The Financial Accounting Standards Board (FASB) was established in 1973. FASB is an independent body. It is located in Norwalk, Connecticut, United States. The FASB established the accounting and financial standards for the private and public companies as well as not for profit organizations following GAAP (Generally Accepted Accounting Principles). The Securities and Exchange Commission (SEC) has recognized the FASB as the designated accounting standard-setting authority for the public companies. Many other organizations also recognize the FASB standards as authoritative including the State Boards of Accountancy as well as the American Institute of CPAs (AICPA).
The FASB uses a transparent and inclusive process to develop and issue financial accounting standards. Through the accounting standards that the FASB develops, it aspires to promote responsible financial reporting that provides useful information to investors and others who use financial reports. The operations of the FASB are overseen by the Financial Accounting Foundation (FAF) that was founded in 1972, a year before the establishment of the FASB. Like FASB, FAF is also an independent not for profit, private-sector organization based in Norwalk, Connecticut, United States. FAF is responsible for the oversight, administration, financing, and appointment of the FASB as well as the GASB or the Governmental Accounting Standards Board.
Mission of the FASB:
The collective mission of the FASB, GASB and the FAF is,
“ 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.”FASB Mission.
The FASB, GASB, FAF trustees and the FAF management contribute to the collective mission according to their specific roles.
- It is the responsibility of the FASB and the GASB to set the highest quality standards through a robust, comprehensive and inclusive process.
- The Financial Accounting Foundation (FAF) Management is responsible for supporting the operations of the standard-setting boards (FASB and GASB) by providing strategic counsel and services.
- It is the responsibility of the FAF Trustees to provide the necessary oversight and to promote an effective and independent standard-setting process.
The FASB has seven members who serve full time. In order to foster their independence, they are required to disconnect from the firms or institutions that they previously worked with before they can join the Board. Despite their diverse backgrounds, the individual board members have a concern for investors, other users, and the public interest in matters of accounting and financial reporting. Collectively, these members are knowledgeable in areas including accounting, finance, business, accounting education, and research. The FAF Board of Trustees appoints these Board members for a 5-year term generally. However, the board members can serve for a period of ten years.