Academic journal article Journal of Accountancy

Test-Driving the Codification: Accounting Research on the Fast Track

Academic journal article Journal of Accountancy

Test-Driving the Codification: Accounting Research on the Fast Track

Article excerpt

[ILLUSTRATION OMITTED]

EXECUTIVE SUMMARY

* FASB released the FASB Accounting Standards Codification in January. The codification simplifies the classification of accounting standards by restructuring all authoritative U.S. GAAP for nongovernmental entities into one online database under a common referencing system. It's a first step in organizing U.S. accounting standards for possible convergence with IFRS.

* The codification is organized in a tiered structure. Information is organized into eight areas, ranging from industry specific to general financial statement matters. Within each area are topics, subtopics, sections, subsections and paragraphs, where details of the technical content reside. At the topic and section levels, the codification material correlates to IFRS.

* Unlike any previous GAAP references, the codification follows an established pattern. The hybrid classification system is XXX-YY-ZZ-PP, where XXX = topic, YY = subtopic, ZZ = section, and PP = paragraph.

* Navigation within the codification research system can be accomplished four ways: browsing by topical structure, cross referencing original standards and the codification, searching, or by using a "go to" feature.

* Browsing by topic--FASB's intended method-requires the user to click on a link from an area list, followed by topic and subtopic. A table of contents displays sections and allows the user to expand the view to list all subsections and paragraphs. A "bread-crumb" navigation stream is listed at the top of the page for reference and navigation.

* The cross-reference feature links original standards with the codification either by standard or by codification. After first choosing a standard type from a dropdown menu of 19 sources and choosing the standard number, the system generates a report linking original source paragraph numbers to codification paragraphs.

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In January, FASB released the FASB Accounting Standards Codification (ASC or codification). The codification simplifies the classification of accounting standards by restructuring all authoritative U.S. GAAP for nongovernmental entities into one online database under a common referencing system. The codification is a first step in organizing U.S. accounting standards for convergence with IFRS.

When it becomes authoritative, which is expected to happen in April, the codification will become the single source of authoritative U.S. accounting standards for nongovernmental entities, superseding all then-existing non-SEC accounting and reporting standards. A summary of the content and structure of the codification was featured in the JofA earlier this year ("Framing the Future," May 08, page 40). This article continues with a more detailed discussion of the structure of the codification and Web-based research system, which offers several options for accessing, viewing and using its contents.

A brief accounting research case study in this article offers a firsthand look at how to use the codification research system. We compare the results of research using the new system with those of traditional research methods.

We encourage readers to test-drive the system while they read the article to better understand the system and experience its benefits firsthand. FASB is not charging for using the system now but has not said whether that will change after the codification becomes authoritative. Register to use the codification at http://asc.fasb.org and consider commenting before FASB closes the verification period on Jan. 15.

TIERED, TOPICAL STRUCTURE: AREAS AND TOPICS

The codification is organized in a tiered structure. Information is organized into eight areas, ranging from industry specific to general financial statement matters. Within each area are topics, subtopics, sections, subsections and paragraphs, where details of the technical content reside. …

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