Which organization defines GAAP for private sector entities?

The Financial Accounting Standards Board (FASB) is the organization responsible for establishing and improving financial accounting and reporting standards for private sector entities within the United States. GAAP, which stands for Generally Accepted Accounting Principles, refers to the set of rules and guidelines that these entities must follow in their financial reporting.

FASB plays a crucial role in developing these standards to ensure transparency, consistency, and comparability in financial statements. It issues standards through a rigorous due process that includes public input and review, making it a cornerstone of private sector financial reporting.

In contrast, other organizations mentioned have distinct roles in the financial reporting landscape. The Federal Accounting Standards Advisory Board (FASAB) focuses on accounting standards for federal government entities, while the Governmental Accounting Standards Board (GASB) establishes standards for state and local government entities. The International Financial Reporting Standards (IFRS) refers to the global accounting standards developed by the International Accounting Standards Board (IASB) and is not limited to private sector entities in the U.S.

Thus, the FASB is clearly the correct choice when identifying the organization that defines GAAP for private sector entities.