Demystifying the Accounting Standards Codification

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Demystifying the Accounting Standards Codification

• Peggy Gallagher, CPA
• mgallagher_at_amper.com

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Demystifying the Accounting Standards Codification

• What is it?
• When is it effective?
• How will it affect me?
• Resources

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Overview of the Codification

• FASBs Accounting Standards Codification (ASC)
• Does not change US GAAP
• Integration and categorization
• Includes most SEC content

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Why was the ASC needed?

• Simplifies access
• Improves accuracy of research
• Mitigates risk of non-compliance
• Streamlines research process
• Provides real-time updates
• Assists with IFRS convergence

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Before the ASC

• FASB statements FASB Staff Positions FASB
• Interpretations Accounting Principles Board
  Opinions
• EITF Abstracts AICPA Audit Accounting Guides
  FASB
• Technical Bulletins SEC S-X Rules SEC Staff
  Accounting
• Bulletins AICPA Statements of Position SEC
  S-K Items
• SEC Speeches AICPA Practice Bulletins
• ETCETERA

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Whats Not in the ASC

• Governmental standards
• Non-GAAP standards (modified cash basis, income
  tax basis or regulatory basis)
• Non-essential content of previous standards
• Basis for Conclusions
• Document summary
• Constituent feedback

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Whats Not in the ASC (cont.)

• FASB used 12-31-08 as a target date for authoring
• Content amended or superseded by FIN 48, SFAS
  141(R)
• Pre-SFAS 158 literature (employers accounting
  for DB plans)
• Generally, most other grandfathered material

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SEC Standards

• SEC content is the domain of the SEC
• Relevant SEC materials included to increase
  the utility of the ASC, in separate sections
• Regulation S-X, Financial Reporting Releases,
  Accounting Series Releases, SABs, SEC Staff
  Observer comments are in
• Content related to the following is EXCLUDED
• MD A
• Auditing matters
• Independence matters

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How the ASC is Structured

• New citations ASC 210-20-60-5 or ASC
  XXX-YY-ZZ-PP
• New classification system
• Areas 5 groupings of topics
• Topics XXX 210
• Subtopics YY 20
• Sections ZZ 60
• Paragraph or subsections P or PP 5

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ASC Areas and Topics (XXX)

• Approximately 90 topics, in 5 main areas
• General Principles (105 199)
• Example 105, GAAP
• Presentation (205 299)
• Balance sheet, Statement of Cash Flows, EPS
• Financial Statement Accounts (305 700)
• Receivables, Equity, Revenue Recognition
• Broad Transactions (805 899)
• Leases, Business Combinations, Consolidation
• Industry ( 905 999)

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Topic Broad Transactions

• 805 Business Combinations
• 808 Collaborative Arrangements
• 810 Consolidation
• 815 Derivatives and Hedging
• 820 Fair Value Measurements and Disclosures
• 825 Financial Instruments
• 830 Foreign Currency Matters
• 835 Interest
• 840 Leases
• 845 Nonmonetary Transactions
• 850 Related Party Disclosures
• 852 Reorganizations
• 855 Subsequent Events
• 860 Transfers and Servicing

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Topic Presentation

• 205 Presentation of Financial Statements
• 210 Balance Sheet
• 215 Statement of Shareholder Equity
• 220 Comprehensive Income
• 225 Income Statement
• 230 Statement of Cash Flows
• 235 Notes to Financial Statements
• 250 Accounting Changes and Error Corrections
• 255 Changing Prices
• 260 Earnings per Share
• 270 Interim Reporting
• 272 Limited Liability Entities
• 275 Risks and Uncertainties
• 280 Segment Reporting

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ASC Subtopics (YY)

• Distinguished by type or scope
• All will contain Overall pervasive guidance
  for topic
• Remainder will vary by topic
• Example
• Topic Leases
• Subtopics Overall, Operating, Capital

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ASC Sections (ZZ)

• Standardized across all Subtopics
• 16 categories, examples
• 00, Status
• 05, Overview and Background
• 15, Scope and Scope Exceptions
• 25, Recognition
• 50, Disclosure
• SEC S before Section number, i.e., S

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USER TIP

• Select the feature Join all Sections in order
  to combine each element of this backbone into
  one, seamless discussion
• Example Join the Disclosure section for all
  subtopics within the Revenue Recognition Topic

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USER TIP

• Q How will I be able to find the original
  source (old standards) of the ASC material?
• A The Codification includes a cross-reference
  report that allows users to identify where
  current standards reside in the Codification, or
  the source of material included in the
  Codification. (see example)

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Future Codification Updates

• Accounting Standard Updates or ASUs
• Numbered by year of issuance, ASU 2009-01 or ASU
  09-01
• 15 issued since July 1, 2009
• Several Proposed ASUs
• Same look and feel as pre-ASC standards

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Codification Updates

• Current and transitional text presented together
  in ASC
• Transitional text not yet effective
• Transitional text will be distinguished from
  current (authoritative) text
• FASB does not consider them authoritative as an
  ASU (no references to ASU 2009-10)

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FASB Exposure Draft Information

• FASB.org
• Similar format to ASUs
• Click on Projects tab, then Exposure Drafts
• Sign up for Action Alerts
• Send an email to join-actionalert_at_listserv.lists.f
  asb.org
• confirmation email will be sent back to you
• all newly issued ASUs, Exposure Drafts and FASB
  Activity will be emailed to you

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Before and After

• New ASC Citation

• Old citation

• SFAS 5
• SFAS 109/FIN 48
• SFAS 142
• SFAS 157

• ASC 450, Contingencies
• ASC 740, Income Taxes
• ASC 350 Intangibles Goodwill and Other
• ASC 820 Fair Value Measurements and Disclosures

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Before and After

• OLD
• SOP 94-6, Significant Risks Uncertainties
• FAS 141(R), Business Combinations
• SFAS 123(R)

• NEW
• ASC 275, Risks Uncertainties
• ASC 805 Business Combinations
• ASC 718 , Compensation Stock Compensation

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Afraid to Change?

• Two ways of linking ASC materials to old
  standards
• Cross reference tool
• Select Printer friendly with Sources view

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Effective Date

• Became authoritative on July 1, 2009
• Mandatory for interim and annual periods ending
  AFTER September 15, 2009
• For public companies Q3

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Accounting Citations Going Forward

• Periods ending before September 15, 2009
• Do NOT refer to ASC only
• May use old references only, or both
• Periods ending after September 15, 2009
• Refer to ASC only, may NOT use old references
• Comparative statements may use both

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USER TIP

• Streamline remove unnecessary, outdated
  technical references in footnotes
• Consider deleting all technical citations in
  favor of a Plain English approach
  (recommended)
• Example .as required by the Derivatives and
  Hedging Topic of the FASB ASC

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Not Just for Financial Reports

• Other documents impacted by ASC
• Internal policy manuals, memos, etc
• Managements Discussion and Analysis (MDA)
  (public companies only)

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Transition Planning

• ASC structure requires practice and training
• Old standards may be split across several topics
• Review financial statements and identify where
  changes are needed
• Update all internal policies, memos, etc.
• Determine how you will access the Codification

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Resources

• FASB website (www.fasb.org)
• FASB on-line tutorials (free)
• FASB Notice to Constituents for ASC (free)
• FASB online ASC annual subscription, 850 print
  (4 volumes), 195
• AP M website

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QUESTIONS ?????????

• The material contained in this presentation is
  for general information and should not be acted
  upon without prior professional consultation.