The Financial Accounting Standards Board (FASB) is the private sector group responsible for writing accounting rules (Accounting Standards) that U.S. companies follow to issue financial reports. The rules that the FASB writes are referred to as Generally Accepted Accounting Principles (GAAP).
The Financial Accounting Standards Board (FASB) is the private sector group responsible for formulating generally accepted accounting principles (GAAP). The Board consists of seven full time members who are appointed for a five-year term (eligible for one additional term).
See the current list of Board Members
Who selects the Board members?
The Financial Accounting Foundation (FAF), which was incorporated to operate exclusively for charitable, educational, scientific, and literary purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, is responsible for selecting the members of the FASB and its advisory council, ensuring adequate funding of their activities and for exercising general oversight with the exception of the FASB's resolution of technical issues.
The primary goal of the 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 attempts to keep accounting rules current, with respect to changes in the business environment, and to promptly consider areas of deficiency, and improve the understanding of the nature and purposes of financial information.
The Financial Accounting Standards Advisory Council, (FASAC) was formed in 1973 concurrent with the establishment of the Financial Accounting Standards Board (FASB).
The primary function of FASAC is to advise the Board on issues related to projects 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 requested by the chairman of the FASB. FASAC meetings provide the Board with an opportunity to obtain and discuss the views of a very diverse group of individuals from varied business and professional backgrounds.
The members of FASAC are drawn from the ranks of CEOs, CFOs, senior partners of public accounting firms, executive directors of professional organizations, and senior members of the academic and analyst communities, all with an interest in the integrity of full and complete financial reporting and disclosure.
Where to they get their authority?
FASB gets its authority to make accounting rules from both the Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants (AICPA). Although the SEC has statutory authority from the SEC Act of 1934 to establish accounting rules for public companies, the SEC has officially allowed Sarbanes Oxley Act of 2002 and the private sector to provide this service. The AICPA has also officially recognized the FASB's rules as the appropriate authoritative accounting literature for CPAs to follow for audit purposes.
Where does their funding come from?
Funding for the FASB is paid by fees charged to publicly traded companies via the SEC.
To whom is FASB "accountable?"
In the area of budgeting and general oversight (non-technical issues), the Financial Accounting Foundation is responsible for FASB oversight. The Financial Accounting Standards Advisory council (FASAC) is selected by the Financial Accounting Foundation, and is comprised of 31 members who are preparers, auditors, and users of financial information. Although the FASB is not "accountable" to FASAC, FASAC consults with the FASB on technical issues. For practical terms, the watchdog of the FASB on technical issues, however, is the SEC.