The Financial Accounting Standards Board, also called the FASB, is an independent council concerned with accounting principles and standards in the financial sector in the United States. Unlike other similar organizations that work under the guidance of the American government, the FASB operates on its own and serves five key functions.
Establish Reporting Standards
One of the most important functions of the Financial Accounting Standards Board is that it is responsible for establishing the reporting standards used by financial professionals. Reporting refers to the detailed reports that accountants make and share with their clients. The FASB ensures that all accountants follow the same standards and that they create reports that those with limited financial experience can understand.
Improve Existing Standards
According to the official website of the Financial Accounting Standards Board, it strives to improve the existing standards used by accountants in today’s world. The FASB has its own independent agency that is responsible for investigating new methods of reporting and looking at how technology changed the accounting field. That council then comes together and introduces new methods of both accounting and reporting. Accountants may also get help learning how to work with their clients and help following established reporting and practice laws.
Ensure Investors Receive Information
Financial accounting often requires that accountants work in large firms and for private and public companies. Those who work for larger corporations are responsible for providing investors with information regarding the profits and losses of that company each year. The Financial Accounting Standards Board ensures that investors receive that necessary information. A recent change that the organization made now gives companies the right to limit the information that they share with investors. This change allows companies to decide whether it should share additional information regarding the testing or early work into a new product. This will most likely relate more to prescription drug companies than traditional manufacturing companies.
Establish Accounting Principles
Generally accepted accounting principles are the principles that the U.S. Securities and Exchange Commission uses and mandates that accountants use too. One example is full disclosure principle, which gives a company the right to inform investors and the general public about all the costs that it incurs and spends every year. Constraints and assumptions are two other examples of accounting principles used today. The FASB both establishes new accounting principles and ensures that financial accountants follow all existing principles.
Ensure an Understanding of Principles
One of the lesser known functions of the Financial Accounting Standards Board is that it is responsible for ensuring that accountants working in the financial sector have a basic understanding of these principles. Though accountants must go through a minimum of four years of schooling that teaches them about assumptions and other principles, they may find themselves losing some of that knowledge after going to work in the field. The FASB ensures that they carry those principles with them and that they have an understanding of how to use each one while working with clients.
Founded in 1973, the FASB is an independent council that serves to keep track of accountants working in the country today. Though not part of the government, it does work with the approval of the federal government and looks at for the best interests of the public at large. Many of the functions that this organization performs relates to general accounting principles and to the tasks that accountants do on the job. Other functions of the Financial Accounting Standards Board include ensuring and establishing new accounting principles, ensuring a basic understanding of financial principles and improving the existing standards that accountants and financial managers use.