What Is Statement of Financial Accounting Concepts?
The Statement of Financial Accounting Concepts (SFAC) was a document issued by the Financial Accounting Standards Board (FASB) covering broad financial reporting concepts. FASB is the organization that sets down the accounting rules and guidelines that make up Generally Accepted Accounting Principles (GAAP).
The purpose of the SFAC document is to provide a general overview of accounting concepts, definitions, and ideas. It is seen as a prelude to the Statement of Financial Accounting Standards (SFAS).
Both SFAC and SFAS has been superseded by the FASB Accounting Standards Codification, which became effective after September 2009. This codification is now updated via Accounting Standards Updates (ASUs) and FASB Concept Statements.
Key Takeaways
- The Statement of Financial Accounting Concept (SFAC) was an overview of accounting and financial reporting terms issued by the FASB.
- The goal has been to establish accounting standards and guidelines for best practices among accountants, bookkeepers, and organizations preparing financial statements.
- Since 2009, these documents have given way to new issuance of accounting updates including Accounting Standards Updates and FASB Concept Statements.
Understanding Statement of Financial Accounting Concepts
Setting accounting standards is an extensive process starts with research, public hearings, and public comment and ends with the issuing of a new accounting standard that then becomes part of GAAP. The SFAC is part of this process in that it is used as a blueprint for the future development of reporting policy and procedures.
In recent years there has been pressure to harmonize accounting standards around the world. The international equivalent of the US-based FASB is the International Accounting Standards Board (IASB). The IASB helps develop standards for countries that require the use of International Financial Reporting Standards (IFRS).
FASB and IASB initially hoped to develop a common set of standards that would be acceptable around the world. But this approach encountered some resistance, and they have settled on a compromise in which the FASB will remain the standard issuer for the United States but endorse IFRS rules and guidelines issued by IASB.
Statement of Financial Accounting Standards
Statement of Financial Accounting Standards, or SFASs, are closely related documents and were published to address specific accounting issues, with a view to enhancing the accuracy and transparency of financial reporting. There would often be a lengthy public consultation about the potential consequences of a rule change before an SFAS was published to update guidelines.
Once an SFAS was published, it became part of the FASB accounting standards, known asgenerally accepted accounting principles(GAAP), that govern the preparation of corporate financial reports and are recognized as authoritative by theSecurities and Exchange Commission(SEC), which regulates American stock exchanges.
FAQs
The Statement of Financial Accounting Concepts (SFAC) was a document issued by the Financial Accounting Standards Board (FASB) covering broad financial reporting concepts. FASB is the organization that sets down the accounting rules and guidelines that make up Generally Accepted Accounting Principles (GAAP).
What are the 10 elements of the financial statements Sfac? ›
The 10 elements are: (1) assets, (2) liabilities, (3) equity, (4) investments by owners, (5) distributions to owners, (6) revenues, (7) expenses, (8) gains, (9) losses, and (10) comprehensive income. The 10 elements of financial statements defined in SFAC 6 describe financial position and periodic performance.
What is Sfac 5 in accounting? ›
SFAC No. 5 indicates that an item, to be recognized, should meet four criteria, subject to the cost-benefit constraint and the materiality threshold.
What is the statement of financial accounting standards SFAS? ›
The Statement of Financial Accounting Standards (SFAS) describes standards for professional accounting practices and procedures in the United States. Furthermore, it is published by the Financial Accounting Standards Board (FASB).
What does SFAC do? ›
SFAC is an exclusive Society focused on increasing incomes of small and marginal farmers through aggregation and development of agribusiness.
Which Sfac describes the objective of financial reporting? ›
Chapter 1, The Objective of General Purpose Financial Reporting, of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, emphasizes usefulness to existing and potential investors, creditors, and others in making rational investment, credit, and similar decisions.
What is the purpose of the FASB concept statement? ›
The FASB Concepts Statements are intended to serve the public interest by setting the objectives, qualitative characteristics, and other concepts that guide selection of economic phenomena to be recognized and measured for financial reporting and their display in financial statements or related means of communicating ...
What are the five basic financial accounting elements? ›
The 5 primary account categories are assets, liabilities, equity, expenses, and income (revenue)
What are the 5 basic financial statements for financial reporting? ›
The 5 types of financial statements you need to know
- Income statement. Arguably the most important. ...
- Cash flow statement. ...
- Balance sheet. ...
- Note to Financial Statements. ...
- Statement of change in equity.
The conceptual framework consists of six Statements of Financial Accounting Concepts (SFAC) comprising a set of objectives (SFAC 1 [Business Enterprises] and 4 [Non-business Organizations]), characteristics of information (SFAC 2) principles (SFAC 5) constraints (SFAC 2), and elements (SFAC3, 6) that are meant to help ...
SFAC 7 is a statement that provides a framework for using cash flows as a basis for accounting measurements, but it only deals with the... amount. SFAC 7 helps you come up with the amount. a) at initial recognition. b) in fresh-start measurements.
What is comprehensive income SFAC No 6? ›
SFAC No. 6 identifies two main components of comprehensive income: net income and other comprehensive income (OCI). Net income includes revenues, expenses, gains, and losses that are recognized in the income statement.
What is the meaning of SFA in accounting? ›
Statements of Financial Accounting Standards were put together to address accounting issues and financial transparency. Published SFAS became part of generally accepted accounting principles (GAAP) once published.
How long is SFAS good for? ›
At the end of the program, a board meets to select those Soldiers most qualified to attend SFQC (selection at SFAS is good for 24 months).
What is SFAS explained? ›
Special Forces training is long and hard. There are several phases of training to go through before one becomes a "Green Beret". The first step is to be "selected" in the Special Forces Assessment and Selection course or SFAS. Special Forces Assessment and Selection is three weeks long.
What are the IFRS financial statements? ›
The standard requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and a statement of cash flows.
What are the FASB concept Statements? ›
The FASB Concepts Statements are intended to serve the public interest by setting the objectives, qualitative characteristics, and other concepts that guide selection of economic phenomena to be recognized and measured for financial reporting and their display in financial statements or related means of communicating ...
What is the accounting concept of financial statement? ›
The financial statements report on five main aspects of a business. The revenue and expenses are accounted for in the income statement and the asset, liabilities, and equity are reported for in the balance sheet.
What sfac describes how cash flows and present values are used when making accounting measurements? ›
According to SFAC 7, the elements of a present value measurement are (1) estimates of future cash flows; (2) expected variability of their amount and timing; (3) the time value of money based on the risk-free interest rate; (4) the price of uncertainty inherent in an asset or liability; and (5) other factors, such as ...
