What is the relationship between GAAP and the Federal Accounting Standards Advisory Board (FASAB)?

The relationship between GAAP and the Federal Accounting Standards Advisory Board (FASAB) is that FASAB is responsible for establishing and improving accounting standards specifically for federal government entities in the United States. The acronym GAAP stands for Generally Accepted Accounting Principles, which encompass the framework of accounting standards and guidance used for financial reporting. Federal entities must follow GAAP, but the standards set for them differ from those applied to private-sector organizations.

FASAB's role is crucial because it tailors GAAP to address the unique financial reporting needs of federal agencies, thereby ensuring transparency and accountability in government financial reporting. This means that while GAAP provides a general framework, FASAB specifies what that framework looks like for federal entities, thereby enhancing the relevance of financial information for stakeholders, such as Congress and the public.

Understanding the purpose of FASAB reinforces the importance of tailored accounting standards that meet the distinct needs of federal operations, differentiating them from for-profit and state/local governments that may follow different standards.