Common U.S. GAAP Issues Facing Accountants, 2nd Edition

Chapter 1The Financial Reporting Environment

Learning objectives

• Identify the roles of the Financial Accounting Foundation (FAF), Financial Accounting Standards Board (FASB), the Emerging Issues Task Force (EITF), and the Private Company Council (PCC) in establishing accounting standards.
• Identify major characteristics of the FASB Accounting Standards Codification^® (ASC) and how this resource is used.

Introduction

This chapter provides an overview of the roles played by FASB, the EITF, and the PCC in establishing accounting standards for nongovernmental entities. The chapter also includes discussion of FASB ASC as well as International Financial Reporting Standards and the move toward the globalization of accounting standards.

Facts about FASB

Financial accounting standards board

FASB, established in 1973, is the designated accounting standard setter for establishing private sector financial accounting and reporting standards for nongovernmental entities. FASB is subject to the oversight of the FAF’s board of trustees.

The FASB board is composed of seven independent members. Each individual board member has a diversified background, is appointed to a five-year term, and is then eligible for reappointment for one additional five-year term. To ensure board independence, each board member is required to sever ties with any entities or firms prior to joining the board.

The Securities and Exchange Commission (SEC) has the statutory authority to establish financial accounting ...