Accounting Principles Board definition

Policy making is more than a polarized process in which a decision of “for or against” is reached. The accounting historian should seek an under standing of the “political” considerations involved in the establishment of a financial accounting standard and the particular alternatives and more subtle points that were considered during the deliberations. The APB was created in 1959 by the American Institute of Certified Public Accountants (AICPA) as a successor to the Committee on Accounting Procedure (CAP). The CAP, which had been in existence since 1939, was dissolved due to concerns about its lack of formal standard-setting procedures and the perceived need for a more authoritative body to govern accounting principles.

Its replacement, the Financial Accounting Standards Board, has proven to be much more effective, since it has a fully-funded full-time staff. Accordingly, the FASB has issued far more content, spanning a broad range of accounting topics. While the ED is out for public comment, the FASB will often conduct a field test, which is designed to test the application of the proposed standard using actual financial information provided by volunteering companies. The FASB sometimes asks for written comments from constituents during the research phase through the issuance of a Discussion Memorandum. Such a document analyzes the problem in depth, delineates the issues, identifies alternative solutions, and discusses the merits of those solutions in an objective way. Alternatively, the board may issue what is known as a Preliminary Views document, which includes tentative decisions on a few basic issues and again seeks input from constituents.

1. Examples of opinions that are still used deal with the content and structure of the financial statements, such as the consolidation of financial statements, the treatment of debt, and interim financial reporting.
2. The main alternative is the International Financial Reporting Standards (IFRS), which sets the standards in all European Union nations and many other countries.
3. The Financial Accounting Standards Board (FASB) is a private standard-setting body1 whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public’s interest.
4. After completion of initial research by the staff and consideration of comments on a Discussion Memorandum or Preliminary Views, if one of those documents is issued, the board members begin deliberating the issues in earnest.
5. They know that their views are carefully weighed during the FASB’s deliberations, but they also recognize that the ultimate determinant of a new standard must be the board’s judgment.
6. Accordingly, the FASB has issued far more content, spanning a broad range of accounting topics.
7. By bringing his analytics to bear upon problems currently under consideration, the accounting historian may provide a rather unique input to the Board.

In response, the AICPA established the Wheat Committee in 1971 to study the existing standard-setting process and recommend changes. The Wheat Committee’s recommendations led to the creation of the Financial Accounting Standards Board (FASB) in 1973, which replaced the APB. Despite disagreement over some specific pronouncements, the board’s various constituents remain generally supportive. They know that their views are carefully weighed during the FASB’s deliberations, but they also recognize that the ultimate determinant of a new standard must be the board’s judgment. As the FASB’s mission statement states, “The FASB is committed to following an open orderly process for standard setting that precludes placing any particular interest above the interests of the many who rely on financial information.” In 1939, urged by the SEC, the American Institute of Certified Public Accountants (AICPA) appointed the Committee on Accounting Procedure (CAP).

Coopers and Lybrand “Accounting and SEC Current Developments”

During 1939 to 1959 CAP issued 51 Accounting Research Bulletins that dealt with a variety of timely accounting problems. However, this problem-by-problem approach failed to develop the much needed structured body of accounting principles. Thus, in 1959, the AICPA created the Accounting Principles Board (APB), whose mission it was to develop an overall conceptual framework. 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 APB issued 31 opinions during its brief existence, including guidelines related to accounting for leases, income taxes, business combinations, intangibles, stock issued to employees for compensation, and early extinguishment of debt.

History of the Accounting Principles Board

It is also possible for the discussion memorandum and public hearings to be eliminated entirely. For those projects in which a discussion memorandum is issued and the complete “due process” cycle is followed, historical studies pertaining to the problem that are available during the period that the FASB staff is preparing a memorandum could be very useful. Since a discussion memorandum is oriented to decision issues, an historical study that focuses on the relevant issues raised in the past and which analyzes past reporting practices could be of assistance in framing current issues.

Accounting Standards Codification

The Codification is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards documents are superseded as described in FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. S-Ox provided for funding through support fees assessed against issuers of securities.(15) While subscriptions and publications provide about one-third of FAF revenues, the substantial majority comes from support fees. This has freed the FAF from its fundraising efforts and helped in 1973 fasb was replaced with further assure the Board’s independence from the preparer and audit communities.

It means that all its technical business is conducted in meetings that are announced in advance and are open to the public. Because the board’s Rules of Procedure require a supermajority of five votes to approve the issuance of any new standard, no more than four board members can meet privately to discuss technical issues. GAAP pronouncements into roughly 90 accounting topics and displays all topics using a consistent structure. It also includes relevant Securities and Exchange Commission (SEC), guidance that follows the same topical structure in separate sections in the Codification.

However, it raises an offsetting concern about independence from government intervention in funding and agendas. Today, government agencies and non-profit organizations as well as public corporations generally adopt GAAP standards. The main alternative is the International Financial Reporting Standards (IFRS), which sets the standards in all European Union nations and many other countries. Some work on accounting standards began as early as the 1930s, as a reaction to the 1929 stock market crash that was at least partially blamed on dubious corporate accounting practices. The three pillars on which the FASB was built are independence, openness (or sunshine), and neutrality. Although independence can never be totally assured, the FASB charter did attempt to protect the board from as much external pressure as possible.

This board would be slimmed down to seven members who would be full-time employees, selected by a Financial Accounting Foundation (FAF), the parent organization of the new structure. Within this overall structure, the FASB has developed an extensive structure of due process to conduct its standard-setting activities. The process usually starts by determining what financial reporting issues are sufficiently pervasive and important that they warrant consideration by the board.

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. While the APB was ultimately replaced by the FASB, its contributions to the development of accounting standards should not be underestimated. The APB played a crucial role in the early efforts to standardize accounting practices, and its work laid the groundwork for the more structured and authoritative approach of the FASB. Today’s financial reporting landscape is built upon the foundation established by the APB and its commitment to improving accounting practices in the United States. Accordingly, any views so expressed are those of the author and do not necessarily reflect the views of the Standards Board.) may be shortened to as few as 30 days when the Board believes that sufficient information is available to enable it to proceed quickly.

Generally Accepted Accounting Principles (United States)

1. Once at least five board members agree on an overall answer, the board issues an Exposure Draft (ED) of a proposed standard for public comment.
2. This process can take anywhere from a few months to several years, depending on the number and complexity of the issues involved as well as the strength of the convictions of individual board members.
3. The APB was created in 1959 by the American Institute of Certified Public Accountants (AICPA) as a successor to the Committee on Accounting Procedure (CAP).
4. In 1939, urged by the SEC, the American Institute of Certified Public Accountants (AICPA) appointed the Committee on Accounting Procedure (CAP).
5. 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.
6. Its replacement, the Financial Accounting Standards Board, has proven to be much more effective, since it has a fully-funded full-time staff.

The charter gives the FASB exclusive authority to set its own agenda and establish accounting standards. 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. Those standards began to be developed by the APB, which was charged with creating guidelines for accounting and issuing pronouncements related to accounting theory and practice. Its membership consisted of between 18 and 21 representatives of accounting firms, corporate executives, and academics. The FASB has a professional staff of approximately forty-five persons; once a project is added to the agenda, staff members are assigned to begin research on the topic.

It also published opinions on disclosure of accounting policies and reporting interim financial data and the results of discontinued operations. The APB itself was a successor organization to the Committee on Accounting Procedure, a group that first attempted to create and impose a set of standards for financial reporting. Virtually all public corporations that operate in the U.S. follow the GAAP standards, which make it easier for investors and auditors to review financial statements and compare one company’s results to those of others. Among the 31 opinions that the APB issued during its existence were ones related to accounting for leases, income taxes, business combinations, intangibles, stock issued to employees for compensation, early extinguishment of debt. It also published opinions on disclosure of accounting policies and reporting interim financial data and results of discontinued operations. Many of the accounting principles established by the APB remain in use today, either in their original form or as modified by the FASB.