Financial Accounting Standards Board FASB Overview, Functions

Financial accounting practices and standards were largely unregulated in the early 20th century which led to large financial accounting fraud cases. Congress passed the Securities Exchange Acts of 1933 and 1934 to prevent companies from misleading investors with fraudulent financial statements. The Financial Accounting Standards Board (FASB) is a private standard-setting body[1] whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public’s interest.

• Its primary objective is to protect investors, maintain fair and efficient markets, and facilitate capital formation.
• By establishing GAAP, FASB ensures consistency and comparability in financial reporting, promoting transparency and confidence in financial information for various stakeholders, including investors, creditors, and the general public.
• Bitcoin is going to be, in all likelihood, the only digital commodity that is made institutional grade by a spot ETF in the American capital markets.
• Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
• So, I guess, first off, Michael’s option exercises were planned and actually fully disclosed.
• It is also advised by the Governmental Accounting Standards Advisory Council (GASAC), an organization that was established by the FAF’s Board of Trustees to advise the GASB on its agenda, priorities and procedural matters.

Actual results may differ materially from these forward-looking statements due to various important factors, including the risk factors discussed in our most recent 10-K file with the SEC. We assume no obligation to update these forward-looking statements which speak only as of today. Also, during today’s call, we will refer to certain non-GAAP financial measures. Reconciliations showing GAAP versus non-GAAP results are available in our earnings release and presentation, which were issued today and are available on our website at microstrategy.com. This new directive by FASB signals an evolution in tax reporting standards.

GASB vs FASB: Recognition and Reporting Differences

It ensures consistency, comparability, and transparency in financial reporting across different companies and industries. The Financial Accounting Standards Board has the authority to establish and interpret generally accepted accounting principles (GAAP) in the United States for public and private companies and nonprofit organizations. GAAP is a set of standards that companies, nonprofits, and governments should follow when preparing and presenting their financial statements, including any related party transactions. And we plan to strategically and opportunistically buy more bitcoin as we have in every quarter since August of 2020 using excess cash from operations and proceeds from any capital markets activities. MicroStrategy remains the largest corporate holder of bitcoin in the world, and we remain committed to our bitcoin acquisition strategy with the utmost conviction, long-term focus, and with a strong risk-managed approach.

GAAP and FASB are related, but they are not the same thing. GAAP refers to a set of accounting principles, standards, and procedures used for preparing and presenting financial statements. These principles are established by various accounting standard-setting organizations, with FASB being the primary one in the U.S. GAAP provides a framework that governs how financial information should be recorded, reported, and disclosed.

What Is The Relationship Between FASB and IASB?

Andrew will provide further details on our bitcoin purchase activity for this quarter. MicroStrategy is also positioned as the world’s largest independent publicly traded business intelligence company. Our objective is to grow in AI and cloud-powered BI software. We have over 1,800 employees focused on our software business, devoted to achieving our vision of intelligence everywhere. There’s an underlying need to reconcile a company’s statutory tax rate with its effective tax rate. This new guidance brings in a dimension of standardization for public companies.

This slide shows an illustrative example of how intelligent leverage can be used to boost returns when bitcoin prices are increasing, the baseline returns of any long bitcoin strategy from spot bitcoin price appreciation. Bitcoin ETPs also benefit from this, offset by the management fees that are charged for those products. The FASB is a board of accounting experts that sets accounting standards for public companies and non-profit organizations in the U.S. The FASB, on the other hand, is a private-sector standard-setting body that establishes accounting standards for financial reporting by public companies and non-profit organizations.

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This may result in a decrease in total recognized revenue in the short term. A set of global accounting standards doesn’t only make it easier for companies to adhere to the proper financial reporting standards. Still, it also makes their financial reporting more transparent what does fasb do and understandable to investors and other financial market governance bodies. In summary, FASB is vital for maintaining the integrity and reliability of financial reporting in the United States and has a significant influence on accounting practices globally.

You can submit questions throughout the webinar and Michael, Phong, or Andrew will answer questions at the end of the session. Please be sure to provide your name and your company’s name when submitting your questions. The short-term convergence is an active agenda project conducted jointly by FASB and IASB —  expected to result in one or more standards that will achieve convergence in certain areas.

Some of the information we provide during today’s call regarding our future expectations, plans, and prospects may constitute forward-looking statements. Additionally, companies’ annual financial reports must disclose the year-to-date income tax paid, after deducting any refunds, to state, federal, and international tax authorities. Under this new disclosure requirement, all companies (public and nonpublic) are required to specify tax payments to individual jurisdictions that account for 5% or more of the total tax paid (net of refunds). The agreement has undergone several changes due to difficulties and disagreements surfacing between the IASB and FASB Boards. The FASB and IASB continue to work together to improve comparability and consistency in global financial reporting.