Government Accounting Standards Board Versus Financial Accounting Standards Board

1295 words - 6 pages

In accounting, private companies are treated differently than governmental and non-profit companies. However governmental and non-profit companies use different reporting requirements from the private sector. The requirements for governmental companies use the Government Accounting Standards Board (GASB), whereas profit and non-profit companies use the Financial Accounting Standards Board. This paper will explain the purpose, discus the similarities, and differences between the GASB and FASB.
Governmental Accounting Standards Board (GASB) is the independent organization that improves and establishes the accounting standards for the United States and local governments. It was established in 1984 by an agreement by the Financial Accounting Foundation and ten national associations of local governments. The mission of the GASB is “to establish and improve standards of the state and local governmental accounting and financial reporting that will result in useful information for users of financial reports, and to guide and educate the public and users of those financial reports (GASB 2014).” Their four core values are: independence, integrity, objectivity, and transparency. The GASB is not a governmental entity, and it is a component of the Financial Accounting Foundation which is a private sector not for profit entity. The GASB standards are not federal laws or regulations, and the GASB does not enforcement authority. However, the standards are enforceable through the laws of the individual states and the auditing process. The process of a standard being set is by due process, and the Governmental Accounting Standards Advisory Council consists of thirty members that are appointed by the Financial Accounting Foundation Trustees. The members of the board serve for a five year term, and they may serve up to ten years. The members are required to have knowledge of governmental accounting and finance (GASB 2014).
The Financial Accounting Standards Board (FASB) is the designated organization for the private sector for non-governmental entities since 1973. The Securities and Exchange Commission (SEC) recognizes the FASB’s standards, and the SEC makes them authoritative. The mission of the FASB is to “establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernmental entities that provides decision useful information to investors and other users of financial reports (FASB 2014).” The FASB is also an independent organization that is different from any other business and professional organization. The FASB has seven members, and they serve full time. They are appointed for five year terms, and are eligible for an additional five year term. The FASB uses due process to implement the process of the standard setting process. The rules for setting or changing standards include; identifying financial reporting issues from stakeholders or other sources, and then the FASB decides whether or not to add the...

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