The purpose of the Financial Accounting Standards Board (FASB) is to develop and establish generally accepted accounting principles (GAAP) in the United States. FASB aims to ensure that financial reporting is transparent, consistent, and reliable across organizations, fostering trust among investors, creditors, and other stakeholders.
Key Objectives of FASB:
- Set High-Quality Standards: Create financial reporting standards that enhance clarity and comparability.
- Improve Financial Reporting: Ensure that financial statements accurately reflect a company’s financial position and performance.
- Protect Investors and Stakeholders: Provide guidelines that help stakeholders make informed financial decisions.
- Promote Uniformity: Minimize inconsistencies in accounting practices across industries.
- Adapt to Change: Continuously revise standards to align with evolving business practices and economic conditions.
Example:
For instance, the FASB issued ASC 842, which updated lease accounting standards. This ensures that leases are reflected on balance sheets, giving a more accurate picture of a company’s liabilities.
