FASB

Question 1

What are the three aspects of financial reporting that GAAP addresses?

Answer 1

1. Recognition
2. Measurement
3. Disclosure

Question 2

What is the hierarchy of the FASB?

Answer 2

FAF (Financial Accounting Foundation)
FASB (Financial Accounting Standards Board)
FASAC (Financial Accounting Standards Advisory Council)

Question 3

The FASB uses the following process when issuing an accounting standard

Answer 3

1. Considers whether to add a project to its agenda, in consultation with the FAF - the FASB receives many requests from its constituencies including the SEC, auditing firms, investors, and reporting firms to address new financial reporting issues and clarify existing standards;
2. Conducts research on the topic and issues a Discussion Memorandum detailing the issues surrounding the topic; the FASB’s conceptual framework plays a role in this process by providing a theoretical structure for guiding the development of a specific standard;
3. Holds public hearings on the topic;
4. Evaluates the research and comments from interested parties and issues an Exposure Draft - the initial accounting standard;
5. Solicits additional comments, modifies the Exposure Draft if needed;
6. Finalizes the new accounting guidance and approves with a majority vote (four of seven affirmative votes);
7. Issues an Accounting Standards Update (ASU). The section on FASB Codification discusses the nature of an ASU in greater detail.