Related Article 

Accounting Standards Codification

What's Not in the Accounting Standards Codification?
FASB's Accounting Standards Codification (ASC) does not change US GAAP
Why was the ASC needed?
Future Codification Updates

For more informaion on Accounting Standards Codification, contact our Public Companies group who specializes in tax and accounting services for public companies.

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Demystifying the Accounting Standards Codification

November 09, 2009

"View the 2012 article on Demystifying accounting Standards Codification" 

  • What is it?
  • When is it effective?
  • How will it affect me?
  • Resources

Overview of the Codification

FASB's Accounting Standards Codification ("ASC") does not change US GAAP

  • Integration and categorization
  • Includes most SEC content

Why was the ASC needed? 

  • Simplifies access
  • Improves accuracy of research
  • Mitigates risk of non-compliance
  • Streamlines research process
  • Provides real-time updates
  • Assists with IFRS convergence

Before the ASC 

FASB statements ~ FASB Staff Positions ~ FASB Interpretations ~ Accounting Principles Board Opinions ~ EITF Abstracts ~ AICPA Audit & Accounting Guides ~ FASB Technical Bulletins ~ SEC S-X Rules ~ SEC Staff Accounting Bulletins ~ AICPA Statements of Position ~ SEC S-K Items ~ SEC Speeches ~ AICPA Practice Bulletins ETCETERA

What's Not in the ASC 

  • Governmental standards
  • Non-GAAP standards (modified cash basis, income tax basis or regulatory basis)
  • "Non-essential" content of previous standards
    • Basis for Conclusions
    • Document summary
    • Constituent feedback
     
  • FASB used 12-31-08 as a target date for authoring
  • Content amended or superseded by FIN 48, SFAS 141(R)
  • Pre-SFAS 158 literature (employers’ accounting for DB plans)
  • Generally, most other grandfathered material

SEC Standards 

  • "SEC content is the domain of the SEC"
  • "Relevant" SEC materials included to "increase the utility" of the ASC, in separate sections
  • Regulation S-X, Financial Reporting Releases, Accounting Series Releases, SABs, SEC Staff Observer comments are in
  • Content related to the following is EXCLUDED:
    • MD & A
    • Auditing matters
    • Independence matters
     

How the ASC is Structured 

  • New citations: "ASC 210-20-60-5" or ASC XXX-YY-ZZ-PP
  • New classification system
    • Areas – 5 groupings of topics
    • Topics = XXX = 210
    • Subtopics = YY = 20
    • Sections = ZZ = 60
    • Paragraph or subsections = P or PP = 5
     

ASC Areas and Topics ("XXX") Approximately 90 topics, in 5 main areas

  • General Principles (105 – 199)
    • Example: 105, GAAP
     
  • Presentation (205 – 299)
    • Balance sheet, Statement of Cash Flows, EPS
     
  • Financial Statement Accounts (305 – 700)
    • Receivables, Equity, Revenue Recognition
     
  • Broad Transactions (805 – 899)
    • Leases, Business Combinations, Consolidation
     
  • Industry ( 905 – 999)

Topic – "Broad Transactions" 

  • 805 – Business Combinations
  • 808 – Collaborative Arrangements
  • 810 – Consolidation
  • 815 – Derivatives and Hedging
  • 820 – Fair Value Measurements and Disclosures
  • 825 – Financial Instruments
  • 830 – Foreign Currency Matters
  • 835 – Interest
  • 840 – Leases
  • 845 – Nonmonetary Transactions
  • 850 – Related Party Disclosures
  • 852 – Reorganizations
  • 855 – Subsequent Events
  • 860 – Transfers and Servicing

Topic – "Presentation" 

  • 205 – Presentation of Financial Statements
  • 210 – Balance Sheet
  • 215 – Statement of Shareholder Equity
  • 220 – Comprehensive Income
  • 225 – Income Statement
  • 230 – Statement of Cash Flows
  • 235 – Notes to Financial Statements
  • 250 – Accounting Changes and Error Corrections
  • 255 – Changing Prices
  • 260 – Earnings per Share
  • 270 – Interim Reporting
  • 272 – Limited Liability Entities
  • 275 – Risks and Uncertainties
  • 280 – Segment Reporting

ASC Subtopics ("YY") 

  • Distinguished by type or scope
  • All will contain "Overall" – pervasive guidance for topic
  • Remainder will vary by topic

Example Topic: Leases
Subtopics: Overall, Operating, Capital

ASC Sections ("ZZ") 

  • Standardized across all Subtopics
  • 16 categories, examples:
    • 00, Status
    • 05, Overview and Background
    • 15, Scope and Scope Exceptions
    • 25, Recognition
    • 50, Disclosure
    • SEC: "S" before Section number, i.e., S
     

USER TIP: Select the feature "Join all Sections" in order to combine each element of this backbone into one, seamless discussion

Example: Join the Disclosure section for all subtopics within the Revenue Recognition Topic

USER TIP 

Q: How will I be able to find the original source (old standards) of the ASC material?

A: The Codification includes a cross-reference report that allows users to identify where current standards reside in the Codification, or the source of material included in the Codification.

Future Codification Updates 

  • Accounting Standard Updates or "ASUs"
  • Numbered by year of issuance, ASU 2009-01 or ASU 09-01
  • 15 issued since July 1, 2009
  • Several "Proposed ASUs"
  • Same look and feel as pre-ASC standards

Codification Updates 

  • Current and transitional text presented together in ASC
  • Transitional text = not yet effective
  • Transitional text will be distinguished from current (authoritative) text
  • FASB does not consider them authoritative as an ASU (no references to ASU 2009-10)

FASB Exposure Draft Information 

  • FASB.org
  • Similar format to ASUs
  • Click on "Projects" tab, then "Exposure Drafts"
  • Sign up for "Action Alerts" :
    • Send an email to join-actionalert@listserv.lists.fasb.org
    • confirmation email will be sent back to you
    • all newly issued ASUs, Exposure Drafts and FASB Activity will be emailed to you
     

Before and After

 

 

"Old" citation  "New" ASC Citation  
SFAS 5 ASC 450, Contingencies
SFAS 109/FIN 48 ASC 740, Income Taxes
SFAS 142 ASC 350 Intangibles – Goodwill and Other
SFAS 157 ASC 820 Fair Value Measurements and Disclosures

Old  New  
SOP 94-6, Significant Risks & Uncertainties ASC 275, Risks & Uncertainties
FAS 141(R), Business Combinations ASC 805 Business Combinations
SFAS 123(R) ASC 718, Compensation – Stock Compensation

 

Afraid to Change? Two ways of linking ASC materials to old standards:

  • Cross reference tool
  • Select "Printer friendly with Sources" view

Effective Date 

  • Became authoritative on July 1, 2009
  • Mandatory for interim and annual periods ending AFTER September 15, 2009
  • For public companies: Q3

Accounting Citations – Going Forward 

  • Periods ending before September 15, 2009:
    • Do NOT refer to ASC only
    • May use "old" references only, or both
     
  • Periods ending after September 15, 2009:
    • Refer to ASC only, may NOT use "old" references
    • Comparative statements: may use both
     

USER TIP 

Streamline: remove unnecessary, outdated technical references in footnotes

Consider: deleting all technical citations in favor of a "Plain English" approach (recommended)

Example: "...as required by the Derivatives and Hedging Topic of the FASB ASC..."

Not Just for Financial Reports Other documents impacted by ASC:

  • Internal policy manuals, memos, etc
  • Management’s Discussion and Analysis (MD&A) (public companies only)

Transition Planning 

  • ASC structure requires practice and training
  • Old standards may be split across several topics
  • Review financial statements and identify where changes are needed
  • Update all internal policies, memos, etc.
  • Determine how you will access the Codification

Resources 

  • FASB website (www.fasb.org)
  • FASB on-line tutorials (free)
  • FASB "Notice to Constituents" for ASC (free)
  • FASB online ASC annual subscription, $850; print (4 volumes), $195
  • AP & M website

Related Article: Do You Speak ASC? 

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