Financial Accounting Standards Board (FASB)

Definition

The Financial Accounting Standards Board (FASB) is an independent organization responsible for establishing accounting and financial reporting standards in the United States. Its guidelines ensure consistency, transparency, and integrity in financial statements.

5 Must Know Facts For Your Next Test

1. FASB issues Generally Accepted Accounting Principles (GAAP) which are widely used in financial accounting.
2. Established in 1973, FASB replaced the Accounting Principles Board (APB).
3. It operates under the oversight of the Financial Accounting Foundation (FAF).
4. FASB’s standards are recognized as authoritative by the Securities and Exchange Commission (SEC).
5. The board consists of seven full-time members who come from various backgrounds in accounting.

Review Questions

• What is the primary role of the Financial Accounting Standards Board?
• Which organization did FASB replace when it was established?
• Why are FASB's standards important for financial statements?

Related terms

GAAP:

Generally Accepted Accounting Principles are a set of rules and standards for financial reporting.

SEC:

The Securities and Exchange Commission is a U.S. government agency that oversees securities markets and protects investors.

FAF: The Financial Accounting Foundation is an organization that oversees the activities of FASB.