What Body Provides Authoritative Support for GAAP?
The Generally Accepted Accounting Principles (GAAP) are a set of standard accounting principles that guide financial reporting in the United States. These principles ensure consistency, comparability, and transparency in financial statements across different businesses and industries. But what body provides authoritative support for GAAP? This article explores the key organization responsible for setting and maintaining these standards.
The Financial Accounting Standards Board (FASB) is the primary body that provides authoritative support for GAAP in the United States. Established in 1973, the FASB is an independent, private, not-for-profit organization that sets accounting standards for public and private companies. The board is composed of seven members, who are selected for their expertise in accounting, finance, and other related fields.
The FASB’s mission is to establish and improve financial accounting and reporting standards to provide useful information to investors and other users of financial reports. The board achieves this by conducting research, issuing new and revised accounting standards, and providing guidance on complex accounting issues.
One of the FASB’s most significant contributions to GAAP is the issuance of Statements of Financial Accounting Standards (SFAS). These statements provide detailed guidance on specific accounting issues and are considered authoritative when preparing financial statements. Over the years, the FASB has issued more than 200 SFAS, covering a wide range of topics, such as revenue recognition, leasing, and fair value measurement.
In addition to SFAS, the FASB also issues Interpretations of Financial Accounting Standards (IFAS). These interpretations provide guidance on the application of existing GAAP in specific situations. The FASB may also issue Technical Bulletins, which address narrow, technical issues that arise in the application of GAAP.
Another important aspect of the FASB’s role in providing authoritative support for GAAP is its collaboration with other organizations. The FASB works closely with the Securities and Exchange Commission (SEC), which regulates the financial reporting of publicly traded companies. The FASB also consults with the American Institute of Certified Public Accountants (AICPA) and other professional organizations to ensure that GAAP is relevant and practical for businesses and their accountants.
In conclusion, the Financial Accounting Standards Board (FASB) is the authoritative body that provides support for GAAP in the United States. Through its research, standard-setting, and collaboration with other organizations, the FASB ensures that financial reporting is consistent, transparent, and reliable, which ultimately benefits investors and other users of financial statements.
