Accounting Principles Board - Explained
What is the Accounting Principles Board?
Written by J. Mance Gordon
Updated at April 18th, 2024
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What is the Accounting Principles Board?
The Accounting Principle Board was created by the American Institute of Certified Public Accountants (AICPA) in 1959 as an authoritative body for the purpose of issuing guidelines and rules on accounting principles. The Accounting Principle Board was replaced by the Financial Accounting Standards Board (FASB) in 1973.
What Does the Accounting Principles Board Do?
During the 14 years of its existence, the Accounting Principle Board issued 31 opinions and four statements related to income taxes, intangibles, early extinguishment of debt, lease, business combination, and others. It also had issued opinions on accounting policies disclosure and interim financial data reporting among others.
Some of its opinions are still part of the Generally Accepted Accounting Principles (GAAP), but most of those are either amended or abolished by the Financial Accounting Standards Board. The statements and opinions published by the Accounting Principle Board were instrumental in promoting good practice in accounting and improving its theories.
The membership of the Accounting Principles Board varied between 18 and 21. The participants were representatives from major accounting firms, academia, and industry. Support of two-third members was required for issuing an opinion.
Before the Accounting Principles Board, there was a Committee on Accounting Procedure, but it was considered ineffective in maintaining the standards and integrity of the accounting practice.
The Accounting Principles Board played important roles in maintaining the standards and laying the foundation of the Generally Accepted Accounting Principles but with time it too became ineffective and failed to keep up the pace with the ever-changing corporate America.
The types of transactional activity got changed over time, and to deal with it the need for an independent organization was felt necessary. It was argued that there were chances of APB getting influenced by its parent organization. The members of the Accounting Principles Board operated on a part-time basis and thus the output was low.
The Financial Accounting Standards Board was created with fully-funded full-time staffs so that they can devote more time and can work independently. As a result, the FASB has created more contents covering a varied range of accounting theory and its practices.