THE FASB CODIFICATION:
WHAT YOU NEED TO KNOW
This presentation has not been approved, disapproved, or otherwise acted upon by any senior technical
committees of the AICPA, nor does it represent the views or an official position of the AICPA. This
presentation is not intended as legal, accounting, or other professional advice and should not be relied upon
as such.
© 2009 The American Institute of Certified Public Accountants
Today’s Objectives
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Today’s session is designed to help you better
understand
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the purpose, meaning, and structure of the
Codification
how to implement FASB Accounting Standards
CodificationTM (ASC); and
available resources.
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What is the Codification?
What is the Codification?
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The source of authoritative U.S. GAAP recognized by
FASB to be applied by all nongovernmental entities
An effort to reduce the complexity of accounting
standards and to facilitate international convergence.
 The effort resulted in a major restructuring of
accounting and reporting standards.
Level A–D U.S. GAAP (previously issued by a standard
setter) was codified into a topically organized format
(approximately 90 topics).
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What is the Codification?
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It affects U.S. non-governmental accounting standards
only
It is NOT intended to change U.S. GAAP.
It supersedes existing sources of U.S. GAAP, and any
prior sources of U.S. GAAP not included in the
Codification or grandfathered are not authoritative.
It is the authoritative source for U.S. GAAP in addition to
guidance issued by the SEC.
It eliminates the four prior levels of the U.S. GAAP
hierarchy (for nongovernmental entities) and instead
integrates U.S. GAAP in which all guidance carries an
equal level of authority.
Why Codify U.S. GAAP?
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Constituent concern was that U.S. GAAP was overly
confusing and difficult to research.
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Multiple types of standards, multiple standard setters,
multiple indexing schemes, and different levels of
authority made it difficult to ensure completeness of all
relevant guidance and accuracy in its application.
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Mitigate the risk of non-compliance with standards
through improved usability of the literature
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See the FASB’s Codification Notice to Constituents
(NTC) for a full discussion of the goals of the
Codification.
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How to Access the Codification
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It is available online, after a quick registration, at
http://asc.fasb.org and as a link from fasb.org.
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There is
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free access to a basic view of the Codification.
fee based subscription to the professional view
which has enhanced functionality (search and
retrieval functions, printer-friendly with sources
utility, cross reference features, personal
annotations, and dynamic linking capabilities).
FASB has also issued an October 31, 2009 version
of the Codification in print (4 volume set).
The Codification Timeline and
What it Means for You
4
Release of the Codification as Authoritative
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June 30, 2009, FASB issued FASB Statement No. 168
which flattens the U.S. GAAP hierarchy into the two new
levels of: authoritative (in the Codification) and
nonauthoritative (not in the Codification)
Financial statement preparers, auditors, and academics
alike must use the Codification.
Referencing the Codification in Financial
Statements
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An entity should reflect the Codification in its financial
statements issued for interim and annual periods ending
after September 15, 2009.
Prior to the issuance of the Codification it was not
unusual for footnotes to refer to specific standard
numbers (for example, ―as required by FASB Statement
No. 133‖). These references are no longer the
authoritative source of U.S. GAAP, and such references
should be changed.
5
Referencing the Codification in Financial
Statements
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FASB encourages the use of plain English language to
describe references (for example, ―as required by the
Derivatives and Hedging Topic of the FASB Accounting
Standards Codification―) rather than referencing the specific
Codification reference.
Including a detailed description of an accounting policy or
accounting treatment of a transaction may be more useful to
financial statement users than references to FASB ASC.
Since FASB ASC is not intended to change U.S. GAAP, the
consistent use of references to only FASB ASC for all periods
presented (including periods before the authoritative release of
FASB ASC) is appropriate.
Referencing the Codification in Financial
Statements
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Since the Codification is not the authority for SEC
guidance, all references to SEC content should still be to
the appropriate SEC rule, NOT to the Codification.
The SEC has stated that for interim and annual financial
statements for periods ending after September 15, 2009,
any references to specific elements of U.S. GAAP should
use the FASB ASC reference (and references for all
periods presented should be on a consistent basis)
6
Referencing the Codification in Financial
Statements
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Certain accounting standards have allowed for the
continued application of superseded accounting standards
for transactions with ongoing effects in an entity’s financial
statements.
If an entity continues to follow grandfathered guidance not
included in the Codification, you would still reference those
standards (and not FASB ASC).
 An explanation and a partial listing of grandfathered
guidance is included in FASB ASC 105-10-70.
 The pooling of interests method is an example of
grandfathered guidance.
Referencing the Codification in Financial
Statements
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The Codification is effective for interim and annual
periods ending after September 15, 2009.
What this means for both public and non public entities:
 A non public entity with a 12/31/09 year end would
reference the Codification (or use plain English
referencing) in its financial statements.
 A public entity filing financial statements for the
quarter ended 9/30/09 would reference the
Codification (or use plain English referencing) in its
financial statements.
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Referencing the Codification in Engagement
Workpapers
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It is prudent to expect that audit, attest, or compilation
and review work papers associated with financial
statements for a period ending after September 15, 2009
would also reflect the Codification since the underlying
financial statements, the subjects of those engagements,
reference the Codification.
SEC Response to FASB ASC
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In August 2009 the SEC issued Interpretive Release No.
33-9062A, Commission Guidance Regarding the
Financial Accounting Standards Board's Accounting
Standards Codification
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The release instructs statement preparers, auditors, and
investors that as of September 15, 2009, ―references in
the commission’s rules and staff guidance to specific
standards under U.S. GAAP should be understood to
mean the corresponding reference in the FASB
Codification.‖
8
PCAOB Publishes Q&A
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The PCAOB has published staff questions and answers on
the Codification which discuss:
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references to U.S. GAAP in PCAOB standards
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auditor responsibilities with respect to the Codification
The Q&As are available at:
http://pcaobus.org/Standards/QandA/2009-0902_FASB_Codification.pdf.
Codification Content
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Codification Content
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Includes authoritative guidance (for example, standards
sections, implementation guidance, and so on)
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Excludes content deemed redundant or nonauthoritative
(for example, much of basis for conclusions)
Codification Content
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Content Approach and Features
 The Codification uses a current text approach; it does
not identify documents that solely amend other
standards.
 The Codification provides references to the standards
used in the Codification through the cross-reference
tool (available in the basic and professional views).
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The Codification includes all level A–D U.S. GAAP
issued by a standard setter, in addition to AICPA TIS
5100, ―Revenue Recognition‖ (paragraphs .38-.76).
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Codification Content
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The following literature is included in the Codification:
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FASB Statements, Interpretations, Technical Bulletins, Staff
Positions, Staff Implementation Guides, and Statement No. 138
Examples
EITF Abstracts and Topic D
Derivative Implementation Group Issues
Accounting Principles Board Opinions
Accounting Research Bulletins
FASB Accounting Interpretations
AICPA Accounting Statements of Position, Practice Bulletins,
incremental accounting guidance from Audit and Accounting
Guides, and Technical Inquiry Service questions and answers
(for Software Revenue Recognition only)
Select SEC guidance
SEC Content in the Codification
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SEC content is the domain of the SEC.
SEC content is included in Codification topics but in
separate SEC sections.
 SEC guidance is required only for SEC registrants.
 An ―S‖ precedes any SEC guidance in the
Codification.
SEC material sections include the full text of the relevant
guidance.
SEC sections do not contain the entire population of
SEC rules, regulations, interpretive releases, and staff
guidance.
To reference SEC guidance, ALWAYS refer to the
specific SEC rule (not the Codification)
11
Excluded Content
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The Codification does not include the following:
 Guidance for non-U.S. GAAP matters such as
OCBOA (including cash basis, income tax basis, or
regulatory accounting principles).
 Governmental accounting standards.
 Standards that were outdated or superseded on
December 31, 2008
Excluded Content
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The Codification also does not include the following:
 Nonessential material such as redundant summaries
of existing standards, historical content, discussions
of previous practice, summaries of constituent
feedback, and similar content.
 Grandfathered material such as pooling of interests in
a business combination and pension transition assets
or obligations
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Codification Structure
How is the
Codification Structured?
Areas
Topics
Subtopics
Sections
Subsections
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How is the Codification Structured?
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Such detailed referencing is recommended for working
papers (e.g. in audit engagements), articles, textbooks,
and other similar items.
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Example of referencing
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FASB Accounting Standards Codification (ASC)
Topic-Subtopic-Section-Paragraph
FASB ASC 305-10-05-1 (cash-overall-overview and
background, paragraph 1)
How is the Codification Structured?
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Areas—groupings of topics
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General Principles
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Presentation
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Assets
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Liabilities
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Equity
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Revenue
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Expenses
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Broad Transactions
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Industry
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How is the Codification Structured?
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Topics
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Broadest categorization of related content (for
example, FASB ASC 405, Liabilities)
Correlate with IFRS / IAS standards
Subtopics
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Represent subsets of a topic (for example, FASB ASC
405-20, which discusses the extinguishment of
liabilities)
Generally distinguished by type or scope
How is the Codification Structured?
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Sections
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Represent the nature of the content in a subtopic.
Examples are recognition, disclosure, and subsequent
measurement.
Correlate with IFRS / IAS sections.
Consistent numbering throughout the Codification. For
example, section 05 is always Overview and
Background Information.
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How is the Codification Structured?
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Standard Sections
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00-Status
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05-Overview and Background
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10-Objectives
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15-Scope and Scope Exceptions
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20-Glossary
How is the Codification Structured?
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Standard Sections (continued)
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25-Recognition
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30-Initial Measurement
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35-Subsequent Measurement
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40-Derecognition
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45-Other Presentation Matters
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50-Disclosure
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How is the Codification Structured?
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Standard Sections (continued)
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55-Implementation Guidance and Illustrations
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60-Relationships
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65-Transition and Open Effective Date Information
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70-Grandfathered Guidance
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75-XBRL Definitions
How is the Codification Structured?
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Subsections
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Allow further segregation and navigation of
content.
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Occur in a limited number of cases.
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Unlike sections, subsections are not numbered.
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Codification Structure Example
Leases
Topic
Subtopics
Sections
Operating
Leases
Overall
Scope
Lessees
Disclosure
Lessees
Scope
Lessees
Capital
Leases
Disclosure
Lessees
Scope
Lessees
Disclosure
Lessees
Subsections
Lessors
Lessors
Lessors
Lessors
Lessors
Lessors
Note: This is for illustration only and does not include all Topics, Subtopics, Sections, and Subsections.
A Look at FASB’s Basic View of the
Codification
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Home Page of the Codification
A Look at the Cross Reference Tool
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A Look at the Cross Reference Tool
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Cross Reference Search by Standard Type
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AAG
AIN
APB
ARB
CFRR
DIG
EITF
FAS
FIN
AICPA Audit and Accounting Guide
AICPA Interpretations
APB Opinions
Accounting Research Bulletins
Codification of Financial Reporting Releases
FASB Derivative Implementation Group
Issues
Emerging Issues Task Force
FASB Statements
FASB Interpretations
A Look at the Cross Reference Tool
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Cross Reference Search by Standard Type (continued)
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FSP
FTB
IR
PB
QA
SAB
SOP
SX
TIS
FASB Staff Positions
FASB Technical Bulletins
SEC Interpretive Release
AICPA Practice Bulletins
FASB Staff Implementation Guides
SEC Staff Accounting Bulletin
AICPA Accounting Statement of Position
SEC Regulation S-X
AICPA Technical Inquiry Service (only for
software revenue recognition 5100, pars. 38-76)
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Areas in the Codification
Navigating in the Codification
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Levels within the Codification
Topic
Subtopic
Sections
SEC Content
FASB ASC on AICPA ReSource - Online
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Go to “My Subscriptions”
FASB Accounting Standards Codification
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Cross Reference Tool
Go To Function
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Navigating the Topics
Show source content
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What Links Here Feature
Join Sections
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Join Sections
Ongoing
Standard Setting Process
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Exposure Drafts
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Exposure drafts are located on the FASB web site
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The standard FASB due process for exposure drafts is
not changing due to the Codification.
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Exposure drafts contain all proposed amendments to the
Codification
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Consistent with pre-Codification exposure drafts
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Added text is underlined
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Deleted text is struck out
Ongoing Standard Setting Process
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New standards will consist of the standard and an
appendix of Accounting Standards Update instructions.
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Accounting Standards Updates for new standards will be
issued and numbered sequentially for each year (for
example, 2010-01 would represent the first Accounting
Standards Update issued in 2010).
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All new standards will be issued this way regardless of
how such guidance was issued previously (for example,
FASB Statements, FASB Staff Positions, and EITF
Abstracts).
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Ongoing Standard Setting Process
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Upon release, the actual standard will not be
authoritative; the Accounting Standards Update
instructions will be the source used to update the
Codification.
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When amending paragraphs in the Codification, both the
old and new paragraphs will be presented until 6 months
after the new guidance is completely effective for all
entities, according to the NTC.
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The Codification Research System will be updated
concurrently with the release of a new standard.
Transitional Matters
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Feedback
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The Codification has a submit feedback feature throughout
where constituents can give FASB comments on the
Codification system and content (included in both the basic
and professional views)
 Any overall non-content matters having to do with system
functionality and performance should be submitted
through the general feedback feature on the FASB ASC
home page. Any feedback related to fatal content flaws or
questions or concerns about U.S. GAAP requirements
should be submitted using the paragraph level feedback
feature.
Examples of feedback FASB is interested in receiving via the
submit feedback:
 The Codification times out too often.
 Accounting for other-than-temporary impairment is not
clear in FASB ASC.
Additional Resources
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Web sites
Codification site is http://asc.fasb.org
Codification site is also available at FASB’s site
www.fasb.org
AICPA resources related to the Codification can be
found at
http://www.aicpa.org/InterestAreas/AccountingAnd
Auditing/Resources/AcctgFinRptg/AcctgFinRptgGu
idance/Pages/FASBAccountingStandardsCodificati
on.aspx.
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Summary and Questions
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