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FASB Codification of US GAAP Takes Effect

By Jim Hamilton

The FASB Accounting Standards Codification became effective July 1, 2009. Going forward, it will be the source of authoritative U.S. GAAP. Rules and interpretive releases of the SEC under authority of the federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. The Codification does not change GAAP; instead, it introduces a new structure that is organized into an online research system.

FASB will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, the Board will issue Accounting Standards Updates. The Board will not consider Accounting Standards Updates as authoritative in their own right. Rather, they will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the changes in the Codification.

Once the Codification is in effect, all of its content will carry the same level of authority. Thus, the GAAP hierarchy will be modified to include only two levels of GAAP: authoritative and non-authoritative.

The Codification reorganizes the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics and displays all topics using a consistent structure. It also includes relevant SEC guidance that follows the same topical structure in separate sections in the Codification.

To increase the utility of the Codification for public companies, relevant portions of authoritative content issued by the SEC and selected SEC staff interpretations and administrative guidance have been included for reference in the Codification, such as Regulation S-X, Financial Reporting Releases, Interpretive Releases, and SEC Staff Accounting Bulletins.

It is important to note that the SEC Sections contain SEC content related to matters within the basic financial statements, but the Codification does not contain the entire population of SEC rules, regulations, interpretive releases, and staff guidance. For
example, the Codification does not include content related to matters outside of the basic financial statements, such as Management?s Discussion and Analysis (MD&A), or to auditing or independence matters.

The Codification does not replace or affect requirements or guidance issued by the SEC or its staff for public companies in their filings with the SEC.

Full post as published by Jim Hamilton's World of Securities Regulation on July 01, 2009 (boomark / email).