What Is Statement of Financial Accounting Concepts?
The Statement of Financial Accounting Concepts (SFAC) is a document issued by the Financial Accounting Standards Board (FASB) covering broad financial reporting concepts. FASB is the organization that sets down the accounting rules and guidelines that make up GAAP. The purpose of the SFAC document is to provide a general overview of accounting concepts, definitions, and ideas. It is seen as a prelude to the Statement of Financial Accounting Standards (SFAS).
Understanding Statement of Financial Accounting Concepts
Setting accounting standards is an extensive process starts with research, public hearings, and public comment and ends with the issuing of a new accounting standard that then becomes part of GAAP. The SFAC is part of this process in that it is used as a blueprint for the future development of reporting policy and procedures.
In recent years there has been pressure to harmonize accounting standards around the world. The international equivalent of the US-based FASB is the International Accounting Standards Board (IASB). The IASB helps develop standards for countries that require the use of International Financial Reporting Standards (IFRS).
FASB and IASB initially hoped to develop a common set of standards that would be acceptable around the world. But this approach encountered some resistance, and they have settled on a compromise in which the FASB will remain the standards issuer for the United States but endorse IFRS rules and guidelines issued by IASB.