Similarities and Differences Between GASB and FASB

In the realm of financial accounting, two prominent entities play a crucial role in establishing and maintaining accounting standards in the United States – the Governmental Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB). While both organizations contribute to the development of accounting principles, they cater to distinct sectors, each with its own set of objectives. In this article, we delve into the similarities and differences between GASB and FASB.

GASB: Governmental Accounting Standards Board

Overview

The Governmental Accounting Standards Board (GASB) is a private-sector organization responsible for establishing accounting and financial reporting standards for state and local governments in the United States. Created in 1984, GASB aims to enhance transparency, accountability, and financial reporting within the public sector.

Objectives

GASB’s primary objectives include developing standards that provide relevant financial information to users, aiding in decision-making processes, and fostering consistency in financial reporting among different government entities.

Authority

GASB operates under the financial accounting and reporting principles established by the American Institute of Certified Public Accountants (AICPA) and has the authority to establish standards for state and local governments.

FASB: Financial Accounting Standards Board

Overview

The Financial Accounting Standards Board (FASB), established in 1973, is a private, non-profit organization that sets accounting standards for the private sector in the United States. FASB’s mission is to establish and improve financial accounting and reporting standards, providing decision-makers with useful information.

Objectives

FASB’s core objectives include ensuring consistency and comparability in financial reporting, providing information that is relevant to users, and promoting transparency in financial statements of private companies.

Authority

FASB derives its authority from the Securities and Exchange Commission (SEC), which recognizes and enforces its standards for publicly traded companies. It sets standards that govern the preparation of financial reports by non-governmental entities.

Similarities between GASB and FASB

1. Non-Governmental Status: Both GASB and FASB operate as private-sector entities, independent of the government, to maintain impartiality and objectivity in standard-setting.
2. Mission for Standardization: Both organizations share the common goal of establishing and improving accounting standards to enhance financial reporting and decision-making.
3. Influence on Financial Reporting: GASB and FASB significantly impact financial reporting practices, albeit in different sectors – governmental and private.

Differences between GASB and FASB

1. Scope of Applicability:

• GASB: Focuses on establishing standards for state and local governments.
• FASB: Sets standards for the private sector, including publicly traded and private companies.

1. User Groups:

• GASB: Targets users of financial information related to state and local governments, such as citizens, legislators, and investors in municipal bonds.
• FASB: Aims to meet the needs of investors, creditors, and other users of financial information in the private sector.

1. Basis of Accounting:

• GASB: Allows for both accrual and modified accrual basis of accounting.
• FASB: Generally requires the use of accrual basis accounting for the private sector.

Conclusion

In summary, while GASB and FASB share common ground as standard-setting bodies, their distinct scopes, objectives, and areas of influence set them apart. Understanding the similarities and differences between GASB and FASB is crucial for professionals and stakeholders in the fields of governmental and private-sector accounting, as it allows for informed decision-making and compliance with relevant financial reporting standards.

References:

1. Governmental Accounting Standards Board (GASB) – Official Website
2. Financial Accounting Standards Board (FASB) – Official Website
3. American Institute of Certified Public Accountants (AICPA) – Official Website