Financial Accounting Foundation

The Financial Accounting Foundation (FAF) is a United States private-sector nonprofit organization responsible for supporting, overseeing, and protecting the independence of the country's principal accounting standard-setting bodies. Organized as a non-stock Delaware corporation in 1972, the foundation was created in response to concerns about the effectiveness and credibility of the accounting rule-making system then centered on the Accounting Principles Board. Its formation followed recommendations in the Wheat Report, prepared under the leadership of former Securities and Exchange Commission official Francis M. Wheat. The report proposed replacing the Accounting Principles Board with an independent seven-member Financial Accounting Standards Board (FASB), while placing the selection and oversight of that board in the hands of a separate foundation. FAF's core responsibilities extend beyond simply publishing accounting rules. It appoints members of the standard-setting boards and their advisory councils, oversees their administration and finances, monitors the integrity and due-process aspects of their work, educates stakeholders about resulting standards, and seeks to preserve the boards' independence from individual commercial or political interests. Its principal standard-setting bodies are FASB, which establishes accounting and financial reporting standards for nongovernmental entities, and the Governmental Accounting Standards Board (GASB), which develops standards for U.S. state and local governments. The foundation also supports the Financial Accounting Standards Advisory Council (FASAC) and the Governmental Accounting Standards Advisory Council (GASAC), which provide constituent input to FASB and GASB respectively. FAF was established on June 30, 1972, after the American Institute of Certified Public Accountants' governing council approved the Wheat Report in May of that year. Its initial trustees were drawn from professional accounting, business, investment, and academic constituencies. Ralph E. Kent of Arthur Young & Co. became the foundation's first president. FASB began operating in 1973 and became the principal U.S. private-company and public-company accounting standard setter. In 1984, FAF established GASB to address the distinct reporting needs of state and local governments. The division between private-sector and governmental standards subsequently became a recurring subject of debate, particularly for organizations with mixed public and private characteristics such as public universities, hospitals, and utilities. The foundation has periodically adjusted its governance structure in response to criticism from regulators and affected stakeholders. In the 1980s, disputes arose over the scope of GASB's authority and the comparability of financial statements issued by public and private institutions. In 1989, FAF voted to require certain government-owned utilities, hospitals, colleges, and universities to use FASB standards rather than GASB standards, while also moving to limit GASB's jurisdiction. The decisions generated opposition from parts of the governmental accounting community. In 1996, following pressure for greater public representation, FAF agreed to expand the number of public-interest trustees so that public representatives constituted approximately half of its board. FAF moved from Stamford to Norwalk, Connecticut, in 1988 and has remained headquartered there. It has also faced periods of financial pressure, including reported operating shortfalls in the early 1990s that were associated with lower private contributions and declining publication sales. More recently, the foundation has emphasized digital access and procedural transparency. In February 2023, it introduced free online access to the FASB Accounting Standards Codification and GASB Governmental Accounting Research System, including navigation functions that had previously been available only through paid access. In April 2023, it add…

The Financial Accounting Foundation emerged from a major rethinking of U.S. accounting governance in the early 1970s. The accounting profession had faced increasing criticism after high-profile accounting-related litigation and concerns that the Accounting Principles Board, established in 1959, did not provide a sufficiently independent or authoritative mechanism for setting rules. In response, former Securities and Exchange Commission official Francis M. Wheat led a review whose recommendations became known as the Wheat Report. In May 1972, the governing council of the American Institute of Certified Public Accountants approved the report's central proposals. It called for a new seven-member Financial Accounting Standards Board to replace the Accounting Principles Board and for a separate foundation with trustees responsible for selecting and overseeing the new board. The proposed trustees were intended to represent multiple constituencies, including public accounting, corporate finance, investment analysis, and accounting education. FAF was formally organized on June 30, 1972, as a non-stock Delaware corporation. Its initial trustees were appointed later that year, with Ralph E. Kent of Arthur Young & Co. serving as its first president. The foundation also helped establish the financial base for the new standards program through commitments from accounting firms and other supporters. FASB began its work in 1973 and became the principal source of authoritative U.S. generally accepted accounting principles for nongovernmental entities. FAF's role was to provide institutional supervision rather than to act as a conventional operating company. It selected board members, managed administrative and financial arrangements, and was expected to protect the standard-setting process from undue influence while ensuring that affected parties could participate. In 1984, FAF created GASB to address accounting and financial reporting by U.S. state and local governments. The two-board structure recognized that governmental entities have different accountability, budgetary, and financing characteristics from private companies. It also created new jurisdictional questions. During the 1980s, commentators and affected organizations debated whether standards for publicly owned utilities, hospitals, colleges, and universities should be developed under GASB or FASB. In 1989, FAF voted to require several categories of government-owned entities to apply FASB standards and separately voted to limit GASB's jurisdiction. The changes were supported by some higher-education groups but provoked opposition among state and local government organizations and parts of the accounting profession. The foundation also experienced financial and governance pressures. In the early 1990s, it reported operating shortfalls associated in part with declining private contributions and publication sales. At the same time, questions were raised about whether its trustee structure provided enough public representation. In 1996, after the Securities and Exchange Commission pressed for governance reforms, FAF agreed to increase public-interest representation. The foundation's board had sixteen seats at the time, and the restructuring ultimately resulted in approximately half of the trustees coming from the public. FAF moved its offices from Stamford to Norwalk, Connecticut, in 1988. It continued to oversee FASB and GASB, as well as the two advisory councils that provide constituent input to those boards: FASAC and GASAC. The foundation's governance system also includes committees dealing with executive matters, development, appointments and evaluations, finance and compensation, audit, standard-setting process oversight, and corporate governance. In the 2000s and 2010s, the organization continued to refine its board and executive arrangements. The FASB board, which had operated with seven members for much of its history, was reduced to five members in 2011. FAF leadership during this period included chairman John J. Brennan, chairman Charles Noski, and president and chief executive Teresa S. Polley. In February 2020, former acting president John Auchincloss was appointed executive director. Edward C. Bernard became chairman of the board of trustees for a term beginning in January 2023. The foundation has increasingly emphasized public accessibility and transparency in the digital era. In February 2023, it opened free online access to the FASB Accounting Standards Codification and GASB Governmental Accounting Research System, including navigation features previously connected with paid subscriptions. In April of the same year, it added web-based channels for stakeholders to complain about possible failures by FASB or GASB to follow their established procedures. These initiatives reflect FAF's continuing attempt to balance technical independence with public accountability. Today, FAF remains headquartered in Norwalk and operates as an independent private-sector nonprofit rather than a government regulator or listed company. Its institutional significance comes from its stewardship of the organizations that develop widely used U.S. financial and governmental accounting standards. Through board appointments, oversight, financing, education, advisory structures, and procedural safeguards, it provides the governance framework supporting FASB and GASB.

1. 2023Free digital access introduced

   FAF launched free online access to the FASB Accounting Standards Codification and GASB Governmental Accounting Research System.

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2. 2020Executive director appointed

   FAF appointed John Auchincloss, previously its acting president, as executive director.

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3. 2011FASB board reduced to five members

   FAF changed the size of the FASB board from seven members to five.

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4. 1996Governance restructuring

   The foundation agreed to expand public-interest representation on its board following calls for governance reform.

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5. 1988Headquarters moved to Norwalk

   FAF relocated from Stamford to Norwalk, Connecticut.

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6. 1984GASB established

   FAF created the Governmental Accounting Standards Board to develop standards for U.S. state and local governments.

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7. 1973FASB begins operations

   The foundation's new Financial Accounting Standards Board began its role as the principal U.S. private-sector accounting standard setter.

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8. 1972Wheat Report approved

   The AICPA governing council approved recommendations to replace the Accounting Principles Board with FASB and create a separate foundation to oversee the new system.

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9. 1972FAF incorporated

   The Financial Accounting Foundation was organized on June 30 as a non-stock Delaware corporation.

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An independent private-sector steward of U.S. accounting standard-setting, positioned around objectivity, due process, public-interest governance, and the integrity of financial reporting.

• Financial Accounting Standards Board oversightPrivate-sector accounting standard-setting1973

  FAF selects and oversees the Financial Accounting Standards Board, which develops authoritative U.S. generally accepted accounting principles for nongovernmental entities. The foundation supports the board's administration, finances, membership, due process, and independence rather than issuing ordinary commercial products itself.

• Governmental Accounting Standards Board oversightGovernmental accounting standard-setting1984

  FAF established and oversees GASB, the body responsible for accounting and financial reporting standards used by U.S. state and local governments. Its role includes appointing board members, supervising administration and finances, and protecting the integrity of the governmental standard-setting process.

• FASB Accounting Standards Codification accessAccounting standards information service2023

  The FASB Accounting Standards Codification organizes authoritative U.S. nongovernmental accounting guidance. In 2023, FAF made online access and navigation available without charge, broadening public access to the standards maintained through the FASB system.

• GASB Governmental Accounting Research System accessGovernmental accounting information service2023

  The GASB Governmental Accounting Research System provides online access to governmental accounting standards and related research material. FAF opened the system's online access and navigation features to users without charge in 2023.

• FASAC and GASAC advisory structuresStakeholder consultation

  The Financial Accounting Standards Advisory Council and Governmental Accounting Standards Advisory Council provide structured input from constituents to FASB and GASB. These councils help connect standard setters with preparers, auditors, investors, finance officials, academics, and other affected groups.

• 2023Free online access to accounting standards systemsProduct launch

  FAF sought to broaden access to authoritative accounting guidance and research resources.

  What changed. The foundation made the FASB Accounting Standards Codification and GASB Governmental Accounting Research System available online for free, including navigation functions.

  Aftermath. Users gained broader access to the principal U.S. nongovernmental and governmental accounting standards research platforms.

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• 2023Introduction of stakeholder procedural complaint channelsOther

  The foundation responded to recommendations concerning transparency and adherence by FASB and GASB to their established standard-setting procedures.

  What changed. FAF added website features through which stakeholders could submit complaints about possible procedural noncompliance by FASB or GASB.

  Aftermath. The initiative created an additional formal avenue for stakeholder feedback and oversight of the standard-setting process.

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• 2011Reduction of FASB board sizeStrategy

  FASB had historically operated with seven board members, and FAF periodically reviewed the structure of its standard-setting bodies.

  What changed. FAF reduced the FASB board from seven members to five.

  Aftermath. The change created a smaller governing body for private-sector accounting standard-setting.

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• 1996Expansion of public-interest representationStrategy

  Regulators and stakeholders questioned whether FAF's trustee structure adequately represented the broader public interest.

  What changed. FAF agreed to increase the number of trustees representing the public, ultimately making public-interest members approximately half of the board.

  Aftermath. The restructuring strengthened the foundation's formal public representation and responded to governance concerns raised by the Securities and Exchange Commission and other stakeholders.

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• 1989Reallocation of accounting jurisdiction for certain government-owned entitiesStrategy

  FAF faced debate over whether government-owned utilities, hospitals, colleges, and universities should follow governmental standards from GASB or private-sector standards from FASB.

  What changed. The foundation voted to require specified government-owned entities to base their accounting decisions on FASB standards rather than GASB standards and also moved to limit GASB's jurisdiction.

  Aftermath. Some higher-education organizations supported the change, while state and local government groups and other parts of the accounting profession criticized it and discussed forming a separate governmental standards organization.

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• 2023FAF launches free access to FASB and GASB online systems

  The foundation made the FASB Accounting Standards Codification and GASB Governmental Accounting Research System available online without charge, including navigation capabilities that had previously been associated with paid access.

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• 2023FAF adds stakeholder complaint procedures to its website

  Following recommendations from the Securities and Exchange Commission, FAF added online features allowing stakeholders to raise complaints about FASB and GASB compliance with established procedures.

  RegulationOther
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• 2022Edward C. Bernard named FAF board chairman

  Edward C. Bernard was selected to chair the foundation's board of trustees for a three-year term beginning January 1, 2023, succeeding Kathleen L. Casey.

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• 2011FAF reduces FASB board size

  The foundation reduced the Financial Accounting Standards Board from seven members to five, changing the governance structure of the U.S. private-sector accounting standard setter.

  Leadership change
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1. Financial Accounting Foundation
2. Financial Accounting Foundation official website