Significant changes in July will affect the way CPAs perform accounting research and reference accounting literature in day-to-day work. On July 1, FASB is expected to issue the FASB Accounting Standards Codification (ASC) as authoritative. The ASC will become the single source of authoritative U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the SEC. Unlike any previous GAAP references, the codification follows an established pattern or classification system of XXX-YY-ZZ-PP, where XXX = topic, YY = subtopic, ZZ = section, and PP = paragraph. FASB in late March released a related exposure draft on changes to the GAAP hierarchy. The 20-page proposal was designed to modify FASB Statement no. 162, The Hierarchy of Generally Accepted Accounting Principles, by establishing only two levels of GAAP—authoritative and nonauthoritative. The proposal’s comment period was scheduled to close on May 8.
The codification includes a Web-based search tool. Advanced features include the ability to select multiple sections from different topics and subtopics and join them into a single document. A cross-reference feature allows users to see where current standards are located in the codification topical structure. Use of the Web-based tool is currently free.
The FASB ASC disassembled and reassembled thousands of nongovernmental accounting pronouncements (including those of FASB, the Emerging Issues Task Force, and the AICPA) to organize them under roughly 90 topics and include all accounting standards issued by a standard setter within levels A–D of the current U.S. GAAP hierarchy. The ASC also includes relevant portions of authoritative content issued by the SEC, as well as selected SEC staff interpretations and administrative guidance issued by the SEC. FASB received about 1,500 comments submitted by approximately 400 constituents during the initial verification period that ended in January. At its Feb. 25 board meeting, FASB noted that approximately 100 changes to the FASB ASC were in process as a result of the feedback received. FASB decided to include in the codification, thereby elevating in authoritative status, the AICPA Technical Inquiry Service (TIS) Section 5100, Revenue Recognition, paragraphs 38–76, which may result in an accounting change for private entities that had not previously applied the guidance.