The GAAP Standard-Setting Process
How New Accounting Standards Are Developed
The FASB follows a structured due process before issuing new accounting standards. This process encourages transparency, public participation, and careful evaluation of proposed guidance.
- Identify an accounting issue.
- Conduct research and gather stakeholder input.
- Issue an Exposure Draft.
- Receive and evaluate public comments.
- Revise the proposal if necessary.
- Issue a final Accounting Standards Update (ASU).
- Incorporate the ASU into the FASB Accounting Standards Codification.
Tip
An Accounting Standards Update (ASU) changes GAAP but is not GAAP by itself until incorporated into the Codification.
Summary
The due process ensures accounting standards are carefully evaluated before becoming authoritative guidance.