Transcript FASB Accounting Standards Codification

FASB Accounting Standards
Codification
Prof. Sonia Feliciano, CPA
Workshop to: Accounting Professors
UPR Bayamón
March 27, 2009
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OBJECTIVES
 To obtain a good understanding of the FASB Standards
Codification System
 To encourage the use of the Codification Research
System for research
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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
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APB Opinions
CAP Accounting
Research Bulletins
Category A (Most Authoritative)
Standard Setting
Business Entities
CPAs and
Accounting Firms
AICPA (AcSEC)
Illustration 1-5 User
Groups that Influence
Accounting Standards
Financial
Community
FASB
Preparers
(e.g., FEI)
Government
Academicians
(SEC, IRS, other
agencies)
Investing Public
Industry
Associations
Accounting standards,
interpretations, and bulletins
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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 Accounting Standards Codification
 Four-year project involving over 200 people from
multiple entities
 Significantly different from the structure of existing
accounting standards
 A major restructuring of accounting and reporting
standards: a reconfiguration of current GAAP
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 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
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FASB
Accounting StandardsCodification
Primary Goal
 Simplify user access to all authoritative US
generally accepted accounting principles (GAAP)
by providing all the authoritative literature in
one place
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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.
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 Reassembled the pieces into approximately 90
topics
 Contents in each topic are further organized first
by subtopic, then section and finally paragraph.
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 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.
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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
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Codification structure, content and styles
 Presentation – Topic codes 205-299 only to presentation matters.
 Financial Statements Accounts – Topic codes 305 -700
organizes topics in a financial statement order including Assets,
Liabilities Equity, Revenue, and Expenses. Topics include Receivables,
Revenue Recognition, Inventory, and so forth.
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 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.
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Description of the Sections
XXX-YY-ZZ
 XXX – Topic
 YY – Subtopic
 ZZ - Section
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Sections of each Subtopic
 XXX-YY-00
 XXX-YY-05
 XXX-YY-10
 XXX-YY-15
 XXX-YY-20
 XXX-YY-25
 XXX-YY-30
 XXX-YY-35
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Status
Overview and Background
Objectives
Scope and Scope Exceptions
Topical Definitions-Glossary
Recognition
Initial Measurement
Subsequent Measurement
 XXX-YY-40
 XXX-YY-45
 XXX-YY-50
 XXX-YY-55
 XXX-YY-60
 XXX-YY-65
 XXX-YY-70
 XXX-YY-75
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Derecognition
Other Presentation Matters
Disclosure
Implementation Guidance and
illustrations
Relationship
Transition and Other Effective Date
information
Links to Grandfathered Material
XBRL Definitions
Description of the Sections
 XXX-YY-00 - Status : includes references to the post-
Codification standards that affect the Subtopic
 XXX-YY-05 – general overview and background regarding the subtopic
 XXX-YY10 – states the high-level objectives of the Subtopic, but
does not discuss the main principles of the Subtopic
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 XXX-YY-15 – Scope and Scope Exceptions: outlines the
items( for ex. entities, transactions, instruments or events) to
which the guidance in the Subtopic does or does not apply. It does
not contain actual accounting or reporting guidance (for ex.
subsequent measurement)
 XXX-YY-20 – Glossary: all the glossary terms used in the
Subtopic
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 XXX-YY-25 – Recognition: criteria, timing, and
location(within the financial statements) for recognizing
a particular item.
 XXX-YY-30 - Initial Measurement: criteria and
amounts used to measure a paricular item at date of
recognition.
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 XXX-YY-35 – Subsequent Measurement: criteria
and amounts used to measure a particular asset, liability,
or equity item subsequent to the date of recognition (for
ex. impairment, fair value changes, depreciation,
amortization, and similar items).
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 XXX-YY-40 - Derecognition: criteria, basis, and timing
to be used when derecognizing a particular asset, liability or
equity item for purposes of determining gain or loss if any
(Ex. Sale, other disposal or loss of assets; and settlement and
cancellation of liabilities)
 XXX-YY-45 - Presentation matters: related to the topic
(Ex. Specific balance sheet classification, specific cash flow
requirements, specific effect on EPS)
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 XXX-YY-50 – Disclosure: specific disclosure
requirements for a subtopic. Excludes general disclosure
requirements
 XXX-YY-55 – Implementation guidance and
illustrations: provides guidance relating to the standards in
simplified and generalized situations.
 XXX-YY-60- Relationships: includes references to other
subtopics that may contain guidance related to the subtopic
 XXX-YY-65 – Transition and open effective date
information
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 XXX-YY-70 - Links to Grandfathered material: the
guidance will be archieved within a database that contain all
superseded and grandfathered literature (Ex. APB 16 Business
Combinations: FASB 141 eliminated the pooling of interest method for all business combination
initiated after June 30, 2001. Entities with pooling transactions prior to June 30, 2001 shall refer
).
 XXX-YY-75 – XBRL Definitions
 SEC Sections – SEC content is included for reference to
improve the usefulness of the Codification for public
companies
to APB 16
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How to use the Codification:
 Go to: http://asc.fasb.org
 View tutorial: click navigation and content
 View help pages: click navigating the codification
 Navigate the codification using a selected topic
 Continue using the ASC for the academic process
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SELECTED TOPIC
 Go to PRESENTATION (205-299)
 CLICK Accounting Changes and Error Corrections
 Click expand, overall, join all sections, overall
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SELECTED TOPIC: REVENUE
 View expanded table of content
 Select a section or
 Click overall
 Click join all sections
 Overall
 Navigate thought a selected topic
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Summary & Questions
Thank you for participating
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
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