Since 1973, the FASB, which stands for the Financial Accounting Standards Board, has been the centralized body for standardizing the best practices of financial accounting in the United States. Though this industry body is currently the largest and most centralized one for the review and ratification of accounting principles, it is not the first one to have this responsibility. In fact, the Financial Accounting Standards Board replaced the Accounting Principles Board of the American Institute of Certified Public Accountants when it was formed over 40 years ago. Today, the group has a series of responsibilities that keep accounting honest, open, and well within the public interest.
Generally Accepted Accounting Principles: A Key Responsibility
Most accountants are probably familiar with GAAP, or generally accepted accounting principles. In the United States, the Financial Accounting Standards Board is primarily concerned with a constant review of these principles to ensure that they’re working as intended, in line with the latest technological and ethical standards, and easy enough to understand so that new accountants can adhere to these principles with ease. If the board notices that there is an issue with one of these principles, they’ll initiate a full review of the principle to determine where the issue is occurring, why it is occurring, and how a slight change to GAAP standards could prevent the issue from occurring in the future. This comprehensive review often involves some of the industry’s leading experts and most seasoned accountants, all of whom offer input and analysis that keeps the profession open and honest.
A Non-Government Entity: Independence is Key
The Financial Accounting Standards Board is not a government-related or government-controlled entity, though it’s common for many people to think the opposite is true. In fact, the GAAP principles that are so meticulously created and maintained by the organization are primarily crafted to apply to non-governmental accounting within large companies, small businesses, or individual homes. The standards can certainly be used in a government setting, since they focus on an open and honest accounting process, but they don’t cover special government accounting practices and principles that are unique to a public entity.
The lack of government association with the Financial Accounting Standards Board means that the group is independently funded and operated, and serves primarily as a trade organization similar to the likes of the American Management Association or the American Bar Association. With that said, GAAP principles codified by the group can be used by the government when investigating a private company for deliberate and fraudulent financial accounting or other practices. As a result, most government accountants are highly familiar with the Financial Accounting Standards Board’s processes and the principles that the group works so hard to maintain within the industry.
One of the Largest Trade Organizations in the Country
As a profession, accounting is one of the largest and most stable career choices in the country. That has serious implications for the Financial Accounting Standards Board, since it oversees the vast majority of accountants who work in businesses of some type. As a result, the Financial Accounting Standards Board is one of the nation’s largest trade organizations, and is among the largest standards-setting professional bodies in the United States. Its decisions are incorporated into government court cases, private lawsuits, and all sorts of textbooks that are used in high school classrooms, undergraduate coursework, and graduate research settings. For these reasons and many more, all accountants should familiarize themselves with the mission and published works of the FASB.