financial accounting standards board fasb 2

/in /by

Discussion: Financial Accounting Standards Board (FASB)

The Financial Accounting Standards Board (FASB) has developed a conceptual framework for financial accounting and reporting. FASB has issued eight Statements of Financial Accounting Concepts (SFAC) as of August, 2013. These statements establish objectives and fundamentals that will be the basis for developing financial accounting and reporting standards.

The purpose of SFAC No. 6, “Elements of Financial Statements—a replacement of FASB Concepts Statement No. 3 (incorporating an amendment of FASB Concepts Statement No. 2)” was to examine the characteristics that make accounting information useful. The characteristics or qualities of information discussed in SFAC No. 6 are the ingredients that make information useful and are the qualities to be sought when accounting choices are made.

SFAC # 6 is one of a series of publications in the FASB conceptual framework for financial accounting and reporting. Statements in the series are intended to establish objectives and fundamentals that will be the basis for development of financial accounting and reporting standards. The objectives identify the goals and purposes of financial reporting. The fundamentals are the underlying concepts of financial accounting — concepts that guide the selection of transactions, events, and circumstances to be accounted for; their recognition and measurement; and the means of summarizing and communicating them to interested parties. Concepts of that type are fundamental in the sense that other concepts flow from them and repeated reference to them will be necessary in establishing, interpreting, and applying accounting and reporting standards.

Concepts Statement No. 8 – Conceptual Framework for Financial Reporting —Chapter 1: “The Objective of General Purpose Financial Reporting,” and Chapter 3, “Qualitative Characteristics of Useful Financial Information (a replacement of FASB Concepts Statements No. 1 and No. 2).” This Concepts Statement, which includes two chapters of that new conceptual framework, supersedes FASB Concepts Statements No. 1, Objectives of Financial Reporting by Business Enterprises, and No. 2, Qualitative Characteristics of Accounting Information. As the Board and the IASB complete additional phases of their joint project, new chapters will be added to this Concepts Statement, and other Concepts Statements will be superseded.

After you have completed the required reading, respond to the following questions in your initial response:

  1. What is the most important quality for accounting information as identified in the Statement of Financial Accounting Concepts No. 6? Explain why it is the most important.
  2. What is the most important quality for accounting information as identified in the Statement of Financial Accounting Concepts No. 8? Explain why it is the most important.

Additional possible topics to include in your discussion:

  1. Identify and discuss the benefits that can be expected to be derived from the FASB’s conceptual framework study.
  2. SFAC No. 6 and No. 8 describe a number of key characteristics or qualities for accounting information. Briefly discuss the importance of understandability, relevance, and reliability for financial reporting purposes.

Just do response each posted # 1 to 3 down below only

Posted 1

  • I read the concept no. 6 which replaced numbers 2 and 3. From what I gathered it was describing what everything was and how they should be labeled or classified. Similarly to Sharon I came to realize that the concept does state the objectives and fundamentals as the most important. “The items in financial statements represent in words and numbers certain entity resources, claims to those resources, and the effects of transactions and other events and circumstances that result in changes in those resources and claims.” – Fasb.org
  • In my words its what we use to perform our tasks in accounting.

From what I gathered within reviewing no. 8 it references the conceptual framework to be the utmost importance which makes sense since it is in the name of the document. How the entries would flow with classifications and notes. Since it specifically pertains to reporting we need to follow the directions laid out in this document. This eliminates the chances of misleading anyone with confusing information or even just trying to hide information by omitting. Very beneficial to anyone that may be interested in investing.

I personally think it gives a better understanding of how the accounting standards. Very tedious for me since I take a few re-reads to process what I read. I now have a better insight for reporting as well.

I think just having the knowledge on doing everything proper so that it is clearly understood by all.

Posted 2

Hello everyone,

Statement of Financial Accounting Concepts No. 6 identifies the most important quality for accounting information are objective and fundamental that make information useful and are the qualities to be sought when accounting choices are made. Objectives and fundamentals are important because the basis for development of financial accounting and reporting standards.

Statement of Financial Accounting Concepts No. 8 identifies the most important quality as conceptual framework. It provides financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.

Posted 3

Hello Class and Professor,

No. 6 provides structure and framework for financial accounting. This issued as a guide for the things needed to be accounted for. No. 8 Users have different needs. This board will aim at meeting all the needs of these users.