Financial Accounting Standards Board ( FASB )

Facts about FASB

Since 1973, the Financial Accounting Standards Board (FASB) has been the designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities. Those standards are officially recognized as authoritative by the Securities and Exchange Commission (SEC) (Financial Reporting Release No. 1, Section 101, and reaffirmed in its April 2003 Policy Statement) and the American Institute of Certified Public Accountants (Rule 203, Rules of Professional Conduct, as amended May 1973 and May 1979). Such standards are important to the efficient functioning of the economy because decisions about the allocation of resources rely heavily on credible, concise, and understandable financial information.

The SEC has statutory authority to establish financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. Throughout its history, however, the Commission’s policy has been to rely on the private sector for this function to the extent that the private sector demonstrates ability to fulfill the responsibility in the public interest.

The Mission of the Financial Accounting Standards Board

The mission of the FASB is to establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision-useful information to investors and other users of financial reports. That mission is accomplished through a comprehensive and independent process that encourages broad participation, objectively considers all stakeholder views, and is subject to oversight by the Financial Accounting Foundation’s Board of Trustees.

Our Independent Structure

The FASB is part of a structure that is independent of all other business and professional organizations. That structure includes the Financial Accounting Foundation (Foundation), the FASB, the Financial Accounting Standards Advisory Council (FASAC), the Governmental Accounting Standards Board (GASB), and the Governmental Accounting Standards Advisory Council (GASAC).

Financial Accounting Foundation (FAF)

The Foundation is the independent, private sector organization that is responsible for the oversight, administration, and finances of the FASB, the GASB, and their advisory councils FASAC and GASAC. The Foundation’s primary duties include protecting the independence and integrity of the standards-setting process and appointing members of the FASB, GASB, FASAC, and GASAC. The Foundation's website includes a complete description of the Foundation, provides a list of and background information about members of the Board of Trustees, and provides other useful information.

Financial Accounting Standard Board

In 1973, the Foundation established the FASB to establish and improve standards of financial accounting and reporting for nongovernmental entities. Consistent with that mission, the FASB maintains the FASB Accounting Standards CodificationTM (Accounting Standards Codification) which represents the source of authoritative standards of accounting and reporting, other than those issued by the SEC, recognized by the FASB to be applied by nongovernmental entities.

Financial Accounting Standards Advisory Council (FASAC)

The primary function of FASAC is to advise the FASB on technical issues on the Board’s agenda, possible new agenda items, project priorities, procedural matters that may require the attention of the FASB, and other matters as may be requested by the FASB or its chairman. At present, the Council has more than 30 members who represent a broad cross section of the FASB’s constituency.

Governmental Accounting Standards Board

In 1984, the Foundation established the GASB to set standards of financial accounting and reporting for state and local governmental units. As with the FASB, the Foundation is responsible for selecting its members, ensuring adequate funding, and exercising general oversight.

Governmental Accounting Standards Advisory Council (GASAC)

The GASAC has responsibility for advising the GASB on technical issues on the Board’s agenda, project priorities, matters likely to require the attention of the GASB, and such other matters as may be requested by the GASB or its chairman.

Our People

The five, full-time members of the FASB are appointed by the Foundation’s Board of Trustees and may serve up to two five-year terms. A 60+ person staff supports the Board.

Board members and staff each have a concern for investors, other users, and the public interest in matters of financial accounting and reporting and collectively have knowledge and experience in investing, accounting, finance, business, accounting education, and research. To ensure the independence of Board members and staff, the Foundation has implemented policies about personal investments and other personal activities that are designed to prevent potential conflicts of interest.

Members of the FASB

FASB Staff

Our Standards-Setting Process

The FASB accomplishes its mission through a comprehensive and independent process that encourages broad participation, objectively considers all stakeholder views, and is subject to oversight by the Financial Accounting Foundation’s Board of Trustees.

The Rules of Procedure describe the FASB’s operating procedures, including the due process activities that are to be open to public participation or observation to provide transparency into the standards-setting process. In particular, the Rules of Procedure describe:

The FASB mission, how the mission is accomplished, and related principles that guide the Board’s standards-setting activities

The organization in which the FASB operates

The operating procedures of the FASB, including the responsibilities of the Chairman, the composition of the FASB technical staff, the role of advisory groups including the Emerging Issues Task Force, and the role of public forums in our due process

Our various forms of communications, including the form and content of Accounting Standards Updates, Exposure Drafts, and Concepts Statements

Protocols for meetings of the FASB and voting requirements

Rules governing public announcements and the kinds of information made broadly available to the public.

A high-level overview of the standards setting process as established by the Rules of Procedure follows. The nature and extent of the Boards’ specific research and outreach activities will vary from project to project, depending on the nature and scope of the reporting issues involved.

The Board identifies a financial reporting issues based on requests/recommendations from stakeholders or through other means.

The FASB Chairman decides whether to add a project to the technical agenda, after consultation with FASB Members and others as appropriate, and subject to oversight by the Foundation's Board of Trustees.

The Board deliberates at one or more public meetings the various reporting issues identified and analyzed by the staff.

The Board issues an Exposure Draft to solicit broad stakeholder input. (In some projects, the Board may issue a Discussion Paper to obtain input in the early stages of a project)

The Board holds a public roundtable meeting on the Exposure Draft, if necessary.

The staff analyzes comment letters, public roundtable discussion, and any other information obtained through due process activities. The Board redeliberates the proposed provisions, carefully considering the stakeholder input received, at one or more public meetings.

The Board issues an Accounting Standards Update describing amendments to the Accounting Standards Codification.

Additional Information

General Information

For further information about the FASB, including Board meeting schedules, access the FASB website at www.fasb.org, call or write Financial Accounting Standards Board, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, telephone (203) 847-0700 or e-mail questions to director@fasb.org.

To Order Publications

Documents published by the FASB may be obtained by placing an order on the FASB website at www.fasb.org or by contacting the FASB Order Department at 1-800-748-0659, weekdays 8:30 a.m. to 5:00 p.m. eastern time.

Public Roundtable Meetings and Comment Letters

For information about submitting written comments on documents or about public roundtable meetings, access the FASB website at www.fasb.org or contact the FASB Project Administration Department at (203) 956-5389.