Relationship Between Accounting Principles Board And The Financial Accounting Standards Board

In 1973, the Financial Accounting Standards Board (FASB) was created and their mission 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.org, 2009a). The FASB is a private, not-for-profit organization whose primary purpose is to develop generally accepted accounting principles (GAAP) within the United States. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. Therefore, the FASB plays a vital and important role in protecting the financial well being and the overall stability of our

The Financial Accounting Standards Board (FASB) sets the Generally Accepted Accounting Principles in the United States. The FASB Accounting Standards codification implements a system for organizing non-governmental generally accepted

At the end of the last century, accountants began to organize and become a profession as state societies and boards of accounting debuted. At that time a few companies began to issue financial statements; however, there were no established standards, codes of ethics, or generally accepted principles. Practitioners wishing to represent the economic reality of an entity had to rely on professional judgement. Over time, the profession evolved so that committiees emerged to address these issues, and practitioners voluntarily abided by their guidance.

The field of accounting is constantly evolving. This is true not only for the theory of accounting itself but also the entities that govern its theory and practice. Presently, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are faced with some of the biggest challenges to date. To understand the significance of these two boards, it is necessary to understand their histories, relations between the boards, and the standards that they set. Also how the knowledge of these boards and the field they lead, gained through the masters of science in accountancy

Research: The Financial Accounting Standards Board (FASB) was founded in 1973 as a private and independent organization governed by the Securities Exchange Commission (SEC). The organization’s primary purpose is to establish the rules and standards of Generally Accepted Accounting Principles (GAAP) for the interest of the public. (“Facts about FASB”) “Since its inception in 1973, the FASB has issued 168 Statements of Financial Accounting Standards and a series of concepts statements”. (Facts about FASB, n.d.) The FASB's mission is "to establish and improve standards of financial accounting and reporting for the guidance and education of the public,

The American Institute of Certified Public Accountants currently has over 386, 00 members since founded in 1887, under the name American Association of Public Accountants. The AICPA is integral to rule making and standard setting in the CPA profession, as well as serves as an advocate before legislative bodies and public interests groups("American Institute of Certified Public Accountants", 2010). In 1934 the New York stock exchange and the AICPA jointly published the Audits of Corporate Accounts of 1934, but a few short years later in 1938, the SEC voted to forgo this prerogative and allow the private sector to regulate its accounting practice—a policy that the commission has maintained to date. The AICPA's Committee on Accounting Procedure (CAP) assumed the financial accounting standard-setting role in 1939. The AICPA shifted this responsibility to its Accounting Principles Board (APB), equipped with its own research staff, in 1959.

The FASB process includes five steps to develop generally accepted accounting principles. The first step involves meeting and issuing a discussion memorandum. “A discussion memorandum is a document intended to encourage discussion and debate amongst accounting and financial professionals in regards to a current issue relating to the accounting industry” (“Discussion Memorandum”, n.d.). These are the ideas that will harm or benefit accountants. Next, they will obtain responses to this memorandum. After this is done FASB will create an exposure draft. Exposure drafts are basically an open blog about the new changes FASB is trying to implement. “The FASB issues a variety of different types of exposure documents to solicit input on its standards-setting

A joint convergence committee created the members of (FASB) and (IASB). (IASB) is recognized as an independent accounting standard-setting body that is similar to (FASB) that joins (GAAP), and is governed by the (IFRS) foundation. Due to this convergence, (AICPA) believes U.S. adoption of a single set of high-quality, globally accepted accounting standards will benefit U.S. financial markets and public companies by enabling preparation of transparent and comparable financial reports throughout the world, (American Institute of CPAs, 2016). Secondly, (AICPA) is dedicated to supplying the whole accounting profession with information, tools and IFRS.com for instance to assimilate as well as implement a new set of standards. As the (AICPA) supports continual convergence of reliable accounting standards between (IFRS) and (GAAP) the mission of completion between (IASB) and (FASB) is prolonged. (AICPA) will always support funding mechanisms of the body-making

One of the primary goals of the AICPA is to set and maintain professional accounting standards. These include setting the industry standards for ethics, auditing, tax practices, quality control and financial planning. However, the AICPA has stepped away from setting certain financial industry standards. For example, the AICPA originally set the generally accepted accounting principles (GAAP), but they relinquished control to the Financial Accounting Standards Board (FASB). In addition to this, the recently formed Public Company Accounting Oversight Board (PCAOB) now oversees financial audits of public companies, while the AICPA oversees private companies.

In some particular case, the accounting standards exactly are the problems. The legislation fixed it though asking those special institution, such as the Securities and commission and the Financial Accounting Standards Board, to tighten the accounting standards. For instants, the “special purpose entities”, that is a institution created by non-profit company , used to treat some particular risk facing by the company during their operating. Nevertheless, in Enron’s case, such institution seems just like useless decorations for their fraud. As required in Sarbanes-Oxley, the capital of Financial Accounting Standard Board should come from itself or public companies. Have no benefit-based relationship with accountants. It ensure that the membership of Financial Accounting Standard Board was independent from accounting operation. The rise in accounting restatements and earnings manipulation suggested that the deeper issue was not with the accounting standards themselves, but rather with the enforcement of those standards through auditing (Bratton, 2003). The Sarbanes-Oxley created a new institution in the first section named Public Company Accounting Oversight Board(PCAOB).

This report provides information about the Public Company Accounting Oversight Board for Dr. Mack. The information includes the history and creation of the PCAOB, its structure, and its duties in today’s accounting world.

According to PCAOB (2015), “the Public Company Accounting Oversight Board (PCAOB) is a nonprofit corporation established by the Sarbanes-Oxley Act. The Board is composed of five members appointed by the Securities and Exchange Commission. It was modeled on private self-regulatory organizations in the securities industry—such as the New York Stock Exchange—that investigate and discipline their own members subject to Commission oversight. Unlike these organizations, the Board is a Government-created entity with expansive powers to govern an entire industry.”

Section 101 of the Sarbanes-Oxley Act establishes the Public Company Accounting Oversights Board (PCAOB). The Board consists of five financially-literate members that are appointed for five-year terms. Three of these members must not be a CPA currently nor have been one in the past. The other two members must be, previously or currently, a certified public accountant. The main focus of this Board is (1) to register along with discipline accounting firms that prepare audit reports on companies that are public; (2) conduct inspections and/or investigations of registered accounting firms that audit public companies; and (3) establish audit and accounting standards.

In recent years there has been significant changes made in our understanding of the relationship between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB). At present both the IASB and FASB are working on a joint venture referred to as the convergence project in hopes of eliminating a variety of differences between International Financial Reporting Standards and U.S. GAAP. Another area covered in this paper besides a brief history of the relationship between the IASB and FASB will be how the MSA program will prepare students for the accounting profession. The intent of this paper will be to address both issues first; explaining my understanding of the

The Financial Accounting Standards Board has issued for public comment two Exposure Drafts related to its disclosure framework project. The first exposure draft proposes amendments to Statement of Financial Accounting Concepts - Conceptual Framework for Financial Reporting, Chapter 3 – Qualitative Characteristics of Useful Financial Information. The purpose of this proposed amendment is to clarify the concept of “materiality”. FASB defines materiality as, information is material if omitting it or misstating it could influence decisions that users make on the basis of the financial information of a specific reporting entity. In other words, materiality is an entity-specific aspect of relevance based on the nature or magnitude or both of the items to which the information relates in the context of an individual entity’s financial report. Consequently, the Board cannot specify a uniform quantitative threshold for materiality or predetermine what could be material in a particular situation.