The Financial Accounting Standards Board (FASB) has had responsibility for providing guidance on generally accepted accounting principles for all not-for-profit organizations.
The correct answer and explanation is:
Correct Answer: True
Explanation:
The Financial Accounting Standards Board (FASB) is the primary body responsible for establishing and improving Generally Accepted Accounting Principles (GAAP) in the United States. This includes providing accounting standards for not-for-profit (NFP) organizations.
Since 1973, FASB has played a central role in standardizing financial reporting for both public and private entities, including not-for-profit organizations such as charities, foundations, educational institutions, and religious organizations. Although these entities do not operate to earn profit, they still engage in financial activities that require consistent, transparent, and comparable reporting for stakeholders such as donors, grant-making institutions, and regulatory bodies.
To fulfill this need, FASB issues Accounting Standards Codification (ASC) topics that apply specifically to not-for-profits. A key example is FASB ASC 958 – Not-for-Profit Entities, which outlines how these organizations should prepare and present financial statements. It includes guidance on:
- Reporting revenues and expenses
- Classifying net assets (with or without donor restrictions)
- Cash flow reporting
- Donor-imposed restrictions
- Endowment fund accounting
This guidance ensures that users of NFP financial statements can make informed decisions and accurately assess an organization’s financial health and stewardship of resources.
Before FASB took over, various industry-specific or government agencies provided guidance to NFPs, leading to inconsistency and confusion. FASB’s involvement brought much-needed uniformity and credibility to financial reporting in the sector.
In conclusion, True is the correct answer. The FASB has clear and authoritative responsibility for setting GAAP for all not-for-profit organizations, ensuring transparency, accountability, and comparability in their financial reporting.