Discussion: Financial Accounting Standards Board (FASB)

TheFinancial Accounting Standards Board (FASB) has developed a conceptualframework for financial accounting and reporting. FASB has issued eightStatements of Financial Accounting Concepts (SFAC) as of August, 2013.These statements establish objectives and fundamentals that will be thebasis for developing financial accounting and reporting standards.

Thepurpose of SFAC No. 6, “Elements of Financial Statements—a replacementof FASB Concepts Statement No. 3 (incorporating an amendment of FASBConcepts Statement No. 2)” was to examine the characteristics that makeaccounting information useful. The characteristics or qualities ofinformation discussed in SFAC No. 6 are the ingredients that makeinformation useful and are the qualities to be sought when accountingchoices are made.

SFAC# 6 is one of a series of publications in the FASB conceptual frameworkfor financial accounting and reporting. Statements in the series areintended to establish objectives and fundamentals that will be the basisfor development of financial accounting and reporting standards. Theobjectives identify the goals and purposes of financial reporting. Thefundamentals are the underlying concepts of financial accounting —concepts that guide the selection of transactions, events, andcircumstances to be accounted for; their recognition and measurement;and the means of summarizing and communicating them to interestedparties. Concepts of that type are fundamental in the sense that otherconcepts flow from them and repeated reference to them will be necessaryin establishing, interpreting, and applying accounting and reportingstandards.

ConceptsStatement No. 8 – Conceptual Framework for Financial Reporting —Chapter1: “The Objective of General Purpose Financial Reporting,” and Chapter3, “Qualitative Characteristics of Useful Financial Information (areplacement of FASB Concepts Statements No. 1 and No. 2).” This ConceptsStatement, which includes two chapters of that new conceptualframework, supersedes FASB Concepts Statements No. 1, Objectives ofFinancial Reporting by Business Enterprises, and No. 2, QualitativeCharacteristics of Accounting Information. As the Board and the IASBcomplete additional phases of their joint project, new chapters will beadded to this Concepts Statement, and other Concepts Statements will besuperseded.

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

1. Whatis the most important quality for accounting information as identifiedin the Statement of Financial Accounting Concepts No. 6? Explain why itis the most important.
2. Whatis the most important quality for accounting information as identifiedin the Statement of Financial Accounting Concepts No. 8? Explain why itis 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. SFACNo. 6 and No. 8 describe a number of key characteristics or qualitiesfor accounting information. Briefly discuss the importance ofunderstandability, relevance, and reliability for financial reportingpurposes.

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 Igathered it was describing what everything was and how they should belabeled or classified. Similarly to Sharon I came to realize that theconcept does state the objectives and fundamentals as the mostimportant. “The items in financial statements represent in words andnumbers certain entity resources, claims to those resources, and theeffects of transactions and other events and circumstances that resultin 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 conceptualframework to be the utmost importance which makes sense since it is inthe name of the document. How the entries would flow withclassifications and notes. Since it specifically pertains to reportingwe need to follow the directions laid out in this document. Thiseliminates the chances of misleading anyone with confusing informationor even just trying to hide information by omitting. Very beneficial toanyone that may be interested in investing.

I personally think it gives a better understanding of how the accountingstandards. Very tedious for me since I take a few re-reads to processwhat 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,

Statementof Financial Accounting Concepts No. 6 identifies the most importantquality for accounting information are objective and fundamental thatmake information useful and are the qualities to be sought whenaccounting choices are made. Objectives and fundamentals are importantbecause the basis for development of financial accounting and reportingstandards.

Statementof Financial Accounting Concepts No. 8 identifies the most importantquality as conceptual framework. It provides financial information aboutthe reporting entity that is useful to existing and potentialinvestors, lenders and other creditors in making decisions aboutproviding resources to the entity.

Posted 3

Hello Class and Professor,

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