Financial Accounting standards Board - wikipedia Financial Accounting standards Board Financial Accounting Standards Board Founded 1972 ( Operational in 1973 ) Location Norwalk, Connecticut Key people Russell G. Golden ( Chairman ) James L. Kroeker ( Vice Chairman ) Website fasb.org Part of a series on 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. FASB accounting standards are accepted as authoritative by many organizations, including state Boards of Accountancy and the American Institute of CPAs ( AICPA ). The FASB 's mission is to `` establish and improve financial accounting and reporting standards to provide useful information to investors and other users of financial reports and educate stakeholders on how to most effectively understand and implement those standards. '' The FASB carries out its mission through improving the usefulness of financial reporting, focusing on the faithful representation and relevance of financial information, including the enhancing characteristics of useful information, comparability, timeliness, understandability, and verifiability. The FASB also accomplishes their mission through educating and guiding auditors, preparers, and other users of financial statements, ensuring current standards reflect developments in methods of doing business and economic environment changes, and by acknowledging areas of insufficiency in financial reporting that could be improved through the standard setting process. Contents 1 Structure 1.1 Oversight 1.2 Funding 2 History 2.1 Inception 2.2 Conceptual Framework 2.3 Emerging Issues Task Force 2.4 International Standard Setting Comparability 2.5 The Norwalk Agreement 2.6 Sarbanes - Oxley Act of 2002 2.7 AICPA 's GAAP Agreement 2.8 Investor Task Force 2.9 Financial Crisis Advisory Group ( FCAG ) 2.10 Accounting Standards Codification 2.11 Convergence to International Comparability 3 Accounting Standards 3.1 FASB Pronouncements 3.2 Major FASB Standards 3.2. 1 Revenue Recognition 3.2. 2 Credit Losses 3.2. 3 Variable Interest Entities 3.2. 4 Pensions 3.2. 5 Stock Options 3.2. 6 Leases ( balance sheet ) 3.2. 7 Derivative Accounting 4 Criticism 4.1 Mark - to - Market 4.2 Materiality 4.3 International Comparability vs. Convergence 5 See Also 5.1 FASB 11 concepts 5.2 Accounting issues 5.3 Related associations 6 References 7 External links Structure The FASB is based in Norwalk, Connecticut, and is led by seven full - time Board members, one being the chairman, appointed by the Financial Accounting Foundation ( FAF ) to serve five - year terms and are eligible for one term reappointment. The qualifications to serve on the FASB Board include professional competence and realistic experience from professions like financial reporting, investment services, and financial planning. Board members also come from sectors such as academia, business, and legal, or government agencies. FASB Board members, as of 30 April 2018 : Member Professional Background Term Expiration Russell Golden, Chairman Public Accounting 2nd term expires in 2020 James Kroeker, Vice Chairman Public Accounting / SEC 2nd term expires in 2024 Christine Botosan Academic 1st term expires in 2021 Marsha Hunt Public Accounting 1st term expires in 2022 Harold Monk, Jr. Private Company Auditor 1st term expires in 2022 R. Harold Schroeder Financial Statement User 2nd term expires in 2021 Marc Siegel Financial Statement User 2nd term expires in 2018 The board is supported by more than 60 staff with backgrounds in public accounting, industry, academia, and government. 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 is selected by a nomination process that involves several organizations that are interested in accounting principles, 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 Funding The FASB obtains funding from accounting support fees, subscription and publication revenues, and investment income. FASB Accounting Support Fees are collected under the authority of the Sarbanes - Oxley Act. Fees are assessed and collected from issuers of publicly - traded securities and allocated based on the average market capitalization of each issuer. The FASB accounting support fees are reviewed by the U.S. Securities and Exchange Commission ( SEC ) each year to ensure compliance with the statute. Subscription and Publication revenue includes sales and licensing of copyrighted FASB - related materials. The Financial Accounting Foundation ( FAF ) licenses the content of the FASB Codification to commercial publishers and other licensees for inclusion in their proprietary online research systems. The FASB Codification materials also are available through various paid subscription plans and hard copy printed versions. History Inception Marshall Armstrong, then - president of the American Institute of Certified Public Accountants ( AICPA ), appointed a group of seven men ( the Wheat Committee ) in the early 1970s to examine the organization and operation of the Accounting Principles Board, in order to determine what adjustments were needed to facilitate more accurate and timely results. Their findings, `` Report of the Study on the Establishment of Accounting Principles '', were published in March 1972, and proposed several changes including establishing the Financial Accounting Foundation, separate from other professional firms, that would be overseen by the Board of Trustees. The FASB was conceived as a full - time body to ensure that Board member deliberations encourage broad participation, objectively consider all stakeholder views, and are not influenced or directed by political / private interests. The Wheat Report also recommended developing the `` Financial Accounting Standards Advisory Council, a 20 - member advisory council that members serve an initial 1 - year term, that could be renewed indefinitely, and to explicitly define the FASB research projects, to ensure timely and appropriate results. The U.S Securities and Exchange Commission ( SEC ) issued Accounting Series Release No. 150 ( ASR 150 ), which states that FASB pronouncements will be considered by the SEC as having `` substantial authoritative support '', in 1973. That same year, the FASB issued its first standard, Statement of Financial Accounting Standards No. 1 : Disclosure of Foreign Currency Translation Information. Conceptual framework The FASB Conceptual Framework was established in 1973 as a comprehensible set of standards and rules intended to address and solve new emerging issues. The conceptual framework underlied financial accounting by serving as the Board 's reasoning behind its standards - setting decisions. The conceptual framework providds two functions : to state the objectives of financial reporting and provide definitions of financial statement elements. The conceptual framework creates a foundation for financial accounting and establishes consistent standards that highlights the nature, function, and limitations of financial reporting. Emerging issues Task Force The FASB formed the Emerging Issues Task Force ( EITF ) in 1984. 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. From conception until the 2003 AICPA GAAP Agreement, if consensus was reached on an topic, the group would issue an EITF Issue that was considered equivalent to a FASB pronouncement and included in GAAP. International standard setting comparability The FASB participated in an international conference on global accounting standards in 1991, `` The Objectives and Concepts Underlying Financial Reporting, '' co-sponsored by the International Accounting Standards Committee and the Fédération des Experts Comptables Européens. Two years later, the FASB participated in the formation of the G4 + 1, a group of international standard setters, whose members included the United States, Australia, the United Kingdom, Canada and New Zealand. In August 1994 the group released a special report, titled `` Future Events : A Conceptual Study of their Significance for Recognition and Measurement ''. In 1999, the FASB issued a report on `` International Accounting Standard Setting : A Vision for the Future '', which acknowledged the rapid changes taking place in the international accounting standard setting environment, and that Convergence and development of high - quality international standards are coinciding goals. 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. '' The Norwalk Agreement Main article : Norwalk Agreement In 2002, the FASB commenced work on a convergence project in partnership with the International Accounting Standards Board ( IASB ), the independent, accounting standard - setting body of the International Financial Reporting Standards Foundation. The two groups met on September 18, 2002, in Norwalk, Connecticut, to sign a Memorandum of Understanding ( MoU ) which `` committed the boards to developing high - quality, compatible accounting standards with a common solution. '' This MoU, which came to be known as the `` Norwalk Agreement, '' outlined plans to converge IFRS and US GAAP into one set of high quality and compatible standards. 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. '' Sarbanes - Oxley Act of 2002 The Sarbanes - Oxley Act of 2002 was signed into law on July 30, 2002, to protect stakeholders and investors by improving the dependability and precision of corporate financial disclosures. The legislation also created the Public Company Accounting Oversight Board ( PCAOB ), and included accounting support fees from issuers of securities to FASB. AICPA 's GAAP Agreement In November 2002, FASB Chairman Robert Herz announced that FASB and AICPA came to the agreement that the AICPA would no longer issue Statements of Positions ( SOPs ) that are considered authoritative GAAP. They also concluded that consensus of the EITF will be required to be ratified by the FASB to become authoritative GAAP. Investor Task Force The FASB established the Investor Task Force ( ITF ) in 2005, which was an advisory resource that provided the Board with sector expertise and specific insights from the professional investment community on relevant accounting issues. The FASB then implemented SFAS 157 which established new standards for disclosure regarding fair value measurements in financial statements in 2006. That same year, the FASB added Investor Liaisons to its staff, who would be responsible for reaching out to investors to hear feedback on the various FASB activities. 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. The FCAG issued a report in July 2009 finding, among other things, 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. Just prior to the report to the G20, 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. '' Accounting standards Codification Main article : Accounting Standards Codification On July 1, 2009, the FASB announced the launch of its Accounting Standards Codification, an online research system representing the single source of authoritative nongovernmental U.S. GAAP, available from the FASB in multiple views ; Professional view, Academic view, and Basic view. The Codification organizes the 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. Convergence to International comparability In 2010, the SEC instructed the staff to create and implement a work plan that addresses whether, when and how US GAAP should be merged into a global reporting model developed by International Accounting Standards Board ( IASB ) -- the standards setting body designated by the International Financial Reporting Standards ( IFRS ). The SEC staff research included including convergence with IFRS and an alternate IFRS endorsement mechanism. In the resulting 2012 report the SEC Staff asserted that the IFRS standards were not sufficiently supported by U.S. capital market participants and lacked consistent implementation methods. The report goes on to say that, while the U.S. financial reporting community does not support IFRS as the authoritative mechanism for US financial reporting, there is support for `` high - quality, globally accepted accounting standards '' as demonstrated in the joint efforts of the IASB and FASB to develop converged financial reporting for revenue recognition and lease accounting. The FASB and the IASB issued guidance on recognizing revenue in contracts with customers in 2014, establishing principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from these transactions. 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 FASB and IASB planned meetings in 2015 to discuss `` business combinations, the disclosure framework, insurance contracts and the conceptual framework. '' As of 2017, there were no active bilateral FASB / IASB projects underway. Instead, the FASB participates in the Accounting Standards Advisory Forum, a global grouping of standard - setters, and monitors individual projects to seek comparability. Accounting standards FASB pronouncements Main article : List of FASB Pronouncements The FASB pronouncements are a set of rules and general guidelines that help to facilitate the reporting of financial information. The pronouncements are part of the accounting framework known as generally accepted accounting principles. 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. Since September 15, 2009, authoritative announcements are contained in the codification itself. Major FASB standards Revenue recognition On May 28, 2014, the FASB and International Accounting Standards Board ( IASB ) jointly issued substantially converged standards on the recognition of revenue from contracts with customers. The standards improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. The two boards developed new, substantially converged requirements for the recognition of revenue in both IFRS and U.S. GAAP -- providing substantial enhancements to the quality and consistency of how revenue is reported while also improving comparability in the financial statements of companies reporting using IFRS and U.S. GAAP. The previous revenue recognitions requirements of both IFRS and U.S. GAAP differed from one and often resulted in different accounting for transactions that were economically similar. Furthermore, while revenue recognition requirements of IFRS lacked sufficient detail, the accounting requirements of U.S. GAAP were considered to be overly prescriptive and conflicting in certain areas. Credit losses On June 16, 2016 the FASB issued an ASU that improves financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU also amends the accounting for credit losses on available - for - sale debt securities and purchased financial assets with credit deterioration, and requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization 's portfolio. Variable interest entities The FASB Issued statement number 167, a revision to FASB interpretation no. 46 ( R ) Consolidation of Variable Interest Entities, in June 2009. This update provides new guidance on how to determine whether an organization that is either inadequately capitalized or not controlled through voting rights should be consolidated. Under the new standard, the decision whether to consolidate is determined by two factors : a company 's design and intention and a parent company 's ability to direct that organization 's actions in a way that significantly impacts its economic performance. Pensions In late 2006, the FASB issued Employers ' Accounting for Defined Benefit Pension and Other Postretirement Plans ( statement 158 ). Under this update, if a pension or other postretirement plan is overfunded, a company must recognize that overfunded amount as an asset, which can be reduced later if the plan becomes underfunded. Conversely, if a plan is underfunded, a company must recognize that underfunded amount as a liability, which can be reduced if a plan 's funding increases in a period. These asset or liability determinations are recognized at the employer 's year end in the same year that the plan funding takes place. These enhancements were made in order to provide employees, investors, retirees, and users of financial statements more complete information about the status of a pension or other postretirement plan, which is used to make informed decisions about organizations capabilities to fulfill plan obligations. Stock Options The FASB issued a statement on Share Based Payments ( statement 123 ( R ) ) in 2004, developed jointly with the IASB. This standard update requires companies to identify the cost of share - based payments ( e.g., restricted share plans, employee share purchase plans, performance - based awards, share appreciation rights, and stock options ) within their financials. The FASB updated this reporting standard with the goal of improving comparability, relevance and reliability of financial information. Leases ( balance sheet ) In February 2016, the FASB issued a new Leases standard, to improve financial reporting about leasing transactions. The new standard requires organizations to include lease obligations on their balance sheets, and affects all companies and other organizations that lease assets. This project was first commenced by the FASB and the IASB in 2006, and the IASB issued IFRS 16, Leases, on January 13, 2016. The FASB issued an ASU to improve the accounting for lease transactions on February 25, 2016. The improvements in this ASU requires organizations engaged in leasing arrangements to recognize assets and liabilities for leases with terms of 12 months or longer. Organizations are also required to recognize both operating leases and capital leases on their balance sheets, and disclose information pertaining to the lease amount, time, and uncertainties of cash flows. Derivative Accounting Statement No. 133 was issued by the FASB in June 1998, which inaugurated accounting and reporting standards for derivative instruments, including instruments rooted in other contracts, and hedging activities. Organizations are also required to identify all derivatives as assets or liabilities, which are stated at fair value. Derivatives can be classified as a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, a hedge of the exposure to variable cash flows of a projected transaction, or a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm obligation, an available - for - sale security, or a foreign - currency - denominated predicted transaction. Upon electing to use hedge accounting, companies must establish a method to evaluate the effectiveness of hedging a derivative, and a method to determine the ineffectiveness of a hedge. The FASB further improved derivative accounting in 2017 with simplification measures included in ASU 2017 - 12. Criticism Mark - to - market Critics argue that the 2006 SFAS 157 contributed to the 2008 financial crisis by easing the mark - to - market accounting rule and allowing valuation of assets based on their current market price, rather than the purchase price. Critics claim FASB changes to mark - to - market accounting were made to accommodate `` banks with toxic assets on their books. '' However, others from within the accounting profession assert that the mark - to - market system in fact provides greater transparency and stability by applying similar values to similar assets, regardless of whether they were bought or created internally by a firm. They contrast this with the alternate `` mark - to - model '' system -- said to be riskier, less transparent, and results in incomparable and inconsistent reporting. Others say mark - to - market provides the most practical choice when valuing most assets, if there is understanding of the long - term effects, and obligation to a global position. They counter that the banking issues went beyond failures in accounting and into major liquidity concerns, and that the accounting profession, FASB, and SEC were not responsible for the banking crisis. A report from the Harvard Business Review agreed that the mark - to - market accounting is not the direct cause of the financial crisis, but the lack of knowledge related to accounting standards by investors fueled the fire. Most investors at the time assumed that all of banks ' assets were appraised at market prices, and that the writing down of bonds would cause banks to violate regulatory capital requirements. Materiality The FASB issued a proposal regarding `` the use of materiality by reporting entities '' in an amendment of the definition of the legal concept of materiality in 2015, stating that `` information would be considered material if it was likely to be seen by a reasonable person as significantly altering the total mix of facts about a company. '' This amendment raised concerns by auditors who believed leaving materiality as a legal concept would undermine judgments made by preparers and auditors to an attorney. However, FASB 's inclusion of materiality was designed to facilitate more transparency by instructing greater disclosure by preparers. According to FASB Concepts Statement 8 : information is material if omitting or misstating it could influence decisions users make on the basis of the financial information of a specific reporting entity. This guidance is followed by the explanation : `` In other words, materiality is an entity - specific aspect of relevance based on the nature or magnitude or both of the items to which the information relates in the context of an individual entity 's financial report. '' International comparability vs. convergence Some industry professionals support development of a single, globally - shared set of accounting standards. Convergence proponents assert that a single set of standards would make it easier and more cost - effective for large multi-national corporations to report using one set of financial reporting standards for all countries. They believe it would make financial statements more comparable to one another, improving overall transparency and understanding of a company 's financial health. Supporters also argue that a single set of standards would give investors access to crucial information more quickly and increase opportunities for international investments, resulting in economic growth. Other professionals, however, are opposed to wholesale convergence of a single set of international accounting standards. Opponents share concerns that, due to different environmental influences around the world, such as differing stages of economic development and sources of funding, independent accounting standards are appropriate and necessary. Convergence opponents have said that without vision and commitment to convergence, the standards would n't be effective unless they were enforced or provide significant benefits. Many U.S. accounting firms are opposed to convergence because of the familiarity of GAAP, the unfamiliarity with international accounting principles, and other countries ' accounting systems. U.S. firms and other CPAs have been reluctant to adapt and learn a new accounting system, and believe that IFRS lacks guidance compared to the GAAP. CFOs are also against converging to one set of standards, because of the associated cost. See Also FASB 133 FIN46 FASB 11 concepts Money measurement Entity Going concern Cost Dual aspect Accounting period Conservation Realization Matching Consistency Materiality Accounting issues Stock option expensing FAS 157 Mark - to - market or fair value accounting Related associations Financial Accounting Foundation Governmental Accounting Standards Board References Jump up ^ Ramanna, Karthik ; Dreschel, Allen ( 26 April 2016 ). `` The Quiet War on Corporate Accountability ''. The New York Times. Retrieved 26 April 2016. ^ Jump up to : `` About the FASB ''. fasb.org. Retrieved 2017 - 10 - 06. ^ Jump up to : `` Financial Accounting Standards Board ( FASB ) ''. www.iasplus.com. Retrieved 2017 - 10 - 06. 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( 13 March 2016 ). `` FASB 's Proposal to Change the Definition of Materiality : The Unexpected Uproar -- The CPA Journal ''. The CPA Journal. Retrieved 16 November 2017. ^ Jump up to : Bader, Keith ( 2009 ). `` The International Accounting Debate : Options in Standardization ''. Journal of International Business and Law. 8 ( 1 ). Retrieved 15 December 2017. ^ Jump up to : Pologeorgis, Nicolas ( 16 October 2012 ). `` The Impact Of Combining The U.S. GAAP And IFRS ''. Investopedia. Retrieved 15 December 2017. Jump up ^ Choi, Frederick D. ( 1981 ). `` A Cluster Approach to Harmonization ''. Management Accounting. p. 29. External links Official Financial Accounting Standards Board website Informational `` About FASB '' videos Retrieved from `` https://en.wikipedia.org/w/index.php?title=Financial_Accounting_Standards_Board&oldid=841007522 '' 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 Official website not in Wikidata Talk Contents About Wikipedia Deutsch فارسی Français 日本 語 Português 中文 Edit links This page was last edited on 13 May 2018, at 13 : 47. Text is available under the Creative Commons Attribution - ShareAlike License ; additional terms may apply. By using this site, you agree to the Terms of Use and Privacy Policy. Wikipedia ® is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization. About Wikipedia

Question: the primary standard setting bodies for financial statements are
Answer: The Financial Accounting Standards Board (FASB)