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Prepared for 'codification'--single source of U.S. GAAP?

In less than a month--on July 1--U.S. generally accepted accounting principles will be reorganized in a way that will ultimately make it much quicker and easier to research accounting issues.

On that day, the FASB Accounting Standards Codification is to become the single official source of authoritative, nongovernmental U.S. GAAP.

Pending approval by the Financial Accounting Standards Board, after that date, only one level of authoritative GAAP will exist, other than guidance issued by the U.S. Securities and Exchange Commission. All other literature will be nonauthoritative--including FASB's Original Pronouncements volumes.

"The codification will be a big change for preparers and auditors of financial reports," acknowledges FASB member Larry Smith. However, he said, it will ultimately enable users to spend substantially less time and effort researching answers to accounting questions and problems.

Another benefit of the codification will be the ability to provide timely information with real-time updates as new standards are released. After it becomes GAAP, FASB will no longer issue Statements of Financial Accounting Standards, Interpretations, FASB Staff Positions or Emerging Issues Task Force Abstracts.

Rather, changes to GAAP, regardless of how they've been issued, will take the form of "Codification Updates."

The codification does not change GAAP; instead, it introduces a new structure--one that is organized into an easily accessible, user-friendly online research system. It reorganizes the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics. Topics may be broken down further into subtopics when there is guidance that is relevant to a subset of transactions.

All topics and subtopics are organized consistently by sections that address the nature of the content, such as recognition, measurements, disclosures and so on.

When the codification becomes authoritative, it will supersede existing FASB, American Institute of Certified Public Accountants, EITF and related literature. Thus, all existing standards that were used to create the codification will be superseded, and will no longer be updated or maintained by FASB.

The superseded standards will still be available for reference, however, along with their original "Basis for Conclusions" sections. Also archived for reference will be "grandfathered" U.S. GAAP, which includes guidance replaced by newer standards that were applied prospectively to transactions occurring after a particular date.

A number of codification resources are available to help prepare U.S. GAAP users for the transition. FASB offers a free online tutorial at http://asc.fasb.org. A recorded instructional webcast, The Move to Codification of US GAAP, also is available at http://www.fasb.org/fasb_webcast_series/index.shtml.

And, codification training opportunities are offered through professional accounting organizations such as AICPA.
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Title Annotation:FINANCIAL REPORTING; generally accepted accounting principles; Securities and Exchange Commission; Financial Accounting Standards Board
Author:Heffes, Ellen M.
Publication:Financial Executive
Article Type:Law overview
Geographic Code:1USA
Date:Jun 1, 2009
Words:432
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