between regulatory agencies.
Accounting Standards are regulated by different agencies. All companies in order to
describe or value its financial status must have at least basic knowledge of Accounting Standards
and Financial Statements. The financial statement will give us all necessary information to
recognize a company’s financial performance. Accounting main purposes are to identify,
measure and communicate.
Security and Exchange Commission (SEC)
The SEC, Securities and Exchange Commission in the U.S is a federal agency that regulates
Accounting Standards. The SEC has the authority to establish accounting standards for publicly
traded companies. Under the SEC information given to stockholders has to be presented in a
standardized way developed by them. The SEC was created by Section 4 of the Securities
Exchange Act of 1934. The SEC makes reports available to companies either quarterly of
annually. This reports are crucial for investors to make important financial decisions.
Now days there are many companies trying to become publicly traded in the United
States and the only agency that can make sure all regulations are met is the SEC along with the
help of FASB.
Companies like Alibaba group, no. 1 e-commerce company from China is trying to open
up door in the US but are they ready? Do they comply with regulations? This is just one
example from the many companies that try to enter in the market of the United States.
The law gives the SEC the authority to prescribe the form and content of financial
statements filed with the commission. However all financial statements formats used by the SEC
are those designed by the FASB. Both agencies work together and with the same purpose which
Comparison of Accounting Standards and Financial Statements3
is to make sure all publicly traded companies in the United States gives current and accurate
information to investors.
Aside from the SEC and the FASB there are other agencies that play a vital role making
sure all companies comply according to accounting standards set. However every agency looks
after a different area. As previously stated the SEC regulates the stock market and protect
investors and FASB known as Financial Accounting Standard Board focus on helping investors
as well as creditors make decision by providing specific information. The Governmental
Accounting Standard Board or the GASB is the agency in charge of making sure that all
government entities are accountable for the money received from us, the taxpayers. We also have
the International Accounting Standard boards that deals with developments of International
Financing Reporting Standard and promotes its application. Even though all agencies are under
the same umbrella there are a few differences on the way and requirements of their Financial
Statements. In the next couple of lines I will be comparing each company and how they comply
with each other.
Government Accounting Standard Board and Financial Accounting Standard Board
GASB and FASB both have many things in common for example both entities constitute of
seven members of the board of directors, are non-government agencies and most importantly
share same interest which is accounting and financial reporting. The FASB was formed in 1973
to take care of accounting standards in the public sector and then in 1984 the GASB was created
to look after the private sector.
The GASB standard identifies three methods of reporting. First method is one that
applies to businesses, second is one that applies to governmental agencies and third to
Comparison of Accounting Standards and Financial Statements4
governmental agencies with business types. In contrast the Financial Accounting Standard
Board only recognizes a single method of accounting reporting.
Both agencies have different ways that…