Researching FASB’s ASC

Effective for FS issued after 9/15/09The “codification” replaces previous standards

Evolution of U.S. GAAP

1938

CAPformed

1959

APBformed

1973

FASBformed

CAPIssued

51ARBs

APBIssued

31Opinions

FASBIssued____

Statements

21 years 14 years 36 years

168

5 to 6 per year

2009

Codification Effective

2009

AICPA Accounting Interpretations

FASB Implementation Guides

Widely recognized and prevalent industry

practices

FASBStatements and Interpretations

APBOpinions

AICPAAccounting Research Bulletins

FASBTechnical Bulletins

AICPA Industry Audit and Accounting Guides

AICPAStatements of

Position

FASB Emerging Issues Task Force AICPA AcSEC Practice Bulletins

The House of GAAP

Most Authoritative

Least Authoritative

FASB’s Accounting Standard Codification

The ASC is the single source of authoritative nongovernmental U.S. GAAP, except for SEC guidance

The “GAAP Hierarchy” now has only 2 levels:Everything in ASC is “equally authoritative”If it isn’t in ASC, refer to textbooks, concept

statements, industry practices, IFRS, etc.FASB Statement No. 168 made it “official” and

is the “last ever” in the series – future changes will be made through “ASC Updates”

Benefits of the ASCAll non-SEC authoritative guidance is now in

one place!Updates and additions to guidance will be

incorporated into appropriate topics instead of a new document number to add to the existing 168 standards

Users can have more confidence that all authoritative guidance has been reviewed or considered in researching an accounting matter

Codification generally didn’t change GAAPLanguage from the original pronouncements was

edited for consistency and certain words were changed (for example, “should” and “must” were replaced with “shall”)Exception is software revenue recognition guidance

from an AICPA Technical Inquiry Serivce (TIS) document which was not previously followed by some nonpublic companies

What is included in ASC?FASB Statements, Interpretations,

Technical Bulletins, FSPs, EITFs, DIG and other implementation guidance, some older material from AICPA Committee on Accounting Procedures and Accounting Principles Board, AICPA SOPs, etc.

Some SEC guidance is included for convenience but safer to check SEC.GOV

What you won’t findFASB concept statementsGovernment accounting standardsGrandfathered materialStandards that were outdated or

superseded as of December 31, 2008Guidance for non-GAAP matters such as

cash or income tax basis accountingSome of the “basis for conclusion”

material

Place topic onagenda

Appoint TaskForce

ConductResearch

IssueDiscussion

Memorandum

Hold publichearing

Analysis ofpublic response

Issue ExposureDraft of ASU

Hold PublicHearings

Analysis ofpublic response

Modify exposuredraft

Vote(approval requires

5 of 7)

Issue AccountingStandard Update (ASU)

Due Process in StandardSetting

ASU = accounting standards updateChanges to the codification are still being made16 ASUs issued in 200924 ASUs issued so far in 2010Multiple major topics are underway as part of

convergence with IFRS includingLeasesRevenue recognitionFair value for financial instrumentsFinancial statement display

NOTHING IS MORE CERTAIN THAN CHANGE!

Standardized Section Numbers

Referencing the “authoritative” guidance in the ASCExamples from Grant Thornton

Let’s go to FASB.ORG

Research questions1. What is a leveraged lease?

2. What is a “sale-leaseback” arrangement?

3. In a sale-leaseback situation, how does one classify the lease for the lessee?

Research questions4. A company is leasing real estate with the

following fair values:Land $400,000Building $800,000

The terms of the lease permit the lessee to acquire the property at the end of the 20-year lease for $300,000. The annual payments will be $139,724. How will the lessee go about classifying this lease?Step 1 – FIND the material!

Research questions4. A company is leasing real estate with the

following fair values:Land $400,000Building $800,000

The terms of the lease permit the lessee to acquire the property at the end of the 20-year lease for $300,000. The annual payments will be $139,724. How will the lessee go about classifying this lease?Step 2 – APPLY standard to the facts