Which entity creates the accounting rules for companies operating in the U.S.?

The Financial Accounting Standards Board (FASB) is the entity responsible for establishing accounting rules and standards for companies operating in the United States. FASB's mission is to improve the financial reporting process by creating and maintaining standards that enhance the relevance and reliability of financial statements. These standards, known as Generally Accepted Accounting Principles (GAAP), guide how financial information should be reported, ensuring consistency and transparency in financial reporting across different companies and industries.

FASB's role is crucial, as it allows investors, creditors, and other stakeholders to compare financial statements reliably and make informed economic decisions. The board conducts extensive research, engages with stakeholders, and considers emerging business practices to keep its standards relevant and effective.

In contrast, the Governmental Accounting Standards Board (GASB) focuses on establishing accounting standards for state and local governments, while International Financial Reporting Standards (IFRS) set guidelines for companies outside of the U.S. The Institute of Management Accountants (IMA) primarily supports management accounting practices rather than creating accounting standards for external financial reporting.