Verification Complete, FASB Codification Official July 1
With the verification phase complete, the Financial Accounting Standards Board (FASB) Accounting Standards CodificationTM is expected to become the single official source of authoritative, non-governmental U.S. generally accepted accounting principles (GAAP) on July 1, 2009.
Once approved by FASB, the Codification will be the only level of authoritative GAAP, other than guidance issued by the Securities and Exchange Commission (SEC). All other literature will be non-authoritative.
The Codification includes all accounting standards issued by a standard-setter within levels A through D of the current U.S. GAAP hierarchy, including FASB, American Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature. It was designed to address the growing complexity of accessing the multitude of U.S. GAAP standards which frequently left accounting professionals frustrated and unsure if the literature they followed was the most relevant for their needs.
“Over a period of many years, U.S. GAAP has evolved to include thousands of standards by numerous standard-setters in various forms. In many cases, there is no defined organization within the standard to assist users in retrieving the specific information they need to research and resolve an accounting question. Users must read the entire standard to find relevant material,” said Tom Hoey, director of the FASB Codification Project. “Users have told the FASB that the dispersed nature of the current literature leaves them uncertain as to whether or not they have retrieved all relevant material during research. As a result, individuals have sometimes relied inadvertently on one piece of literature when another standard may be more relevant.”
The Codification addresses this problem by integrating and simplifying U.S. GAAP. It reorganizes the thousands of existing U.S. GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure that is organized in an easily accessible, user-friendly online research system. As a result, the new structure and system is expected to:
- Reduce the amount of time and effort required to solve an accounting research issue
- Mitigate the risk of noncompliance with standards through improved usability of the literature
- Provide accurate information with real-time updates as new standards are released
During the verification period, which began January 15, 2008, constituents were encouraged to use the online Codification Research System free of charge to research accounting issues and provide feedback on the system itself, and on how accurately content reflects existing U.S. GAAP for non-governmental entities. Throughout the year, Codification content was updated based on that feedback and to reflect new standards.
Hoey noted that more than 1,500 pieces of feedback were received, although not all resulted in changes to the Codification. The feedback that did result in changes included grammatical items, changes or creation of links, conforming text changes, including or excluding content, etc.
“Response to the Codification has been overwhelmingly positive,” he said.
To prepare constituents for the change, FASB provides online tutorials available on the Codification website at asc.fasb.org. There, they will also find a Notice to Constituents that includes a significant amount of background, general information about how to use the system and special features such as Cross Reference Reports, Join Sections, and Go To.
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