Learn something new every day
More Info... by email
The Accounting Principles Board served as the deliberative body for the American Institute of Certified Public Accountants (AICPA), a professional association for those in the accounting industry. This board offered opinions and statements on generally accepted accounting principles (GAAP) in the United States from 1959 to 1973. These standards are used by accountants with federal agencies and corporations. The AICPA replaced the Accounting Principles Board with the Financial Accounting Standards Board (FASB) in 1973 to increase responsiveness to accounting issues.
The historical reputation of the AICPA provided legitimacy to the Accounting Principles Board during its brief life. The AICPA was created in 1887 as the leading industry organization for accountants working in the U.S. This institute set ethical, educational and professional standards for accountants at a time when corporations were expanding worldwide. The first board within the AICPA was the Committee on Accounting Procedure, which existed from 1936 to 1959. The board built on the committee’s work in preventing corrupt accounting principles that contributed to the 1929 stock market crash.
The U.S. Securities and Exchange Commission (SEC) relied on the Accounting Principles Board to establish accounting standards. The SEC is authorized under the Securities Exchange Act of 1934 to set standards for bookkeeping by publicly traded companies. SEC officials have worked with AICPA since 1934 to use the organization’s accounting knowledge for the public good. This public-private partnership allows the SEC to consult with leading accountants on ways to keep accurate accounting ledgers. Most of the opinions by the Accounting Principles Board and FASB have been incorporated into federal policies on public accounting.
The board issued 35 opinions and statements during its 14-year existence. Corporations and government agencies still use 19 board opinions as part of GAAP. A December 1967 decision by the board created criteria for reporting asset depreciation and deferred compensation. In August 1970, the board generated principles for reporting the transfer of assets as part of business combinations and mergers. The board’s decision in October 1972 set standards for corporate reporting of stocks used as payment for employees.
The AICPA replaced the Accounting Principles Board with FASB in 1973 because of criticisms of the previous board. The Accounting Principles Board was seen by critics as insufficiently independent from the federal government and corporations. The design of the FASB is informed largely by the failings of its past boards. The FASB requires its members to resign from corporate boards and sell off business interests during their five-year terms. These requirements allow FASB members to create accounting standards independent of personal and financial interests.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!