FASB Accounting Standards Codification Prof. Sonia Feliciano, CPA Workshopto: AccountingProfessors UPR Bayamón March 27, 2009
OBJECTIVES • To obtain a good understanding of the FASB Standards Codification System • To encourage the use of the Codification Research System for research
House of GAAP AICPA Accounting Interpretations FASB Implementation Guides Recognized Industry Practices Category D (Least Authoritative) FASB Emerging Issues Task Force AICPA AcSEC Practice Bulletins Category C FASB Technical Bulletins AICPA Industry Audit and Accounting Guides AICPA Statements of Position Category B FASB Statements, Interpretations, and Staff Positions APB Opinions CAP Accounting Research Bulletins Category A(Most Authoritative)
Standard Setting Business Entities Illustration 1-5User Groups that Influence Accounting Standards CPAs and Accounting Firms Financial Community AICPA (AcSEC) FASB Preparers (e.g., FEI) Academicians Government (SEC, IRS, other agencies) Investing Public Industry Associations Accounting standards, interpretations, and bulletins LO 8 Describe the impact of user groups on the standard-setting process.
Why Codify U.S. GAAP? • Constituent concern that U.S. GAAP is overly confusing and difficult to research • Multiple types of standards, multiple standard setters, multiple indexing schemes, and different levels of authority make it difficult to retrieve all relevant U.S. GAAP
FASB AccountingStandardsCodification • Four-yearprojectinvolvingover 200 peoplefrommultipleentities • Significantlydifferentfromthestructure of existingaccountingstandards • A majorrestructuring of accounting and reportingstandards: a reconfiguration of current GAAP
The FASB’s intent in creating the Codification is that the content accurately represent existing standards • Authors were instructed to change as few words as possible when authoring their topics • As of July 1, 2009 the FASB expects to formally approve the Codification as the single source of authoritative US accounting and reporting standards
FASBAccounting StandardsCodification Primary Goal • Simplify user access to all authoritative US generally accepted accounting principles (GAAP) by providing all the authoritative literature in one place
FASB expects that the codification: • Will help mitigate the risk of noncompliance with accounting standards • Provide real-time updates as standards change and, • Reduce the amount of time and effort required to research accounting issues.
Reassembled the pieces into approximately 90 topics • Contents in each topic are further organized first by subtopic, then section and finally paragraph.
The paragraph level is the only level that contains substantive content; all higher levels in the topical structure exist merely to organize the paragraph level content • The SEC guidance in the codification will be provided strictly on a convenience basis, and FASB has made extensive disclaimer regarding reliance on it.
Before Codification is authoritative • FASB strongly encourages use of the Codification Research System for research • Until Codification is authorithative, the web-based online research tool is freely available to users • Users must keep in mind that the Codification has not been approved as authoritative
Codificationstructure, content and styles • Presentation – Topiccodes205-299onlytopresentationmatters. • FinancialStatementsAccounts – Topiccodes305 -700 organizestopics in a financialstatementorderincludingAssets, LiabilitiesEquity, Revenue, and Expenses. TopicsincludeReceivables, RevenueRecognition, Inventory, and so forth.
Broad Transactions – Topic Codes 805 – 899 relate to multiple financial statement accounts and are generally transaction- oriented. Topics include Business Combinations, Derivatives, Nonmonetary transactions, an so forth. • Industries – Topic Codes 905-999 relate to accounting that is unique to an industry or type of activity. Topics include Airlines, Software, Real State, and so forth.
Description of theSectionsXXX-YY-ZZ • XXX – Topic • YY – Subtopic • ZZ - Section
Sections of each Subtopic • XXX-YY-00 Status • XXX-YY-05 Overview and Background • XXX-YY-10 Objectives • XXX-YY-15 Scope and Scope Exceptions • XXX-YY-20 Topical Definitions-Glossary • XXX-YY-25 Recognition • XXX-YY-30 Initial Measurement • XXX-YY-35 Subsequent Measurement
XXX-YY-40Derecognition • XXX-YY-45 Other Presentation Matters • XXX-YY-50 Disclosure • XXX-YY-55 Implementation Guidance and illustrations • XXX-YY-60 Relationship • XXX-YY-65 Transition and Other Effective Date information • XXX-YY-70 Links to Grandfathered Material • XXX-YY-75 XBRL Definitions
Description of the Sections • XXX-YY-00 - Status : includesreferencestothe post-CodificationstandardsthataffecttheSubtopic • XXX-YY-05 – general overview and backgroundregardingthesubtopic • XXX-YY10 – statesthehigh-levelobjectivesof theSubtopic, butdoesnotdiscussthemainprinciples of theSubtopic
XXX-YY-15 – Scope and ScopeExceptions: outlinestheitems( for ex. entities, transactions, instrumentsorevents) towhichtheguidance in theSubtopicdoesordoesnotapply. Itdoesnotcontain actual accountingorreportingguidance (for ex. subsequentmeasurement) • XXX-YY-20 – Glossary: alltheglossarytermsused in theSubtopic
XXX-YY-25 – Recognition: criteria, timing, and location(withinthefinancialstatements) forrecognizing a particular item. • XXX-YY-30 - InitialMeasurement: criteria and amountsusedtomeasure a paricularitem at date of recognition.
XXX-YY-35 – SubsequentMeasurement: criteria and amountsusedtomeasure a particular asset, liability, orequityitemsubsequenttothe date of recognition (for ex. impairment, fairvaluechanges, depreciation, amortization, and similar items).
XXX-YY-40 - Derecognition: criteria, basis, and timingtobeusedwhenderecognizing a particular asset, liabilityorequityitemforpurposes of determininggainorlossifany (Ex. Sale, otherdisposalorloss of assets; and settlement and cancellation of liabilities) • XXX-YY-45 - Presentationmatters: relatedtothetopic (Ex.Specific balance sheetclassification, specific cash flowrequirements, specificeffecton EPS)
XXX-YY-50 – Disclosure:specificdisclosurerequirementsfor a subtopic. Excludes general disclosurerequirements • XXX-YY-55 – Implementationguidance and illustrations:providesguidancerelatingtothestandards in simplified and generalizedsituations. • XXX-YY-60- Relationships: includesreferencestoothersubtopicsthatmaycontainguidancerelatedtothesubtopic • XXX-YY-65 – Transition and open effective date information
XXX-YY-70 - Links toGrandfathered material: theguidancewillbearchievedwithin a databasethatcontainallsuperseded and grandfatheredliterature (Ex. APB 16 Business Combinations: FASB 141 eliminatedthepooling of interestmethodforallbusinesscombinationinitiatedafter June 30, 2001. Entitieswithpoolingtransactions prior to June 30, 2001 shallreferto APB 16). • XXX-YY-75 – XBRL Definitions • SEC Sections– SEC contentisincludedforreferencetoimprovetheusefulness of theCodificationforpubliccompanies
Howto use theCodification: • Goto: http://asc.fasb.org • View tutorial: clicknavigation and content • View helppages: clicknavigatingthecodification • Navigatethecodificationusing a selectedtopic • Continueusingthe ASC fortheacademicprocess
SELECTED TOPIC • GotoPRESENTATION (205-299) • CLICK AccountingChanges and Error Corrections • Clickexpand, overall, joinallsections, overall
SELECTED TOPIC: REVENUE • View expandedtable of content • Select a sectionor • Clickoverall • Clickjoinallsections • Overall • Navigatethought a selectedtopic
References: • Ford Caroline O., C. William Thomas, Test Driving the Codification, Journal of Accountancy, December 2008, Vol. 206, pg. 62 • Heffes Ellen M., Conceptual Framework, Revenue Recognition Top FASAC Priority List, Financial Executive, December 2006, Vol. 22, pg.14 • Pounder Bruce, Framing the Future, Journal of Accountancy, May 2008, Vol.205,pg.40 • Williams Kathy, FASB Wants Feedback on Codification, Strategic Finance, February 2008, Vol. 89, pg.21