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Case 1-7 The FASB
The Financial Accounting Standards Board (FASB) was established in 1973 and the
Financial Accounting Foundation (FAF) was established in 1972, each organization proves to be
vital to the accounting industry. The FASB establishes and maintains the Generally Accepted
Accounting Principles and the FAF oversees FASB and the Governmental Accounting Standards
Board. In the paragraphs to follow we will discuss the structure of the FASB and how the FAF
members are nominated, all while keeping in mind how these ties into a Christian worldview.
Question 1
Discuss the structure of the FASB.
The Financial Accounting Standards Board (FASB) is responsible for establishing
financial accounting and reporting standards for public and private companies and not-for-profit
organizations that follow Generally Accepted Accounting Principles (GAAP) (FASB, 2009). The
FASB sets accounting standards for public companies, as recognized by the Security and
Exchange Commission. The Governmental Accounting Standards Advisory Council (GASAC),
the Governmental Accounting Standards Board (GASB), the Financial Accounting Standards
Advisory Council (FASAC), and the Financial Accounting Foundation (FAF) are all a part of a
large, independent group with FASB. The FAF oversees FASB as well as GASB. The FASB has
seven full-time board members that are appointed by the FAF’s board for a five-year term with a
maximum allowable tenure of 10 years. To be on the board of FASB you must sever their ties to
past companies and organizations. The current board members are the Chair and the Vice
Chairman, Richard Jones, and James Kroeker, respectfully, with five other members Christine
Botosan, Gary Buesser, Susan Cosper, Marsha Hunt, and R. Harold Schroeder. To ensure the
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board can successfully achieve its objective, it is assisted by a staff of 60 professionals, the
senior staff is chaired by the Technical Director, Hillary H. Salo.
Question 2
How are the Financial Accounting Foundation members nominated?
The Financial Accounting Foundation (FAF) was established in 1972, there are 16
members that govern the Board of Trustees. Of the 16 members, 8 members are nominated by
the Financial Nominating Organizations (FNOs) and 3 are nominated by the Governmental
Nominating Organizations (GNOs), and the remaining five members are members at large. The
members of the FNO are nominated in accordance with different organizations, 3 are from the
American Institute of Certified Public Accountants, and one each from the American Accounting
Association, CFA Institute, Financial Executives International, Institute of Management
Accountants, and Securities Industry and Financial Markets Association. While the FNO can
nominate these individuals, The FAF has the ultimate authority in determining whether to elect
them. The 3 nominated by the GNO are elected by representatives of the Government Finance
Officers Association and the National Association of State Auditors, Comptrollers, and
Treasurers. The At-large trustees are individuals with professional, government, business, or
other experience who can contribute to advancing the purpose of the FAF.
The FAF updated their By-Laws in 2021, in the By-Laws they have the process of
nominating Board of Trustee members. The By-Laws give them guidance to ensure the right
candidates are selected, just like Proverbs 11:14 “Where there is no guidance, a people falls, but
in an abundance of counselors there is safety.” According to the AFA (2021) The Board of
Trustees “shall have sole authority to nominate all candidates for the office of Chairman Trustee,
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and any nominee for such office may, but need not, be a member of the Board of Trustees at the
time nominated.” For the Governmental Trustee position, the FAF follows these guidelines; all
nominations shall be submitted in accordance with the requirements and procedures; the board
has the authority in evaluating and determining the suitability of each Trustee candidate; ensure
that the nomination exercised reasonable diligence that the nominee is suitable for election as a
Trustee; promptly notify the Governmental Organizations if they deem the candidates not
suitable for the election; and in advance of the vote to be on the board, the Board of Trustees
recommends to the Members each Trustee office for which there will be an expiring term at the
end of such year.
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References
ESV. (2016). Proverbs 11:14 (ESV). Bible Gateway. Retrieved October 30, 2022, from
https://www.biblegateway.com/
FAF. (2021, February 23). BY-LAWS OF THE FINANCIAL ACCOUNTING FOUNDATION.
Financial Accounting Foundation. https://accountingfoundation.org/Page/ShowPdf?
path=FAF_By-Laws_(Final_Version_2.23.21).pdf
FASB Accounting Standards Codification®. (2009). Retrieved October 30, 2022, from
https://asc.fasb.org/1943274/2147479419
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