DEFINITION of Financial Accounting Foundation - FAF
The Financial Accounting Foundation (FAF) is an independent, private-sector organization that is mainly responsible for establishing and improving financial accounting and operating standards, and educating its constituents about those standards. The Financial Accounting Foundation has responsibility for the oversight, administration and finances of two accounting boards and their advisory councils: the Governmental Accounting Standards Board (GASB), and the Financial Accounting Standards Board (FASB). GASB is a private non-governmental organization that creates accounting reporting standards, or generally accepted accounting principles (GAAP), for U.S. state and local governments.
BREAKING DOWN Financial Accounting Foundation - FAF
FASB is responsible for standards for publicly traded companies, private companies and not-for-profit organizations. Taxpayers, holders of municipal bonds, legislators and oversight bodies rely on this financial information to shape public policy and make investments. The Financial Accounting Foundation (FAF) also selects the members of the boards and councils that set accounting standards and protects their independence.
Members of the Financial Accounting Foundation (FAF) Team
The FAF includes the FAF management team, the FAF board of trustees, FASB, and GASB. The FAF is a non-stock Delaware corporation established in 1972 that operates only for educational, charitable, scientific and literary purposes. The FAF, FASB or GASB do not receive funds from Federal, state or local governments.
The FAF is governed by a board of trustees: an independent body of leaders with diverse personal and professional backgrounds and experience, including business, investment, capital markets, accounting, accounting and business education and government. The size of the board is typically 14 to 18 members. Trustees serve a single, five-year term.
Because capital markets and governments include many participants with competing demands and proprietary interests, independence is key to the activities of the FAF's standard-setting boards, FASB and GASB. This independence allows them to provide objectivity and integrity to the U.S. financial reporting system. Because the FAF is an independent entity with no stakes in specific outcomes, the FAF's boards can make objective decisions on accounting standards without being swayed by industrial lobbying groups or political pressure.
The work of the FAF, FASB, and GASB is funded by accounting support fees, subscription and publication revenue, and investment income. The largest share of financial support for the standard-setting boards comes from accounting support fees. Those fees are paid by publicly traded companies (for FASB) and municipal bond brokers and dealers (for GASB).