Question

Compare and contrast the institutional process used by FASAB for establishing generally accepted accounting principles for the federal government with the process used by FASB for developing accounting standards.

Answer 1

FASABs standards have been recognized as GAAP for federal entities since October 1999, some federal entities follow GAAP for nongovernment entities promulgated by the private sector FASB GAAP. In early 2000, the FASAB recognized the practice as acceptable for those entities that have been following FASB GAAP to avoid an immediate and unanticipated requirement that these federal entities follow federal GAAP after the FASAB was recognized as the Rule 203 standards setting body for the federal government .

Providing interim guidance on the applications of standards issued by the FASB serves to proactively address entity concerns that moving the hierarchy of generally accepted accounting principles into the accounting literature without addressing the use of FASB GAAP would require a sudden and dramatic change in practice.