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GAAP is essential to the efficient functioning of the US economy. Investors, creditors, donors and other users of financial reports need credible, transparent, comparable and unbiased financial information. In today’s dynamic financial markets, integrity, transparency and objectivity in financial reporting are necessary to ensure the strength of US capital markets and provide investors with accurate and timely information.
Reliable financial reporting has a critical role in supporting the efficient functioning of the capital markets: robust financial reporting increases investor confidence, which in turn leads to better capital allocation decisions and economic growth. Today, as the US economy continues to recover from the financial crisis and recession, the FAF and FASB remain committed to ensuring that US nation’s financial accounting and reporting standards provide investors with the information they need to invest confidently in the US markets.
An independent standard-setting process has always been paramount to producing high-quality, confidence-inspiring accounting standards in the US. This process relies on the collective judgement of experts, informed by the input of all interested parties through a thorough, open and deliberative process. The FASB sets accounting standards through comprehensive, robust processes that are open, accord due process to all interested parties, and, allow for extensive input from all stakeholders. This rigorous process of stakeholder outreach includes public meetings, public round table discussions, field visits and tests, meetings with stakeholder groups, the exposure of proposed standards for public comment, and extensive redeliberation to review the stakeholder input.
The FASB’s accounting standard-setting process is subject to oversight by the FAF, which consists of 16 independent trustees. The FASB is also subject to oversight by the SEC with respect to standard-setting for public companies. Additionally, the FAF understands Congress’s interest in the capital markets, which is why it regularly participates in oversight hearings and briefs Members and their staffs on accounting-related developments.
This thorough process allows the FASB to learn and understand the views of all interested parties and results in high-quality standards that are thorough, deliberative, and balance the multifaceted and often countervailing factors at issue. The Board’s wide consultation helps it to assess whether the benefits to users of improved information from proposed changes outweigh the costs of the changes to financial statement preparers and others. Wide consultation also provides for the identification of unintended consequences and, ultimately, broad acceptance of the standards that are adopted. This assessment extends to all aspects of accounting standards – including determining the appropriate effective dates for new or revised accounting standards applicable to all types of companies, including the emerging growth companies that are the subject of S. 1933, Section 3(c). Stated differently, although the effective date of a new standard is not a technical accounting matter, the FASB sets effective dates using the input received from the thorough process that informs every other aspect of a new standard.