how the financial accounting standards board fasb works
the financial accounting standards board has the authority to establish and interpret generally accepted accounting principles gaap in the united states for public and private companies and nonprofit organizations gaap is a set of standards that companies nonprofits and governments should follow when preparing and presenting their financial statements including any related party transactions the securities and exchange commission sec recognizes the fasb as the accounting standard setter for public companies it is also recognized by state accounting boards the american institute of certified public accountants aicpa and other organizations in the field the financial accounting standards board is part of a larger independent nonprofit group that also includes the financial accounting foundation faf the financial accounting standards advisory council fasac the governmental accounting standards board gasb and the governmental accounting standards advisory council gasac the gasb which is similar in function to the fasb was established in 1984 to set accounting and financial reporting standards for state and local governments across the united states the faf oversees both the fasb and the gasb the two advisory councils provide guidance in their respective areas collectively the organization s mission is to improve nonprofit financial accounting and reporting standards so that the information is useful to investors and other users of financial reports the organizations also educate stakeholders on how to understand and implement the standards most effectively the fasb is governed by seven full time board members who are required to sever their ties to the companies or organizations they work for before joining the board board members are appointed by the faf s board of trustees for five year terms and may serve for up to 10 years in 2009 the faf launched the fasb accounting standards codification an online research tool designed as a single source for authoritative nongovernmental generally accepted accounting principles in the united states according to the faf the tool reorganizes the thousands of u s gaap pronouncements into roughly 90 accounting topics and displays all topics using a consistent structure the website also provides relevant securities and exchange commission sec guidance on those topics a basic view version is free while the more comprehensive professional view is available by paid subscription the london based international accounting standards board iasb founded in 2001 to replace an older standards organization is responsible for the international financial reporting standards ifrs which are now used in many countries throughout the world in recent years the fasb has been working with the iasb on an initiative to improve financial reporting and the comparability of financial reports globally 