This past July, the accounting governing board issued a new single codification system. Don’t get left in the void
Just when you thought you had a handle on the alphabet soup that comprises U.S. GAAP, the way you reference and research the rules has been turned upside down. Financial Accounting Standards Board’s (FASB) new codification, which went live on July 1, does away with the FAS, FIN and APB references and reorganizes thousands of GAAP pronouncements into roughly 90 accounting topics. Only one level of authoritative GAAP now exists, superseding all other literature.
Ultimately, experts agree, the change should be a good thing for CPAs. Ever since the term “Generally Accepted Accounting Principles” first surfaced in the 1930s, the system has evolved steadily into an unwieldy mass of disparate components, including FASB standards and interpretations, American Institute of Certified Public Accountants (AICP) Statements of Position, Accounting Principles Board opinions and AICPA industry audit and accounting guides, among others. Having to wade through hundreds of pieces of literature cobbled together in an often-confusing hierarchy made GAAP research especially challenging.
Though it does not change GAAP rules, the new FASB Accounting Standards Codification takes previously issued FASB standards and other authoritative pronouncements, changes the nomenclature used to refer to them in the past, and rearranges them in a simplified structure with easier-to-use topics. The changes are expected to cut down on research time and lower risk of noncompliance with standards.
Some work to adapt is required. Since the codification replaces all existing standards and draws a sharp distinction between authoritative and non-authoritative GAAP, it will obviously affect the way public companies reference GAAP in their financial statements and accounting policies. Internal accounting manuals and controls will need to be combed over to ensure proper compliance. Those who are accustomed to the old GAAP will need time and practice to find their way around the codification.
Although FASB is offering a tutorial on the new system on a website dedicated to the project, experts note that using a private database of accounting research can help lessen confusion. CCH’s Accounting Research Manager, for example, includes the complete FASB codification and cross-referenced tables to pre-codified U.S. GAAP to bridge old and new. However users get acclimated, they should find the new codification a sizable improvement in accounting research.
This story is from the CCH e-newsletter Figures, written specifically for corporate tax professionals. Figures offers tips, tricks and ideas about how to increase your organization’s productivity and efficiency. Every issue also features insights with a corporate tax professional