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Both SFAC and SFAS has been superseded by the FASB Accounting Standards Codification, which became effective after September 2009.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 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 is Sfac 5 in accounting? ›
Statement of Financial Accounting Concepts (SFAC) No. 5. a. Recognition and Measurement in Financial Statements of Business Enterprises.
Which standard setting body issues the statements of financial accounting concepts sfac that form the basis of GAAP in the united states? ›
The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB.
What is the Sfac number 6? ›
Statement of Financial Accounting Concept (SFAC) No. 6 deals with the elements or items found on financial statements. Details regarding comprehensive income, distributions to owners, equity, expenses, liabilities, owner investments, revenues, and other elements are clearly defined.
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 is a SFAC? ›
The Statements of Financial Accounting Concepts (SFAC) are a series of publications from the Financial Accounting Standards Board (FASB) that set forth fundamental objectives and concepts that the FASB uses in developing future standards of financial accounting and reporting.
What are the four 4 elements of financial statement? ›
Financial statements can be divided into four categories: balance sheets, income statements, cash flow statements, and equity statements.
How to pass sfas reddit? ›
Tips for Sfas
- Don't run slower than a 35 minute 5 mile don't ruck slower than a 2:35 12 mile. ...
- Bring a different therapy item than your battle buddy. ...
- MAKE SURE YOU CAN CLIMB A ROPE!
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).
How long does SFAS last? ›
Kennedy Special Warfare Center accepts students from allied nations. The first phase of the Special Forces Qualification Course is Special Forces Assessment and Selection (SFAS), consisting of twenty-four days of training at Camp Mackall. SFAS includes numerous long-distance land navigation courses.
How many Sfac are there? ›
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 ...
What is SFAC No 2? ›
Statement of Financial Accounting. Concepts No. 2. Qualitative Characteristics of Accounting Information. Financial Accounting Standards Board.
What are the three components of reliability in pre sfac no 8? ›
Reliability is composed of three parts: verifiability, representational faith- fulness, and neutrality. Verifiability. Verifiability in SFAC No.
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 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 ...
What is financial accounting standard concept? ›
Financial accounting standards are defined rules or principals governing the accounting of economic transactions. They are usually issued by a country's own accounting standards board or similar neutral organization.
