf/faf_info.shtml Jump up ^ Memorandum of Understanding, The Norwalk Agreement ( PDF ), Financial Accounting Standards Board and International Accounting Standards Board, 2002, retrieved March 17, 2009 ^ Jump up to : Calfee Halter & Griswold LLP ( May 18, 2015 ), Will SEC finally nix IFRS in the United States ?, retrieved April 26, 2016 CS1 maint : Uses authors parameter ( link ) Jump up ^ http://www.fasb.org/summary/stsum157.shtml, `` Summary of Statement No. 157 '' - FASB Pre-Codification Standards. ^ Jump up to : Reed, Kevin ( February 26, 2009 ), `` Do n't mix politics and standards, says Haddrill ) '', Accountancy Age, retrieved April 26, 2016 Jump up ^ MR Young, PBW Miller ( May 2008 ), `` The role of fair value accounting in the subprime mortgage meltdown '', Journal of Accountancy : 34 -- 38 Jump up ^ Momentum Gathers to Ease Mark - to - Market Accounting Rule ^ Jump up to : Financial Accounting Standards Board ( 2009 ). News Release 07 / 1 / 09. Retrieved September 8, 2009. Jump up ^ IFRS Foundation, 2012. About the IFRS Foundation and the IASB. Retrieved on April 25, 2012. Jump up ^ Deloitte Global Services Limited, 2012. Former Deloitte Global CEO James Quigley appointed to the IFRS Foundation. Retrieved on April 25, 2012. ^ Jump up to : Lugo, Denise ( Jun 15, 2015 ), FASB - IASB make full circle return to the norwalk agreement access - date = requires url = ( help ) Jump up ^ `` Michel Prada Chairman, Autorité des Marchés Financiers ( France ) ''. Global Public Policy Symposium. Archived from the original on 2008 - 11 - 21. Retrieved 2011 - 06 - 07. Jump up ^ `` Michel Prada ''. International Council of Securities Associations. Archived from the original on 2011 - 07 - 14. Retrieved 2011 - 06 - 07. Jump up ^ `` Conceptual Statement # 2 ''. FASB. Jump up ^ IFRS Foundation, 2012. About the IFRS Foundation and the IASB. Retrieved on April 28, 2012. Jump up ^ Financial Accounting Standards Board and International Accounting Standards Board ( 2002 ). Memorandum of Understanding, `` The Norwalk Agreement ''... Retrieved March 17, 2009. External links FASB Official Website FASB and IASB : Dependence Despite Independence Lawrence A. Cunningham, Private Standards in Public Law ( Article on FASB 's Policy of Copyrighting and Selling its Materials Despite Being Funded by Public Company Fees ), Michigan Law Review ( 2005 ) CFO Summary : The Implications of the FASB Pension Disclosure Guidelines Retrieved from `` https://en.wikipedia.org/w/index.php?title=Financial_Accounting_Standards_Board&oldid=804926575 '' Categories : Accounting organizations Accounting in the United States Non-profit organizations based in Connecticut Organizations established in 1973 1973 establishments in Connecticut Accounting standards Hidden categories : Pages using citations with accessdate and no URL CS1 maint : Uses authors parameter Pages using infobox organization with unsupported parameters All articles with unsourced statements Articles with unsourced statements from April 2016 Articles with unsourced statements from June 2007 Talk Contents About Wikipedia Deutsch فارسی Français 日本 語 Português 中文 Edit links This page was last edited on 11 October 2017, at 23 : 45. 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Question: what is the function of the accounting standard​ setters
Answer: to establish and improve generally accepted accounting principles (GAAP) within the United States in the public's interest