FASB Concept Statement Assignment Help

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Introduction 

In the contemporary business era, setting accounting standards is an extensive procedure that begins with public hearing and comments and research, and ends with new accounting standards issuance which finally becomes a part of the general accepted accounting principles (GAAP). The statement of financial accounting concepts (SFAC) is a part of this procedure as it is used in the form of a blueprint for the future development of the procedures and policy of reporting. There has been a high amount of pressure for harmonizing the standards of accounting in the recent years across different countries the world. The International Accounting Standards Board (IASB) helps in developing standards for the nations which need the usage of international financial reporting standards (IFRS). 

FASB Statement of Financial Accounting Concepts 

A document issued by the FASB (Financial Accounting Standards Board) which covers the broad concepts of financial accounting is known as the statement of financial accounting concepts (Kirsch, 2012). The FASB is that institutional body which sets down the accounting guidelines and rules which make up the general accepted accounting principles (GAAP). The primary purpose of the statement of financial accounting concepts (SFAC) concepts is providing with a general overview of the concepts, ideas and definitions related to accounting (FASB, 2010). The SFAC document is considered to be a preliminary to the statement of accounting standards (SFAS). It was initially expected by the IASB and the FASB for developing a common set of standards which be globally accepted. However, some resistance as encountered by the approach hence both the bodies settle down on a compromise where the FASB remained to be issuer of standards for the United States whereas the IASB would issue and endorse the IFRS guidelines and rules (FASB, 2010). The board of the conceptual framework for financial reporting and accounting has produced a series of publications, one of which is the statement of financial accounting concepts or the concepts statement. The concept statements have been intended and setting forth the fundamental concepts as well as the objectives which food from the base for the development of the guidance of the financial reporting and accounting. The purposes and primary goals of financial accounting and reporting are identified by such objectives. The fundamentals here are referred to the financial accounting's underlying concepts. Again, the underlying concepts guide the transactions' selection and various other conditions and events to be accounted for. The concepts are fundamental on the basis of the fact that are the concepts repeat reference from them and flow within them which will be important for the establishment, interpretation and application in reporting and accounting guidance. The conceptual framework is referred as coherent system of fundamental concepts and interrelated objectives and goals which prescribe the function, limits and nature of financial reporting and accounting which is expected for leading to continuous guidance (Kirsch, 2012).

SFAC No. 8 and Chapters 

It is provided by the statement number 8 that Government Universities and colleges as well as other governmental Institutions and bodies which are known for using specific specialized industry reporting and accounting principles as well as practices must not alter their reporting and accounting for the purpose of capital asset depreciation. This has been provided in the FASB statement number 93, under the section, depreciation recognition for not for profit organizations (FASB, 2010). However, the governmental universities and colleges are not introductory in the depreciation of their capital assets. This is provided under an option which is permitted by the industry audit guide of the AICPA, audits of universities and colleges. The effectiveness of the provision of this statement is seen only on issuance. The pronouncements of the Governmental Accounting Standards Board (GASB) apply to the financial accounts of all the local and state government institutions including the public authorities and benefit corporations, government utilities, colleges, hospitals, Universities and employee retirement systems, unless specified otherwise.

There are basically 8 chapters in the statement of financial accounting and concepts no. 8. The first chapter is related to definition of financial reporting. Here, the entities have a requirement of producing general purpose financial reports for final users who are dependent upon such financial reports for making economic decisions. The second chapter is related to definition of the reporting entity. An entity which has users, who are dependent upon financial reports of general purpose as the primary source of financial data related to entities, is called a reporting entity. The third chapter relates to the definition accounts’ users and their information requirements. It identifies a wide range of users of the general purpose financial reports including creditors, lenders, customers, suppliers, government, analysts, unions, employer groups, groups having special interest and financial investors. The fourth chapter is related to the objectives and aims of financial statements. These objectives are providing in information for evaluating and making economic decisions and enabling external parties for discharging accountability by assessing the management’s stewardship. The fifth chapter relates to the underlying assumptions. The two primary assumptions here are the going concern and accrual basis. Chapter no. 6 discusses the qualitative characteristics of the financial statements. The qualities or attributes which are required within financial information and data if it has to be useful for the purpose of making economic decisions are known as qualitative characteristics. These are relevance, comparability, understandability and reliability. The two constraints are timeliness and cost versus benefit. 

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Comparison

Current Conceptual Framework

For the general purpose financial reports, two objectives are identified by the framework of the IASB and SAC2. These are:

- Providing data for evaluating and making economic decisions. 

- Information is presented in a way which helps the management in accountability discharge. 

A wide range of final users of the financial statements of general purpose are identified by the IASB framework and the SAC2 including creditors, lenders, customers, suppliers, government, analysts, unions, employer groups, groups having special interest and financial investors.

The four qualitative characteristics which should be present within financial statements in order to be useful to the users, which are identified by the framework of the IASB, are relevance, comparability, understandability and reliability.

Two constraints on the reliability and relevance of financial data are identified by the framework of IASB: costs versus benefits and timeliness of providing data.

Revised Conceptual Framework

A similar objective is identified by the revised conceptual framework which is that it also provides data for making economic decisions related to providing resources to the entities.

Only creditors and investors are identified by the revised conceptual framework as financial reports’ users. It is commented by the revised conceptual framework that the data which is given to creditors and investors might also be beneficial for the other users for making economic decisions. However, financial statements are not necessarily directed towards the requirements of the other users.

Two fundamental qualitative characteristics have been identified by the revised conceptual framework. These are faithful representation and relevance. 

Four enhancing qualitative characteristics have been identified by the revised conceptual framework. These are verifiability, timeliness, understandability and comparability.

Conclusion  

It can be concluded that the conceptual framework is a reasonable system which consists of interrelated aims fundamental concepts as well as aims and objectives which prescribe the limits, function and nature of financial reporting and accounting and which is necessary for achieving continuous guidance. The conceptual framework intends to serve the general interest of the public and users of financial report by providing direction and structure to financial reporting and accounting for the further facilitation of financial information and related data that is unbiased. It was analyzed that although the current and revised conceptual framework are mostly similar to each other, however, the current framework is much broader.

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