What role does the Financial Accounting Standards Board (FASB) play in governmental accounting?

The Financial Accounting Standards Board (FASB) primarily focuses on establishing and improving financial accounting and reporting standards for private sector entities, including businesses and for-profit organizations. This means that FASB is responsible for defining Generally Accepted Accounting Principles (GAAP) specifically for the private sector, ensuring consistency, transparency, and comparability in financial statements.

In contrast, governmental accounting is guided by different standards tailored for state and local governments, primarily set by the Governmental Accounting Standards Board (GASB). GASB specifically addresses the unique financial reporting needs and regulatory environments of government entities. Understanding the distinct roles of FASB and GASB is crucial for distinguishing between their functions within different sectors of the economy.