Chapter 3 (Codification) Flashcards
How many areas are included in the Codification?
9
How to properly cite from the Codification?
Topic—Subtopic—Section—Paragraph
Ex. FASB ASC 450-20-30-1
What is the Codification?
The sole source for authoritative GAAP for nongovernmental entities
Unmodified Audit Opinion
No major problems with how information was reported and disclosed (clean opinion)`
Why was the Codification created?
There are so may complex and diverse sources, the Codification makes it easier to research standards
What is it called when FASB updates rules?
Accounting Standards Update (ASU)
When rules are required by the SEC, how is that notated?
There is an “S” right before the section number
Ex. FASB ASC 450-20-S30-1
Who does the SEC pertain to?
Only public companies
What is the best way to find information in the Codification?
Browse
Keyword search
Where do you typically find the answers to your research?
Paragraphs
Basis for Conclusions (BC)
The FASB reasoning for updating the Codification—found in ASU or statements themselves
6 Steps Researching Process
- Establish and understand the facts
- Identify the Issue: What is the research question?
- Search the authoritative literature
- Evaluate the results of the search
- Develop conclusions
- Communicate results of the research
Where will you find your BC’s?
FASB website—ASU issued
100
General Principles
200
Presentation
300
Assets
400
Liabilities
500
Equity
600
Revenue
700
Expenses
800
Broad Transactions
900
Industry
***ASC includes industry-specific guidance for specific industries (airlines, financial services, NFP, real estate, software) that must be followed in addition to other general accounting requirements applicable to other entities
Navigating a Subtopic
- Read the Overview section
- Review the Scope section to confirm that your specific transaction is within the scope of this guidance
- Then, determine if your issue concerns Recognition, Initial Measurement, etc.
- Read any related preceding paragraphs
- Skim the rest of the section to ensure you have considered all relevant guidance
- Skim or review the Implementation Guidance section (section 55)
- For public companies, scan the S sections for relevant SEC guidance.
Research is important in accounting because _____
In addition, the business environment is constantly changing, ______
Therefore, accounting professionals must be able to find the answers to technical accounting questions _______
There is a significant volume of accounting standards making it impossible to memorize them all
Requiring revisions of accounting standards
In order to function effectively on a day-to-day basis.
