FASB Codification

What do you need to know about FASB Accounting Standards Codification? How does this affect you?

With the end of the third quarter 2009, your organization needs to be aware of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) and its impact. (Take our survey and receive a copy of the results.)

• Referencing FASB ASC using the numbers relating to the specific paragraphs, sections, topics and subtopics.
• Referencing the specific information using “plain English” (using the name of the specific item – paragraph, section, topic, and subtopic.

Check with your audit team for its preferences.

What is FASB Codification?

The Codification re-organizes all nongovernmental accounting standards using a system of numbered paragraphs, sections, topics and subtopics for easy reference.  FASB ASC supersedes all currently existing, non-SEC accounting and reporting standards (all existing FASB, AICPA, EITF and related literature), with a very few exclusions (noted below).

FASB Codification applies to both for-profit and nonprofit organizations.  Private organizations will need to address FASB codification in their yearend statements.  Public companies will need to use it for financial results for quarters that close after September 15, 2009.

FASB has provided a great deal of information on its website.

What benefits will FASB ASC provide?

FASB ASC was designed to restructure the accounting and reporting standards.  It was not intended to change U.S. GAAP or any of the SEC’s requirements but rather to simplify accounting standards.  This simplification will also help facilitate convergence with international financial reporting standards (IFRS) going forward.

Among other things, FASB ASC should:

• Reduce the time and effort accountants need to devote to accounting research
• Reduce noncompliance through a simplification of the literature
• Provide accurate real-time updates as new standards are released
• Become the authority on eXtensible business reporting language (XBRL) taxonomy
• Assist research and convergence efforts during the standard-setting process
• Make it clear that guidance not contained in the Codification is not considered authoritative

What’s not included?

FASB ASC is intended to become the single official source of all accounting and reporting standards but a few exclusions do exist:

• Governmental accounting standards (GASB)
• Guidance for non-GAAP matters such as Other Comprehensive Basis of Accounting (OCBOA), Cash Basis, Income Tax Basis and Regulatory Accounting Principles (RAP)
• Nonessential material such as redundant summaries of existing standards, historical content, discussions of previous practice, summaries of constituent feedback and similar material
• Certain content that will be outdated or superseded by December 31, 2008
• Grandfathered material in FASB ACS.  (Example, the pooling of interests in a business combination described in paragraph  B217 of FASB Statement No. 141)
• FASB Statements No. 164, 166, 167 which will remain authoritative until they are integrated