SFAC stands for Statement of Financial Accounting Concepts. It refers to a series of documents published by the Financial Accounting Standards Board (FASB) in the United States that aim to establish a conceptual framework for financial accounting and reporting standards. Often considered as the foundation of accounting principles, SFACs provide a comprehensive overview of the objectives, qualitative characteristics, and elements of financial statements.
The SFACs cover various key concepts and principles guiding the preparation and presentation of financial statements. They define fundamental terms and ideas used in financial reporting, such as assets, liabilities, revenues, expenses, and equity. Additionally, SFACs outline the fundamental objectives of financial reporting, which include providing relevant information to users for making informed economic decisions, assessing a company's cash flows, and understanding its financial performance and financial position.
Furthermore, SFACs discuss the qualitative characteristics that make financial information useful and reliable, such as relevance, reliability, comparability, and consistency. They also emphasize the importance of providing both qualitative and quantitative information, ensuring that financial statements are not only understandable but also relevant for decision-making purposes.
Although the SFACs are not considered authoritative accounting standards themselves, they serve as a basis for developing accounting standards and guidelines. Accounting professionals and standard-setting bodies use the concepts and principles outlined in the SFACs to create detailed accounting standards that guide financial reporting practices across various industries.
