Financial Accounting Standards Board
| Founded | 1972 (Operational in 1973) |
|---|---|
| Location | |
| Slogan | Serving the investment public through transparent information resulting from high-quality financial reporting standards, developed in an independent, private-sector, open due process. |
| Website | fasb.org |
The Financial Accounting Standards Board (FASB) is a private, non-profit organization standard setting body whose primary purpose is to establish and improve generally accepted accounting principles (GAAP) within the United States in the public's interest. The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S. The FASB replaced the American Institute of Certified Public Accountants' (AICPA) Accounting Principles Board (APB) on July 1, 1973.
In 2009 Reuters, the Wall Street Journal, USA Today and others claimed that the FASB succumbed to "political pressure" and lobbyists and tweaked mark-to-market accounting to accommodate "banks with toxic assets on their books."
Since 2009 the FASB added the disclosure framework project to its conceptual framework in order to make financial statement disclosures "more effective and coordinated and less redundant." As part of this process, in September 2015 the FASB issued a controversial proposal regarding "the use of materiality by reporting entities" and an amendment of the definition of the legal concept materiality. Materiality is "a mainstay of corporate financial disclosure that determines what a company must tell investors about its operations and results." Harvard professor, Karthik Ramanna and lawyer, Allen Dreschel claim FASB's proposed revised definition of materiality "could put the economy at greater risk of another huge accounting fraud, like Enron or Lehman Brothers" by weakening disclosure which is "the cornerstone of fair and efficient markets." For example, if the new proposal is enacted—a pharmaceutical company would be allowed to not disclose to its investors that its new drug in the pipeline performed poorly in drug trials because there is a "substantial likelihood" that the information could sway investment decisions. Some Fortune 500 companies and the United States Chamber of Commerce argue that investors and companies suffer from "disclosure overload."
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