What are the Statements of Financial Accounting Concepts intended to establish?

The Statements of Financial Accounting Concepts (SFACs) constitute the FASB's Conceptual Framework. This framework is a coherent system of interrelated objectives and fundamental concepts that provides the theoretical foundation for financial accounting. Its primary purpose is to guide the FASB in the development of new accounting standards and in the review of existing ones. It also provides a frame of reference for preparers and auditors to resolve accounting and reporting issues in the absence of specific authoritative guidance. The concepts themselves are not authoritative GAAP but are the underlying principles upon which GAAP is established.

A. The SFACs are the foundation for GAAP, not GAAP itself. The FASB Accounting Standards Codification (ASC) is the single source of authoritative U.S. GAAP.
B. While the framework helps in understanding fair presentation, its primary purpose is much broader: to guide the development of all financial accounting and reporting standards.
D. The hierarchy of sources for GAAP is established within the FASB Accounting Standards Codification (specifically ASC 105), not by the SFACs.

1. Financial Accounting Standards Board (FASB). Statement of Financial Accounting Concepts No. 8: Conceptual Framework for Financial Reporting—Chapter 1, The Objective of General Purpose Financial Reporting. "The objective of general purpose financial reporting is the foundation of the Conceptual Framework. Other aspects of the Conceptual Framework...flow logically from the objective." (Paragraph OB1). This demonstrates the framework's role in establishing foundational objectives.

2. Financial Accounting Standards Board (FASB). About the Conceptual Framework. "The Concepts Statements are intended to set forth objectives and fundamental concepts that will be the basis for development of financial accounting and reporting standards." (FASB Website, Conceptual Framework Project Page). This statement directly supports the correct answer.

3. Spiceland, J. D., Nelson, M. W., & Thomas, W. B. (2021). Intermediate Accounting (11th ed.). McGraw-Hill Education. In Chapter 1, the text states, "The Conceptual Framework...is not authoritative GAAP but provides the underlying structure for the development of accounting standards... It is a coherent system of interrelated objectives and fundamentals that is intended to lead to consistent standards." (Chapter 1, Section: The Conceptual Framework). This is standard content in university-level accounting courseware.