The Financial Accounting Standards Board (FASB) is a nonprofit group that operates independently, and its main job is to set the rules for accounting and financial reporting for both businesses and nonprofits in the U.S., all in line with generally accepted accounting principles (GAAP). Established in 1973, the FASB took over from the Accounting Principles Board to continue its work. You can find them in Norwalk, Connecticut.
How does FASB work?
The Financial Accounting Standards Board (FASB) is in charge of setting and interpreting generally accepted accounting principles (GAAP) in the U.S. for both public and private companies, as well as nonprofit organizations. GAAP provides a framework that these entities should adhere to when creating and presenting their financial statements, including any transactions involving related parties.
The Securities and Exchange Commission (SEC) acknowledges the FASB as the official standard setter for public companies. Additionally, state accounting boards, the American Institute of Certified Public Accountants (AICPA), and various other organizations in the accounting field also recognize its authority.
The FASB is part of a broader, independent nonprofit organization that includes the Financial Accounting Foundation (FAF), the Financial Accounting Standards Advisory Council (FASAC), the Governmental Accounting Standards Board (GASB), and the Governmental Accounting Standards Advisory Council (GASAC).
Established in 1984, the GASB functions similarly to the FASB but focuses on setting accounting and financial reporting standards for state and local governments throughout the U.S. The FAF oversees both the FASB and GASB, while the advisory councils offer guidance in their specific areas.
Together, these organizations aim to enhance financial accounting and reporting standards for nonprofits, ensuring that the information is valuable to investors and other users of financial reports. They also work to educate stakeholders on effectively understanding and applying these standards.
The FASB is led by seven full-time board members who must cut ties with any companies or organizations they were affiliated with before joining. These members are appointed by the FAF’s board of trustees for five-year terms, with a maximum service period of 10 years.
In 2009, the FAF introduced the FASB Accounting Standards Codification, an online tool designed to serve as a single authoritative source for non-governmental accounting standards.