The Financial Accounting Standards Board (FASB) is an independent body which was formed with the intent to develop and improve the generally accepted accounting principles in the United States (Financial, 2017). The financial accounting guidelines and reporting standards promulgated by this body are aimed at protecting the interest of the public, as per order by the Securities and Exchange Commission. The FASB has a role in protecting the public interest, thus it shares a collective mission with with the FAF and the Governmental Accounting Standards Board (GASB). These agencies have a mission “to establish and improve financial accounting and reporting standards to provide useful information” (Financial, 2017). The overall goal of this mission is to be able to come up with information that can be used by various stakeholders. Specifically, the FASB, along with the GASB is responsible in setting up the highest-quality of standards under a “process that is robust, comprehensive, and inclusive” (Financial, 2017).
The main difference of the FASB from that of the APB which it precedented, was that, the APB was more focused on “standard setting with a two-pronged approach” (Wolks et al, 2008). That is, in contrast to the APB which was tasked to provide the postulates and diverse accounting principles, the FASB’s main task is to efficiently and completely set standards that will guide the manner of financial accounting and reporting. Further, some of the noted difference between the APB and the FASB is that the membership composition, such that while the former has 18 members, the latter has only 7 members (Walton, 2003). The APB was also considered as a committee of the AICPA, which is not the case with the FASB which has more autonomy and independence.
The Accounting Principles Board (APB) was placed in operation from 1959 to 1973, and was able to issue accounting principles board opinions, interpretations and statements. Consequently, the emergence of the FASB was attributed to the failure of the APB to develop an underlying framework from which to base the rules to be followed in financial accounting and reporting. The members of the accounting profession and other agencies which were concerned about financial statements had issues about the inability of the APB to quickly respond to emerging financial reporting concerns. Moreover, there were criticisms that the interest of some stakeholders was not represented in the APB body, thus the need to create a more independent and autonomous body, resulting in the establishment of the FASB.
The regulatory relationship of the FASB with that of the SEC in setting standards is attributed to how the latter designed the FASB to be responsible in setting up the needed accounting standards that will govern the diverse public companies in the United States. The SEC and the FASB have a role, not only in establishing the GAAP, which will govern the reporting methods in the country. In addition to that, both these agencies have the duty to look into the details of the relevance of the GAAP in the existing business environment as well as in preparing for the occurrence of possible events in the future. The authority of the SEC in the process of financial reporting is attributed to being the commission that is authorized under the laws of the U.S to develop accounting standards. In line with this authority, it created the FASB to to help it carry out its responsibilities in setting accounting standards.
References
Financial Accounting Standards Board. (2017). About the FASB. Retrieved from http://www.fasb.org/facts/
Walton, P., Haller, A., & Raffournier, B. (2003). International accounting. Cengage Learning EMEA.
Wolk, H., Dodd, J., & Rozycki, J. (2008). Accounting theory: Conceptual issues in a political and economic environment, volume 2. SAGE.
