Statement of Financial Accounting Standards - SFAS
Categories: Accounting
The U.S. Constitution sets the broad outline of how the federal government works. You can get a good idea of how to play baseball by reading the MLB's official rule book. And if you want to know the basic rules that you should follow as an accountant, look no further than the statement of financial accounting standards.
It lays down the broad strokes on how books should be kept for U.S. companies. The document is put out by the Financial Accounting Standards Board, or FASB...the same group of party animals responsible for the generally accepted accounting principles (GAAP) that dictate how accounting should be done in the U.S.
The goal of all these accounting rules (the SFAS and the GAAP) are to make it possible to compare results between companies. Since everyone treats almost every situation in the same way, investors and managers can read the books for any company and understand what's going on. These documents basically provide a kind of grammar textbook for writing financial statements.
The SFAS provides guidelines on how certain accounting situations should be interpreted. It includes general accounting rules (stuff applicable to almost any company), as well as items that only really come up in certain industries.
Related or Semi-related Video
Finance: What is FASB?9 Views
Finance a la shmoop what is FASB? ok first say it with me people FASB sounds
way cooler than Financial Accounting Standards Board alright well what is it
well it's a private regulatory body that has given birth to myriad opinions on [FASB definition appears on 100 dollar bill]
how things should be accounted for with its favorite child being GAAP.....
yeah, remember GAAP generally accepted accounting principles and it's the
religion of accounting so GAAP was the most famous creation of FASB, but
hundreds of other little creations followed in that the august group of
seven members who run FASB realized 50 years ago that the world would look a
whole lot different half a century later when you were countin beans like who'd have
thunk about digital beans accounting standards would have to be flexible [People stretching in a field]
almost in the same vague way the US Constitution is written so that when a
customer buys an upgrade from the people who make angry birds in an app sold by
Apple but downloaded by Comcast paid for with a Visa card while everyone would
know with certainty who got paid what when the key idea behind FASB is that
it's an adaptive group that changes with a quickly changing bean-counting
environment trying to make sure everything is you know fair and square
for all if you want to think about it in a mathy way well they seek to be the
derivative not the curve itself alright so you're living right here on the curve [Arrow points to derivative on a curve]
changing all the time dxdy and all that crap, FASB....