3 - Financial Accounting Standards Codification Flashcards
The FASB amends the Accounting Standards Codification through the issuance of
Accounting Standards Updates.
Statements of Financial Accounting Standards.
Technical Bulletins.
Staff Accounting Bulletins.
Accounting Standards Updates.
U.S. GAAP includes a very large set of accounting guidance. Choose the correct statement.
The FASB Accounting Standards Codification includes guidance about items that are not under the purview of the Generally Accepted Accounting Principles, such as the income tax basis of accounting.
Authoritative guidance from FASB Statements adopted before the FASB Accounting Standards Codification does not appear in the Codification.
There is an implied hierarchy within the FASB Accounting Standards Codification, with FASB Statements assuming the top level.
International accounting standards are not included in the FASB Accounting Standards Codification.
International accounting standards are not included in the FASB Accounting Standards Codification.
Which of the following documents is typically issued as part of the due-process activities of the Financial Accounting Standards Board (FASB) for amending the FASB Accounting Standards Codification?
A proposed statement of position.
A proposed accounting standards update.
A proposed accounting research bulletin.
A proposed staff accounting bulletin.
A proposed accounting standards update.
Which of the following statements includes the most useful guidance for practicing accountants concerning the FASB Accounting Standards Codification.
The Codification includes only FASB Statements.
The Codification is the sole source of U.S. GAAP, for nongovernmental entities.
The Codification significantly modified the content of GAAP when it became effective.
An accountant can be sure that all SEC rules are included in the Codification.
The Codification is the sole source of U.S. GAAP, for nongovernmental entities.
The FASB Codification Research System is the online, real-time database by which users access the Codification. The Codification system became effective on July 1, 2009.
Goals of the Codification
The online nature of the Codification and its internal structure were designed to achieve the following goals:
Simplify the structure and accessibility of authoritative GAAP.
Provide all authoritative literature in a single location.
Reduce the time and effort required to research an accounting issue.
Reduce the risk of noncompliance with GAAP.
Facilitate updating of accounting standards.
Assist the FASB with research and convergence (IFRS) efforts.
1-Changes to authoritative GAAP are accomplished through FASB Accounting Standards Updates (ASU), including amendments to SEC content. No longer will separate FASB Statements or other documents be separately published. ASUs are designated chronologically by year. For example, ASU 2014-12 refers to the twelfth ASU issued by the FASB in 2014.
An ASU is a separate document posted on the FASB website and incorporated in the Codification. The ASU will (1) summarize the key aspects of the update, (2) detail how the Codification will change, and (3) explain the basis for the update. ASUs are not authoritative—ASUs are a vehicle to update the codification and are not permanent in their own right, but a way to amend the codification. When changes to the codification happen, the FASB updates the Codification and issues the ASU simultaneously.
2-During the transition period for an ASU to become effective, the Codification shows the new guidance as “Pending Text.“ When the new guidance is effective, the previous guidance (if any) is deleted and the new guidance takes its place.
Although updates no longer use the old FASB numbering system, the Codification provides access to the original standards used in creating the Codification.
The Codification provides links enabling users to provide feedback, which then is directly transmitted to the FASB.
Codification Structure
Areas—Topics—Subtopics—Sections—Subsections—Paragraphs
The highest level in the Codification is the ____, of which there are nine, each with a specific numeric identifier.
Area
There are approximately 90 ____ across the nine areas
Topics
The Codification does not include accounting guidance related to:
Other Comprehensive basis of accounting
Cash basis accounting
Income tax basis accounting
Regulatory accounting principles (e.g., insurance)
Governmental accounting standardsThe Codification provides four different ways for researching an issue:
Browse the structure (illustrated above) in the menu provided.
Search by key word(s); this mode allows narrowing of a search both by related term and by major area within the Codification structure.
Enter the specific Codification location (using the numerical system within the Codification); this is designed for users who know their topic and section of interest.
Search by previous GAAP standard number (e.g., by FAS 13).
In addition, the Codification allows users to aggregate findings by similar content. For example, all Status sections for a topic can be accessed and joined without separately accessing the Status section for each subtopic.
Moreover, information can be combined. For example, all content in a subsection may be viewed in one document without having to separately access each individual section.
What are the 9 areas of codification?
General principles (100);
Presentation (200) (does not address recognition or measurement);
Assets (300);
Liabilities (400);
Equity (500);
Revenue (600);
Expenses (700);
Broad transactions (800) (transactions involving more than one area such as interest, and subsequent events);
Industry (900) (special industry accounting).
