FASB and IASB
/ FASB = 'FAZ-bee'; IASB = say the letters I-A-S-B /
Someone has to write the rulebook. Just as a sport needs a body that decides what counts as a foul, accounting needs organizations that decide what counts as revenue, an asset, or an expense. The FASB and the IASB are the two such bodies that matter most in the world today: the FASB writes US GAAP, and the IASB writes IFRS.
FASB stands for the Financial Accounting Standards Board, a private, independent, US-based organization (overseen by the Financial Accounting Foundation) that has set US GAAP since 1973. IASB stands for the International Accounting Standards Board, a private, independent, London-based body (under the IFRS Foundation) that sets IFRS, used in most of the world. Both follow a careful 'due process': they research an issue, publish a draft for public comment, weigh the responses, and only then issue a final standard. Crucially, neither is a government — they set standards, but governments and regulators (like the SEC in the US) give those standards legal force.
These boards matter because the rules they write quietly shape what millions of financial statements look like, and therefore how capital flows. For years they ran a joint 'convergence' project to bring GAAP and IFRS closer, producing shared standards such as the modern revenue-recognition model. Worth remembering: because they are standard-setters and not regulators, a board can declare a rule, but it relies on the SEC, national regulators, and auditors to enforce it.
When the two boards jointly rewrote how companies report revenue, the FASB issued its version into US GAAP and the IASB issued a matching version (IFRS 15) — so a US firm and a German firm now recognize revenue using nearly the same five-step model. That shared standard came from years of joint due process by both boards.
The FASB and IASB sometimes write matching standards, narrowing the gap between GAAP and IFRS.
Neither board is a government agency, and neither can force a company to comply. They set the standards; regulators like the SEC and the courts give them teeth. Confusing 'standard-setter' with 'enforcer' is a common beginner error.