Final answer:
The Financial Accounting Standards Board (FASB) was established in 1973 to improve and establish financial reporting standards and replaced the Committee on Accounting Procedure and the Accounting Principles Board.
Step-by-step explanation:
The FASB, or Financial Accounting Standards Board, is an independent private-sector organization that is responsible for establishing and improving accounting and financial reporting standards for companies and non-profit organizations in the United States. It was established in 1973 to replace the Committee on Accounting Procedure (CAP) and the Accounting Principles Board (APB), both of which had been part of the American Institute of Certified Public Accountants. The FASB was created to ensure that financial reporting provides clear and consistent information that investors, creditors, and the market can rely upon to make informed financial decisions.
Prior to the FASB's establishment, the CAP and the APB issued pronouncements that were considered less consistent and authoritative, leading to the need for a more structured and authoritative body. The FASB operates under the oversight of the Financial Accounting Foundation (FAF), and its standards, officially recognized as authoritative by the Securities and Exchange Commission (SEC), are known as Generally Accepted Accounting Principles (GAAP).