Accounting Principles Board
The authoritative body that established the Generally Accepted Accounting Principles overseen and organized by the American Institute of Public Accountants operated from 1959-1973.
Accounting Principles Board Details
The APB is a precursor to the new Financial Accounting Standards Board (FASB). Its key roles were to issue the recommended guidelines and rules that guided the accounting principles laid down to form the Generally Accepted Accounting Principles (GAAP).
The GAAP standards and procedures necessitate easier reviewing of the financial statements of a company's performance and result against another company by investors and auditors. Fundamentally, all public businesses in the United States follow GAAP standards.
APB's membership comprises representatives from corporate executives, accounting firms, and academics who ranged from 18 to 21 in number. For an opinion to take hold and be issued, it was a requirement that a two-thirds majority rule was required. The APB succeeded in the Committee on Accounting Procedure. The committee was the first to attempt to set financial reporting standards. After World War II, the committee's influence was waning and was then disbanded.
Real-World Example of Accounting Principles Board
The Financial Accounting Standards Board (FASB) establishes the guidelines for creating financial records and accounting reports. FASB is essential in creating consistent financial information aimed at improving clarity.
Most of the opinions and pronouncements of the APB ceased to be used after its replacement by FASB; yet, some of the opinions remain in use. For instance, the statements that had included the content and the structure of the financial statements, guidelines on the consolidation of the financial statements, procedures on treating debt, and strategies on the interim financial reporting.
Reasons that necessitated the replacing of the APB by the FASB:
- The amount of the APB output was small- in a span of the 14 years in operation, the number of opinions released was 31 and four statements, which proved to be a small number to the years in operation. The low output was because the representatives only operated on a part-time basis necessitating FASB to have full-time staff.
- There was a necessity to create a new body independent of the American Institute of Public Accountants that potentially influenced APB's opinions as a parent organization- this consequently limited influence from any internal body.
- There was a large number of qualified approvals attached to the APB's opinion documents by the representatives. FASB issued a lot more content to address a wide range of accounting topics reducing the number of attachments to the opinion documents.
History of the Accounting Principles Board
In its brief existence, APB issued a total of 31 opinions. Here are some of the opinions:
- New Depreciation Guidelines and Rules - establishes provisions on when accountants may use the IRS guidelines regarding depreciation.
- Accounting for the "Investment Credit" - provides standards for investment credit.
- Accounting for the "Investment Credit" - provides clarification on consideration of investment credits as net income.
- Reporting of Leases in Financial Statements of Lessee - provides a discussion of "leased property" reporting and the specific aspects included in the financial statements.
- Status of Accounting Research, Bulletins - reviews Accounting Research Bulletins.
- Accounting for Leases in Financial Statements of Lessors -consolidates accounting information for a lease property and factors to be considered.
- Accounting for the Cost of Pension - strategizes on the factors to consider when accounting for the pension costs.
- Reporting the Results of Operations - confers the reporting requirements on the net income and the extraordinary items.
- Omnibus Opinion (1966) - provides guidelines and insights on the tax allocation accounts, the consolidation of the financial statements, tax allocation, and stock-related activities.
- Accounting for Income Taxes - guidelines on how to appropriate and account for income taxes.
- Omnibus Opinion (1967) - provides guidelines and guidance on the allowances, depreciation, deferred compensation, debt, and capital changes.
- Earnings per Share - provides a discussion on the earnings per share, including the stocks' computations, the securities, and the "treasury stock."
- Business Combinations - recommendations on accounting and reporting business combinations.
- Intangible Assets - provides for guidelines on the reporting of goodwill and various intangible assets.
- The Equity Method of Accounting for Investments in Common Stock - guidelines on whether equity should be determined in applying to common stock.
- Reporting Changes in Financial Position - provides guidelines on the reporting process for the financial position changes.
- Accounting Changes - defines the various types of accounting changes and how to report each type.
- Interest on Receivables and Payables - clarifies the interest applied in the case of the receivables and payables.
- Disclosure of Accounting Principles - provides insights on the disclosure of the accounting principles in the financial statements.
- Accounting for Income Taxes - Special Areas Accounts for establishing the guidelines of reporting intangible developmental costs and subsequent subsidiaries.
- Accounting for Income Taxes - (Investments in Common Stock Accounted for by the Equity method) - provides for the procedure for accounting income taxes other than Subsidiaries and Corporate Joint Ventures.
- Accounting for stock issued to employees - reporting guidelines for stocks provided as compensation for the employees.
- Early Extinguishment of Debt - makes provisions for the differences associated with debt-related issues.
- Accounting for Lease Transactions by Manufacturer or Dealer Lessors - Provides for procedures on lease transactions.
- Interim Financial Reporting - clarifies the accounting principles concerning the reporting of the interim financial reports.
- Accounting for Nonmonetary Transactions - substantiates that nonmonetary transactions should be value-based.
- Disclosure of Lease Commitments by Lessees - describes all that pertains to the disclosure of lease agreements.