Financial Accounting Standards Board

The Financial Accounting Standards Board (FASB) is the principal private-sector body responsible for establishing and improving generally accepted accounting principles (GAAP) used in the United States. Its standards shape how companies and other nongovernmental organizations recognize, measure, present, and disclose financial information. The U.S. Securities and Exchange Commission recognizes FASB standards as having substantial authoritative support for public-company reporting, while state boards of accountancy, the American Institute of Certified Public Accountants, auditors, investors, lenders, and other financial-reporting users rely on the resulting body of guidance. FASB began operations on July 1, 1973, replacing the AICPA's Accounting Principles Board. Its creation followed the Wheat Committee's review of weaknesses in the previous standard-setting structure. The committee recommended a full-time, independent board supported by a separate foundation and an advisory council, with procedures intended to encourage broad participation and reduce the influence of individual firms or political interests. The Financial Accounting Foundation (FAF) oversees and funds FASB, appoints its board members, and also supports the Governmental Accounting Standards Board, which sets standards for state and local governments. The board is structured around seven full-time members, including a chair, appointed for five-year terms with eligibility for one reappointment. Members are expected to bring professional competence and practical experience from areas such as corporate reporting, investment, finance, academia, law, and government. FASB is supported by a professional staff and by advisory groups, including the Financial Accounting Standards Advisory Council and the Emerging Issues Task Force. These bodies help identify emerging reporting problems, obtain views from affected constituencies, and support the development of technically coherent standards. FASB's work extends beyond individual accounting rules. Its Conceptual Framework provides the underlying objectives, definitions, and reasoning used in developing standards. The Accounting Standards Codification, launched in 2009, reorganized authoritative nongovernmental U.S. GAAP into a single searchable system, replacing the need to consult numerous separate pronouncements as the primary research method. Major areas addressed by FASB include revenue recognition, leases, credit losses, fair-value measurement, pensions and other postretirement benefits, consolidation, business combinations, financial instruments, and disclosures. The organization has also played an important role in international standard-setting. In 2002, FASB and the International Accounting Standards Board signed the Norwalk Agreement, committing to develop compatible, high-quality standards and reduce differences between U.S. GAAP and International Financial Reporting Standards. Their collaboration produced important joint work, including revenue-recognition guidance issued in 2014. The broader goal of replacing national systems with one global framework was not adopted in the United States, however. Subsequent U.S. policy discussions concluded that mandatory IFRS adoption for U.S. public companies lacked sufficient support, while continued cooperation on comparability and individual projects remained valuable. FASB's authority and independence have periodically been debated, especially during financial crises and controversial accounting projects. The 2008 financial crisis prompted examination of fair-value accounting, impairment, and the relationship between standard setters, regulators, banks, investors, and elected officials. FASB continues to operate through an open due-process model involving proposals, public comment, outreach, redeliberation, and final standards. Its role is therefore both technical and institutional: it produces the core accounting framework for U.S. capital markets while balancing…

FASB was created in response to concerns that the Accounting Principles Board was not sufficiently independent, timely, or broadly representative. In 1971, AICPA president Marshall Armstrong appointed a seven-member committee chaired by Francis Wheat to study the accounting standard-setting system. Its 1972 report recommended a new structure centered on the Financial Accounting Foundation, an independent trustee board, a full-time Financial Accounting Standards Board, and an advisory council capable of bringing outside views into the process. FASB began operations on July 1, 1973. The SEC soon issued Accounting Series Release No. 150, stating that FASB pronouncements would have substantial authoritative support. The board's first standard addressed disclosure of foreign-currency translation information. From its beginning, FASB also developed a Conceptual Framework intended to provide consistent reasoning for decisions about the objectives of financial reporting and the definitions of financial-statement elements. The board expanded its mechanisms for handling emerging issues. In 1984 it created the Emerging Issues Task Force, bringing together experienced representatives from the private and public sectors, FASB members or staff, and an SEC observer. The task force was designed to respond more quickly than the full standard-setting process to new transactions and reporting questions. FASB also developed more systematic investor outreach, including an Investor Task Force in 2005 and investor-liaison functions added to its staff in 2006. During the 1990s and 2000s, FASB became increasingly involved in international comparability efforts. It participated in international discussions on financial-reporting concepts, helped form the G4+1 group of national standard setters, and published a 1999 vision statement on international accounting standard setting. In September 2002, FASB and IASB signed the Norwalk Agreement, beginning a sustained convergence program. Their cooperation produced joint or substantially aligned work on subjects such as revenue recognition and leases, although the United States ultimately did not adopt IFRS as the mandatory reporting basis for domestic public companies. The Sarbanes-Oxley Act of 2002 strengthened the U.S. financial-reporting infrastructure after major corporate-accounting failures. It created the Public Company Accounting Oversight Board and established issuer-funded accounting-support fees for FASB. That legislation reinforced FASB's role while also placing it within a broader system of SEC oversight, audit regulation, investor protection, and foundation governance. The same period brought changes to the relationship between FASB and the AICPA: authoritative GAAP would increasingly be established through FASB and ratified EITF consensus rather than through new AICPA Statements of Position. The 2008 financial crisis intensified scrutiny of fair-value measurement, impairment, credit losses, and the independence of standard setters. FASB and IASB established the Financial Crisis Advisory Group to examine lessons from the crisis and the pressures placed on accounting authorities. In 2009, FASB launched the Accounting Standards Codification, consolidating authoritative nongovernmental U.S. GAAP into a searchable online structure. This became a major practical change in how accountants, auditors, regulators, educators, and preparers research the standards. In the 2010s, the SEC evaluated whether U.S. reporting should move toward IFRS or use another endorsement model. Its 2012 staff report found limited support for mandatory IFRS adoption, although it recognized the benefits of globally accepted, high-quality standards. FASB subsequently continued international engagement through forums such as the Accounting Standards Advisory Forum while concentrating on U.S. GAAP projects. Major outputs included new guidance on revenue recognition, leases, credit losses, financial instruments, consolidation, pensions, and disclosure. FASB remains an active Norwalk-based standard setter governed by the Financial Accounting Foundation and supported by full-time members, technical staff, advisory bodies, and an open public due process.

• 2016

  Credit-loss standard issued

  [7]Credit-loss standard issuedfasb.org

  FASB issued guidance requiring more timely recognition of expected credit losses and additional disclosures.

• 2014

  Joint revenue standard issued

  [6]Joint revenue standard issuedfasb.org

  FASB and IASB issued aligned guidance for recognizing revenue from contracts with customers.

• 2009

  Accounting Standards Codification launched

  [3]FASB Accounting Standards Codificationasc.fasb.org

  The Codification became the central online research structure for authoritative nongovernmental U.S. GAAP.

• 2005

  Investor Task Force established

  [1]Financial Accounting Standards Boarden.wikipedia.org

  FASB created an investor-focused advisory resource to bring capital-market perspectives into its work.

• 2002

  Norwalk Agreement signed

  [4]FASB and IASB international convergence informationfasb.org

  FASB and IASB began a formal effort to improve compatibility between U.S. GAAP and IFRS.

• 1984

  Emerging Issues Task Force established

  [1]Financial Accounting Standards Boarden.wikipedia.org

  FASB created the EITF to develop timely responses to newly arising accounting issues.

• 1973

  FASB begins operations

  [1]Financial Accounting Standards Boarden.wikipedia.org

  FASB replaced the Accounting Principles Board on July 1 and issued its first standard during the year.

• 1972

  Wheat Report recommends independent standard setting

  [1]Financial Accounting Standards Boarden.wikipedia.org

  The committee proposed the Financial Accounting Foundation, a full-time board, and an advisory council.

• 1971

  Wheat Committee formed

  [1]Financial Accounting Standards Boarden.wikipedia.org

  AICPA president Marshall Armstrong appointed the committee that examined weaknesses in the Accounting Principles Board and proposed a new standard-setting structure.

Authoritative, independent U.S. financial-reporting standard setter

• Standards database · 2009

  Accounting Standards Codification

  The Accounting Standards Codification is FASB's central system for authoritative nongovernmental U.S. GAAP. Introduced in 2009, it reorganized numerous standards, interpretations, and related materials into a consistent topical structure with searchable online access. It is used by preparers, auditors, regulators, educators, and other financial-reporting professionals as the primary reference point for U.S. accounting requirements.

• Accounting framework · 1973

  U.S. GAAP

  U.S. generally accepted accounting principles are the body of authoritative accounting principles, standards, and disclosure requirements used by nongovernmental entities reporting under the U.S. financial-reporting system. FASB establishes and updates much of this framework through standards, amendments, and codified guidance covering recognition, measurement, presentation, and disclosure.

• Accounting framework · 1973

  Conceptual Framework

  The Conceptual Framework supplies the reasoning foundation for FASB's standards-setting activities. It addresses the objectives of financial reporting and defines important financial-statement elements, helping the board evaluate new issues consistently even when no specific existing rule directly resolves a transaction.

• Standards publications

  Accounting Standards Updates

  Accounting Standards Updates communicate amendments to the Codification. They explain the affected guidance, the reasons for the change, transition requirements, and effective dates. Updates are the principal vehicle through which FASB changes U.S. GAAP after its proposal, consultation, deliberation, and approval process.

• 2009

  Financial-crisis pressure on accounting standards

  A Financial Crisis Advisory Group report examined claims that political and banking-sector pressure affected debates over fair-value accounting during the 2008 financial crisis. The episode highlighted concerns about preserving the independence of accounting standard setters while responding to severe market conditions.

  Source

Read more

• 2005Investor outreach initiative

  United States

  FASB expanded formal engagement with investors through an Investor Task Force and later investor-liaison activities.

  Outcome. Investor perspectives became a more explicit input into standards development and board outreach.

  Source
• 2002Norwalk Agreement convergence program

  United States · International

  FASB and IASB committed to developing compatible, high-quality standards and reducing differences between U.S. GAAP and IFRS.

  Outcome. The program produced important aligned work, including revenue-recognition guidance, but did not lead to mandatory IFRS adoption in the United States.

  Source

• 2016

  Issuance of current expected credit-loss guidanceOther

  Background

  Stakeholders sought earlier recognition of credit deterioration after weaknesses in loss recognition became prominent during the financial crisis.

  Action taken

  FASB required entities to recognize expected credit losses on specified loans and financial instruments and expanded disclosures about estimates and portfolio quality.

  Aftermath

  The guidance changed impairment measurement and required banks and other affected organizations to revise data, modeling, controls, and disclosures.

  Source

• 2014

  Issuance of the revenue-recognition standardProduct launch

  Background

  FASB and IASB sought to reduce important differences in how revenue from customer contracts was reported under U.S. GAAP and IFRS.

  Action taken

  The boards issued a common principles-based model addressing the nature, timing, and uncertainty of revenue recognition.

  Aftermath

  The standard became a major convergence achievement and introduced significant implementation work for reporting entities.

  Source

• 2009

  Launch of the Accounting Standards CodificationProduct launch

  Background

  U.S. GAAP had developed through numerous separate pronouncements and interpretive documents, making research and hierarchy difficult.

  Action taken

  FASB reorganized authoritative nongovernmental GAAP into a centralized, searchable topical Codification.

  Aftermath

  The Codification became the main research source for nongovernmental U.S. GAAP.

  Source

• 1973

  Adoption of a full-time independent standard-setting modelStrategy

  Background

  The Wheat Committee concluded that the previous Accounting Principles Board structure needed greater independence, continuity, technical capacity, and public participation.

  Action taken

  FASB was established under the oversight of the Financial Accounting Foundation, with full-time members and advisory support.

  Aftermath

  The model became the foundation of U.S. private-sector accounting standard setting and remains in operation.

  Source

1. 1Financial Accounting Standards Boarden.wikipedia.org
2. 2FASB official websitefasb.org
3. 3FASB Accounting Standards Codificationasc.fasb.org
4. 4FASB and IASB international convergence informationfasb.org
5. 5SEC staff report on IFRS incorporationsec.gov
6. 6Joint revenue standard issuedfasb.org
7. 7Credit-loss standard issuedfasb.org