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| Financial Accounting Standards Board (FASB) | |
|---|---|
| Name | Financial Accounting Standards Board |
| Founded | 1973 |
| Location | Norwalk, Connecticut |
| Area served | United States |
| Focus | Accounting standards |
| Parent organization | Private sector |
Financial Accounting Standards Board (FASB) The Financial Accounting Standards Board (FASB) is the primary private-sector organization responsible for establishing accounting standards for nongovernmental entities in the United States. It issues authoritative guidance that affects financial reporting by corporations, not-for-profit organizations, and other entities subject to Securities and Exchange Commission oversight, and interacts with international bodies such as the International Accounting Standards Board, International Organization of Securities Commissions, and multilateral institutions including the World Bank and the International Monetary Fund. The Board's pronouncements are widely cited by preparers, auditors, investors, and regulators including the Public Company Accounting Oversight Board and the Department of Justice in enforcement and compliance contexts.
FASB was established in 1973 as the successor to the Accounting Principles Board and the Wheat Committee, created after critiques in forums such as the AICPA and events following the Texas Gulf Sulphur case. Formation followed recommendations by the Financial Accounting Foundation and influenced by studies from Harvard Business School, reports by the American Institute of Certified Public Accountants, and congressional interest exemplified in hearings of the United States Congress and the Senate Committee on Banking, Housing, and Urban Affairs. Early decisions drew on precedent from influential committees like the Committee on Accounting Procedure and responded to market events including corporate scandals such as those connected with Enron and WorldCom, which later shaped post-2000 reforms.
FASB operates under the oversight of the Financial Accounting Foundation, with a board composed of professional members selected from academia, industry, and public accounting—similar in profile to leaders from institutions such as Columbia Business School, Wharton School, Stanford Graduate School of Business, and firms like Ernst & Young, Deloitte, PricewaterhouseCoopers, and KPMG. Governance structures align with standards for independent commissions comparable to bodies like the Federal Reserve Board and commissions such as the Securities and Exchange Commission. Staffing includes technical directors, research staff, and liaisons who engage with university researchers from Massachusetts Institute of Technology, University of Chicago, and University of Pennsylvania and specialists from organizations like the Governmental Accounting Standards Board and the National Association of State Auditors.
The Board follows an open, due-process model reminiscent of rulemaking in agencies such as the Environmental Protection Agency and consultative practices used by the International Accounting Standards Committee predecessor. Standard-setting proceeds through research reports, exposure drafts, public comment letters, and public roundtables drawing stakeholders from JP Morgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, and trade groups like the Business Roundtable and Financial Executives International. Final Accounting Standards Updates are approved by board vote and communicated through codification efforts comparable to legal codifications like the United States Code and administrative codifications from the Federal Register.
Significant pronouncements include standards on revenue recognition, lease accounting, and financial instruments, informed by academic work from scholars at Harvard University, Yale University, and London School of Economics and by precedent in cases such as Arthur Andersen LLP prosecutions. Landmark standards often reference concepts debated within forums involving International Accounting Standards Board collaboration, affecting entities including General Electric, Ford Motor Company, ExxonMobil, Apple Inc., and Microsoft. Pronouncements have driven changes in reporting practices similar in scale to reforms in Sarbanes–Oxley Act implementation and tax policy shifts debated in the United States Congress.
FASB's influence reaches investors, auditors, and policymakers and is critiqued by commentators from outlets such as The Wall Street Journal, academics from New York University, and industry coalitions including the Chamber of Commerce and Better Markets. Critics point to concerns voiced in filings and testimonies before the House Committee on Financial Services and the Senate Permanent Subcommittee on Investigations about complexity, cost of compliance for firms like Tesla, Inc. and Amazon (company), and perceived impacts on capital markets referenced in analyses by the Federal Reserve Bank of New York and Federal Reserve Board. Defenders cite empirical research published in journals associated with American Accounting Association, Journal of Accounting Research, and policy evaluations by the Congressional Budget Office.
FASB collaborates and sometimes converges with the International Accounting Standards Board under initiatives promoted by the Financial Stability Board and the International Organization of Securities Commissions. It coordinates with domestic bodies such as the Governmental Accounting Standards Board and engages with supranational institutions like the European Commission, Organisation for Economic Co-operation and Development, and the Bank for International Settlements on cross-border issues. Tensions have arisen with national regulators including the Securities and Exchange Commission and policymakers in legislative bodies like the United States Congress when priorities diverge.
FASB standards have materially affected reporting by public companies, private companies, and nonprofits—altering balance sheet presentation, income statement recognition, and disclosure practices for entities ranging from Boeing and Caterpillar to hospitals associated with Johns Hopkins Medicine and universities such as Princeton University. Changes in lease and revenue rules have influenced capital markets, lending by institutions like Bank of America and Wells Fargo, and investment analysis used by asset managers including Vanguard and BlackRock. The Board’s work continues to shape accounting curricula at schools like New York University School of Law, Columbia Law School, and Georgetown University and standards applied by auditors and advisory firms in global practice.
Category:Accounting organizations Category:United States financial regulatory authorities