Financial Accounting Standards Board (FASB)

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superseded.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.