ACCOUNTING & AUDITING ARTICLE-
Financial Accounting Standards Board (FASB) SummarY

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The Financial Accounting Standards Board (FASB) is an organization that provides standardized guidelines for financial reporting. The mission of FASB is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors and users of financial information.

FASB was created in 1973 and replaced the Accounting Principles Board and the Committee on Accounting Procedure. These entities were part of the American Institute of Certified Public Accountants (AICPA). Although the responsibilities of FASB were designated by the SEC, FASB is not a governmental body. FASB is an independent structure; however, this independent body is overseen by the Financial Accounting Foundation (FAF).

Accounting standards are essential to the efficient functioning of the economy because decisions about the allocation of resources rely heavily on credible, concise, transparent, and understandable financial information. Financial information about the operations and financial position of individual entities is also used by the public in making various other kinds of decisions.

To accomplish its mission, FASB acts to:

• Improve the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability and on the qualities of comparability and consistency;
• Keep standards current to reflect changes in methods of doing business and changes in the economic environment;
• Consider promptly any significant areas of deficiency in financial reporting that might be improved through the standard-setting process;
• Promote the international convergence of accounting standards concurrent with improving the quality of financial reporting; and
• Improve the common understanding of the nature and purposes of information contained in financial reports.

FASB develops broad accounting concepts as well as standards for financial reporting. It also provides guidance on implementation of standards in forensic accounting. Concepts are useful in guiding the Board in establishing standards and in providing a frame of reference, or conceptual framework, for resolving accounting issues. The framework will help to establish reasonable bounds for judgment in preparing financial information and to increase understanding of, and confidence in, financial information on the part of users of financial reports. It also will help the public to understand the nature and limitations of information supplied by financial reporting.

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