Tips Clear News Portal Your Ultimate Guide to Clear Tips on Life, Tech, Health, and More What Is a Statement of Financial Accounting Standards (SFAS)?
Statements of Financial Accounting Standards (SFAS), published by the Financial Accounting Standards Board (FASB), provided guidance on a specific accounting topic, until 2009. SFAS laid the guidelines for accounting standards in the U.S. These SFAS were published in an effort to update the accounting industry on how to handle certain transactions or events.
Key Takeaways
- Statements of Financial Accounting Standards were put together to address accounting issues and financial transparency.
- Published SFAS became part of generally accepted accounting principles (GAAP) once published.
- No new SFAS has not been published since 2009. There were 168 standards.
- The FASB Accounting Standards Codification replaced SFAS.
Understanding SFAS
Statements of Financial Accounting Standards were published to address specific accounting issues, with a view to enhancing the accuracy and transparency of financial reporting. There was a lengthy public consultation about the potential consequences of a rule change before an SFAS was published.
An SFAS became part of the FASB accounting standards once it was published. The FASB sets accounting standards in the United States, which are published as the generally accepted accounting principles (GAAP). GAAP governs the financial preparation and reporting by corporations and represents the rules that publicly-traded companies must adhere to when reporting their financial information. GAAP includes standards for how U.S. companies should report their income statement, balance sheet, and statement of cash flows. These financial statements are compiled and used by regulators and investors. Publicly-traded companies are regulated by the Securities and Exchange Commission (SEC), which is the top watchdog for the proper functioning of U.S. exchanges.
SFAS have been superseded by the FASB Accounting Standards Codification, which became effective after Sept. 15, 2009. This codification is now updated via Accounting Standards Updates (ASUs). The total number of SFAS is 168, with no. 168 noting that all prior standards are superseded by the ASC.
Special Considerations
The FASB now uses the Accounting Standards Codification (ASC). The ASC is now the sole source of GAAP. The FASB transitioned to the ASC, the authority of accounting literature, in order to create a single database for accounting standards. The ASC is organized into 90 accounting topics, and notably, its introduction did not change GAAP but instead introduced a new structure for organizing all the information. The idea was that ASC would make searching for topics easier, enhancing the research process and making it easier.
Example of SFAS
An SFAS comes into play when the concept becomes part of GAAP. Before that, it’s just a concept and goes through various steps to decide whether it should be adopted into GAAP. The FASB will pinpoint an issue that needs to be addressed, whether through their own investigation or via a topic the accounting industry or companies are talking about. The board then puts together a framework for handling the problem and will hold public meetings to discuss the issue.
A proposed solution is put together and sent to stakeholders for feedback. Changes are made based on feedback, and the FASB will hold another public meeting to discuss. The board then considers that feedback and if they are in agreement with the industry’s proposals and the proper accounting treatment, they will issue an SFAS and add it to GAAP.