GASB and FASB Essay

GASB and FASB

The Government Accounting Standards Board (GASB) was created in 1984 to develop accounting standards for governmental units such as state and local entities. It operates under the oversight of the Financial Accounting Foundation (FAF) and the Governmental Advisory Council.

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In 1984, and after a good deal of often heated debate, the Financial Accounting Foundation established a separate body to develop standards for municipal and state units, hospitals, utility authorities, universities, and other not-for-profit organiza­tions. The Governmental Accounting Standards Board (GASB) was established on a trial basis and operates similarly to the FASB. The trial period has now passed, and the GASB is continuing operations. Since some of the organizations covered under the standards set by GASB operate for profit and others do not (hospitals and universities, for example), jurisdictional problems with the FASB inevitably arise. An important task that will continue to face the FAF and the two Boards is finding a workable solution to the jurisdictional issue. Recently the FAF has adopted a solution that places primary responsibility for most of the jurisdictional issues with the FASB.

Of all of the accounting organizations, the FASB is the most influential. Its primary purpose is to promulgate financial accounting standards. It was created in 1973 to replace the Accounting Principles Board. Unlike the APB, the FASB is independent; its members have no affiliation with any other organization. The AlCPA’s special committee, which suggested that the FASB replace the APB, recommended the FASB be part of the following structure, as amended.

Financial Accounting Foundation (FAF) – composed currently of sixteen trust­ees appointed by the board of directors of the AICPA. Their responsibilities are to appoint members of the Financial Accounting Standards Board, to appoint a Financial Accounting Standards Advisory Council, to raise funds to support the organiza­tion’s structure, and to periodically review and revise the FASETs basic structure.

Financial Accounting Standards Board (FASB) – composed of seven full-time members with to establish financial accounting standards and to direct a research program structured to accomplish specific objectives to support the standard-setting process.

Financial Accounting Standards Advisory Council (FASAC)—a group of senior-level individuals broadly selected from preparers, users, auditors, and CPA constituencies. The number of members has varied over time but is about 35. Their responsibilities are to work closely with the FASB in an advisory capacity and to establish priorities, establish task forces, evaluate performance, and react to proposed standards.

Since its inception in 1973, the FASB has undergone several changes. Its current organization is composed of seven members. Their primary responsibilities are establishment of financial accounting concepts and standards; it conducts a research program to support the standard-setting process.

Bibliography

Bloom, R., M. Collins and J. Fuglister. The Schism in Accounting. Westport, CT: Quorum Books, 1994.

“FASB and GASB Define Government.” Journal of Accountancy. Vol: 182. Issue: 1, 2001.

Jacobson, P. D. and J. R. Miller. “GASB after the Five-Year Structure Review.” Journal of Accountancy. Vol: 169. Issue: 4, 1998, pp. 85+.

Riper, R. V. Setting Standards for Financial Reporting: FASB and the Struggle for Control of a Critical Process. Westport, CT: Quorum Books, 1994.

Solomons, D. Making Accounting Policy: The Quest for Credibility in Financial Reporting. New York: Oxford US, 1986.