FASB Codification System Orientation
An Introduction to the FASB Codification System
In effort to create a system to aid professionals when researching accounting principles, the Financial Accounting Standards Board created the FASB Codification System. The new Codification system is widely accepted as the source of authoritative United States Generally Accepted Accounting Principles (US GAAP). This article will explain the FASB Codification System and its purpose. In addition we’ll discuss the eight content areas located in the FASB Codification System, plus describe what types of items are located under each content area.
Accounting Books & Software
Securities and Exchange Commission Guidance
FASB Codification System
The FASB Codification System is a database of accounting information that allows the user to search among thousands of US GAAP pronouncements organized into approximately 90 topics. Codification is intended to reduce the complexity of nongovernmental accounting standards, while facilitating the increased need for international accounting standards. As the authoritative source for US GAAP, Codification topics are intended to reduce the amount of standards, and standard setters, with the guidance of the Securities and Exchange Commission (SEC).
IFRS Vs GAAP
The Purpose of FASB Codification
The purpose of Codification is to better organize accounting principles and laws to simplify user access. By reducing the amount of time needed to research accounting topics, accounting professionals can perform their work far more efficiently and effectively. In addition, accounting professionals can lessen the risk of noncompliance through improved usability of literature and real time updates on new standards. Furthermore, Codification is intended to bridge the gap between differences in accounting practices between international accounting standards and the FASB.
Eight Content Areas in FASB Codification
There are eight main content areas located in the FASB Codification System, including Presentation, Assets, Liabilities, Equity, Revenue, Expenses, Broad Transactions, and Industry. The following information is gathered from the Accounting Standards Codification website.
Presentation offers guidance on income statement preparation, notes to financial statements, and for calculating earnings per share.
The Assets section contains information on accounting for receivables, investments, and inventory.
For information on asset retirement and environmental obligations, contingencies, and distinguishing liabilities from equity, accounting professionals will want to view the Liabilities section.
The Equity section discusses status, recognition, and SEC materials needed to record equity-based payments to non-employees.
The Revenue area is intended to guide accounting professionals on revenue recognition and updates to accounting standards that affect revenue recognition.
Expenses describes procedures used to report compensation, including stock compensation, research and development, and for preparing income taxes.
The Broad Transactions area contains information on business combinations, consolidation, fair value measurements and disclosures, financial instruments, and leases.
Finally, the Industry area shows the user data related to specific industries, including oil and gas, broker and dealers, and depository and lending.
The FASB Codification System was designed to aid all needs for accurate and up-to-date accounting information, excluding governmental accounting standards. With the introduction of the program, users are able to quickly locate principles based on eight main content areas. It is within these main content areas that users can research specific topics and fully comply with accounting laws and regulations.
More by this Author
Learning how to properly prepare financial statements is important for all companies, whether small business or big business...
A close look at an example of a company the utilizes financial accounting theory and analysis to create sound accounting decisions...
The politicalization of accounting standards was a necessary move by governing agencies to help protect consumers from fraudulent accounting practices...