What is the Financial Accounting Standards Board (FASB)?

The Financial Accounting Standards Board (FASB) is an independent, private-sector, non-profit organization that is responsible for the formulation and promulgation of financial accounting and reporting standards for public and private companies and not-for-profit organizations that abide by Generally Accepted Accounting Principles (GAAP). The FASB was established in 1973 and is based in Norwalk, Connecticut. It is officially designated as the body responsible for setting accounting standards for public companies through a transparent and inclusive process. The FASB is recognized by the Securities and Exchange Commission (SEC), the American Institute of CPAs (AICPA), and several state Boards of Accountancy.

What does the Financial Accounting Standards Board Do?

The Financial Accounting Standards Board (FASB) functions with support from and under the purview of the Financial Accounting Foundation (FAF) The FAF was set up in 1972 as an independent, private-sector, non-profit organization responsible for the supervision, management, funding, and commissioning of the FASB as well as the Governmental Accounting Standards Board (GASB). The Financial Accounting Foundation is based in Norwalk, Connecticut. On its own, the FASB endeavors to set the highest-quality standards by way of undertakings that are both robust as well as inclusive. The FASB also shares a collective responsibility with the GASB and the FAF of establishing and enhancing financial accounting and reporting standards in order to provide helpful data to investors and other users of financial reports. Besides, these three organizations are also responsible for educating stakeholders on how to effectively comprehend and implement those standards.

Members of the Financial Accounting Standards Board

The FASB consists of seven full-time members that are entrusted with responsibilities pertaining to accounting and financial reporting. These members are required to sever all ties with the companies or organizations they served before joining the Board. It is the usual norm for the FASB to draw its member from diverse occupational backgrounds. However, the members are expected to act as a team in order to safeguard the interests of investors, other users and the public in general. Besides, the members are also expected to leverage their knowledge and experience in the fields of accounting, finance, business, accounting education, and research. Although FASB board members are appointed for five-year terms, each member is eligible to be reappointed to an additional five-year term.

FASB Staff

The FASB currently boasts over 60 staff members that are collectively responsible for assisting the board members in their accounting and financial reporting duties. The staff members cooperate with the FASB Board as well as various project resource groups, partake in research activities, participate in roundtable meetings and scrutinize suggestions received from the public. They are also responsible for formulating recommendations and creating drafts of documents for consideration by the Board members.

FASB Advisory Groups

The FASB is assisted by several advisory groups. Members of the advisory groups are expected to leverage their experience for the benefit of the Board and express their opinions on matters pertaining to projects undertaken by the FASB, future items on the Boards agenda, formulation and implementation of new standards, and matters pertaining to the strategy of the organization. Currently, the FASB has the following advisory groups:

• Financial Accounting Standards Advisory Council (FASAC)
• Investor Advisory Committee (IAC)
• Not-for-Profit Advisory Committee (NAC)
• Small Business Advisory Committee (SBAC)

Operating Procedures of the Financial Accounting Standards Board

The FASB follows a comprehensive and independent process for the formulation and promulgation of financial accounting and reporting standards. It encourages inclusive participation, while objectively considering the opinions of stakeholders. The FASB is officially supervised by the Board of Trustees of the Financial Accounting Foundation (FAF). The FASB has adopted a set of procedures that it terms the Rules of Procedure with a view to institute and enhance standards of financial accounting and reporting for non-governmental entities. The Rules of Procedure elaborate the following:

1. The organizational structure of the FASB.
2. The mission of the FASB, including ways to accomplish its goals as well as associated principles that regulate the Boards standards-setting undertakings.
3. The operating procedures of the FASB, comprising the roles and responsibilities of the Chairman, the organization of the technical staff of the Board, the roles and responsibilities of the various advisory groups, the Emerging Issues Task Force (EITF), and allied public forums.
4. The different formats of communication such as the formats of the Accounting Standards Updates, Exposure Drafts, and Concepts Statements.
5. The various protocols associated with the meetings conducted by the FASB, besides voting requirements.
6. The various directives pertaining to public announcements as well as rules governing the release of information to the public.