Financial Reporting (FAR)

The Financial Accounting Standards Board (FASB) sets U.S. GAAP for nongovernmental entities. Its single authoritative source is the FASB Accounting Standards Codification (ASC); changes are issued through Accounting Standards Updates (ASUs), which amend the Codification rather than stand on their own.

To provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors in making decisions about providing resources to the entity (e.g., buying/selling equity or debt, providing or settling loans).

Relevance and faithful representation. Relevance = capable of making a difference in decisions (predictive value, confirmatory value, and materiality). Faithful representation = complete, neutral, and free from error.

Comparability, verifiability, timeliness, and understandability. These enhance the usefulness of information that is already relevant and faithfully represented but cannot make non-useful information useful.

Information is material if omitting, misstating, or obscuring it could reasonably be expected to influence decisions that primary users make based on the financial statements. Materiality is entity-specific — it depends on the nature and magnitude of the item in the context of an individual entity's report.

Historical cost (entry price at acquisition, sometimes adjusted for depreciation/amortization/impairment) and current value, which includes fair value, value in use / fulfillment value, and current cost. Different ASC topics prescribe which attribute applies to a given asset or liability.