Establishing Inflation Accounting Standards in the United States : a Developmental Process

This article describes the procedures by which accounting standards are established in the United States. It illustrates the application of those procedures in practice, by describing how they are being applied to develop standards for accounting for inflation. The United States has a unique institutional structure for the promulgation of accounting standards a private sector Financial Accounting Standards Board (referred to as "the Board" or "the FASB") that is supported by, but independent of, government, industry, and public accountants' organizations. Independence and procedural safeguards are the foundations on which the FASB is built. The seven Members of the FASB serve full time and are required to sever all connections with the firms or organizations where they worked before joining the Board. The Board is assisted by a full-time staff of 45 professionals drawn from public accounting, industry, academe, and government. The Board Members are appointed and the activities of the FASB are funded by an independent Financial Accounting Foundation. The Foundation's trustees are nominated by six sponsoring organizations whose members have special interest in financial reporting. Those sponsoring organizations represent academic accountants (professors), public accountants, investors and investment advisors (financial analysts), corporate financial executives, management accountants, and investment bankers and brokers. So, to summarize, the sponsoring organizations nominate the trustees of the Foundation; the Foundation appoints Board Members and funds the operations of the Board; and the Board Members, with assistance of a staff, establish accounting standards. The funds are obtained by contributions from the business community and by sales of FASB publications.