While analyzing the relationship between Governmental Accounting Standards Board (GASB) and Financial Accounting Standards Board (FASB) I realized that both play an important role in the accounting field. There are different objectives for each board and I will explain the similarities and differences. I will describe the role of government regulation in the application of accounting standards and reporting requirements. Finally, I will present a situation in a governmental accounting environment in which FASB standards would apply.
The GASB was organized to establish standards of financial accounting and reporting for state and local government entities. The FASB was organized to establish standards of financial accounting and reporting for the private sector (www.gasb.org). The mission of both boards is to establish and improve standards of financial accounting and reporting that will result in useful information for users of financial reports, and to guide and educate the public, including issuers, auditors, and users of those financial reports.
Each board issues standards that improve the usefulness of financial reports based on the needs of financial users. Each board also improves the common understanding of the nature and purposes of information contained in financial reports. They also consider significant areas of accounting and financial reporting that can be improved through the standard-setting process. The boards also develop and use concepts to guide its work of establishing standards and providing a frame of reference or conceptual framework for resolving accounting issues.
The GASB and FASB are different in these aspects. The FASB keeps standards current to reflect changes in the economic environment and the GASB keeps standards current to reflect changes in the governmental environment. The makeup of the boards are the same, each has seven members, but the members of the GASB works on a part-time basis and may be employed by another organization.