Accounting Principles Board

Accounting Principles Board (APB) was the principal accounting standard-setting body in the United States from 1959 to 1973. Established by the American Institute of Certified Public Accountants (AICPA), the APB was responsible for developing accounting principles and issuing authoritative guidance for financial reporting by business enterprises. During its existence, the Board issued Accounting Principles Board Opinions (APB Opinions), which became an important component of Generally Accepted Accounting Principles (GAAP). In 1973, the APB was replaced by the Financial Accounting Standards Board (FASB), which assumed responsibility for establishing accounting standards in the United States.

History

The Accounting Principles Board was established in 1959 by the American Institute of Certified Public Accountants as the successor to the Committee on Accounting Procedure (CAP).

Its creation reflected the growing need for more comprehensive and authoritative accounting standards as the size and complexity of American corporations and financial markets increased. The Board sought to reduce inconsistencies in accounting practices and improve the comparability of financial statements.

During its fourteen years of operation, the APB issued numerous accounting opinions and interpretative guidance covering a wide range of accounting topics.

In 1973, following criticism regarding its independence, efficiency, and standard-setting process, the APB was replaced by the independent Financial Accounting Standards Board.

Objectives

The principal objectives of the Accounting Principles Board included:

developing accounting principles;
improving consistency in financial reporting;
reducing diversity in accounting practices;
providing authoritative accounting guidance;
promoting reliable financial reporting;
supporting investor confidence.

These objectives contributed to the evolution of standardized accounting practices in the United States.

Organization

The APB operated under the authority of the American Institute of Certified Public Accountants.

Board members were generally selected from:

public accounting firms;
business enterprises;
academic institutions;
other accounting professionals.

Unlike the later FASB, APB members typically served on a part-time basis while continuing their primary professional responsibilities.

Responsibilities

The Accounting Principles Board was responsible for:

issuing APB Opinions;
developing accounting principles;
interpreting existing accounting guidance;
recommending improvements to accounting practices;
addressing emerging financial reporting issues.

Its pronouncements were recognized as authoritative guidance for financial reporting before the establishment of the FASB.

Publications

The principal publications issued by the APB included:

Accounting Principles Board Opinions (APB Opinions);
Interpretations of APB Opinions;
Statements relating to accounting principles.

Many APB Opinions continued to remain effective after the establishment of the FASB until they were superseded or incorporated into subsequent accounting standards.

Criticism

The Accounting Principles Board received criticism in several areas.

Major concerns included:

limited independence from the accounting profession;
slow standard-setting process;
part-time membership;
inconsistent responses to emerging accounting issues;
insufficient authority to enforce accounting standards.

These criticisms contributed to recommendations for the establishment of a more independent accounting standard-setting body.

Replacement by the FASB

In 1973, the Financial Accounting Standards Board succeeded the Accounting Principles Board.

Characteristic	Accounting Principles Board	Financial Accounting Standards Board
Years of operation	1959–1973	1973–present
Governing organization	American Institute of Certified Public Accountants	Financial Accounting Foundation
Membership	Primarily part-time	Full-time
Primary publications	APB Opinions	Accounting Standards Updates (ASUs)

The establishment of the FASB introduced a more independent and structured approach to accounting standard-setting in the United States.

Impact

Although relatively short-lived, the Accounting Principles Board played an important role in the development of modern accounting standards in the United States. Its opinions contributed significantly to the evolution of Generally Accepted Accounting Principles and influenced subsequent accounting guidance issued by the Financial Accounting Standards Board. The experience gained during the APB era also shaped the design of modern accounting standard-setting institutions and processes.