The needs for accounting standards are so important for today’s society. Accounting standards are needed so the financial statements will fairly and consistently describe the financial performance of an organization (QuickMBA Accounting, 1997-2007). The public relies heavily on this information to be consistent and accurate for investing, making credit decisions, and such. Today, we know these standards as GAAP or Generally Accepted Accounting Principles. Bodies in authority have set these standards and therefore, the standards are generally accepted by accounting professions and used widely across the economy. The Financial Accounting Standard Board (FASB) and International Accounting Standards Boards (ISAB) are extremely influential in setting these standards.
Brief History of the ISAB and FASB
As a result of the growing criticism of the APB, the board of directors of the American Institute of Certified Public Accountants (AICPA) appointed two committees in 1971, the Wheat Committee and the Trueblood Committee. The Wheat Committee responsibility was to study how financial accounting principles should be established. The Trueblood Committee was asked to determine the objectives of financial statements. In 1972, the Wheat Committee had issued its report with the recommendation that the APB is abolished and FASB be created. In 1973, the Trueblood Committee affirmed this decision. The AICPA adopted the recommendations of the Wheat Committee and FASB has been the designated organization in the private sector for establishing standards of financial accounting. Those standards govern the preparation of financial statements (University of Phoenix, 2005). They are officially recognized as authoritative by the Securities and Exchange Commission (SEC) and the American Institute of Certified (FASB, 2009). The mission of the FASB is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including...