(855) Marcum1 | FOLLOW US           
Marcum LLP
  • 中文
Marcum LLP

SEC Insights - June 2010


FASB Accounting Standards Codification – Where We Are Today



Effective July 1, 2009, the Financial Accounting Standards Board ("FASB") completed its Accounting Standards Codification ("Codification") of US Generally Accepted Accounting Principles (GAAP). The Codification became the single source of authoritative literature governing non-governmental GAAP in the United States. At that time, all existing accounting standards including those of the FASB and the Emerging Issues Task Force ("EITF"), as well as other related authoritative literature were superseded. The codification was effective for all non-governmental organizations for interim and annual periods ending after September 15, 2009.

"Today’s launch of the Codification represents a milestone in U.S. accounting standards," stated FASB Chairman Robert Herz at the time. "After years of development, this much more efficient, user-friendly method of researching up-to-date solutions has become a reality".

The primary purpose of the Codification was to mitigate the difficulty of locating, understanding and applying the various levels of hierarchy of GAAP that were issued by numerous standard setting bodies over the years. The FASB believes these difficulties may have resulted in the incorrect application of GAAP. A goal of the Codification project was to streamline the process of researching accounting topics by compiling all authoritative literature in one place. Among other things, through the Codification the FASB hoped to reduce the time and effort accountants devote to accounting research; reduce incorrect application of the standards (caused by not having all appropriate literature at hand); provide accurate real-time updates as new standards are released, and most importantly make it clear that guidance not contained in the Codification is not considered authoritative.

Prior to the Codification, standard setting bodies issued guidance in many forms, without a consistent organizational structure. The dispersed nature of the literature made it difficult to determine that all guidance relevant to particular issue had been considered.

The Codification has organized the thousands of GAAP pronouncements into four primary groupings that include presentation, financial statements accounts (assets, liabilities, equity, revenue and expenses), broad transactions and industry guidance. The topical structure includes topics, subtopics, sections and subsections. Guidance within each topic becomes more specific as it is further grouped into subtopics, sections, and subsections. This modular format helps create a consistent, user-friendly structure that allows users to obtain all relevant information in one location in a more efficient and effective manner. The new layout is condensed as compared to the original GAAP standards. The Codification only includes essential standards and implementation guidance. Nonessential information (historical content, document summaries and basis for conclusions etc.) was excluded. The format of the Codification also does not include footnotes unless they are deemed relevant.

The initial challenge that all financial statement preparers, auditors, and other users of financial statements were faced with in connection with the implementation of the Codification, was how to locate topics in the Codification. While there were no changes to the substantive content of GAAP, the referencing and format was all new. For inexperienced users, as well as individuals with years of experience working with the old GAAP, the changes in the structure required significant training.

At first, many professionals felt that learning the Codification structure was time consuming. At times, some professionals still refer to the old FASB guidance to search out certain topics due to their familiarity with its organization. After working with the Codification for the past year, most professionals now acknowledge the benefit of having all information in one location, including real-time updates which help ensure consideration of all relevant accounting guidance. The Codification helps decrease the amount of time and effort required to resolve accounting research issues.

For financial statements issued for interim and annual periods ending after September 15, 2009, footnote references must be modified to remove specific references to outdated GAAP. Consequently, once the users understood how to use the Codification, the next challenge was to modify the presentation of the financial statements and accounting policies accordingly.

With the implementation of the Codification those preparing the financial statements have a choice how to reference GAAP. The financial statement referencing can be accomplished in one of two ways. The first option allows the user to make reference to the Codification topic (XXX), subtopic (YY) and section number (ZZ) "FASB ASC XXX-YY-ZZ". The second option allows the preparer to provide a general description of the accounting policy in "plain English" without any specific reference to the Codification standard.

The flexibility in referencing allows the preparer to use plain English (i.e. no specific disclosures). The option to modify the financials using plain English also gives the preparer an opportunity to redraft the footnotes and more clearly describe concepts. The SEC also encourages the use of plain English in financial statements and reminded the preparers to consider the users of the financial statements when choosing a transition option.

In conclusion, it appears that while the researching and referencing will take time to become common practice, the implementation of the Codification has been accomplished with minimal issues encountered. The benefits of all GAAP accounting standards in one reference source has many users breathing a sigh of relief. In a time of much financial turmoil, the Codification has pushed financial statement preparers and auditors alike to reevaluate and refresh the financial statement disclosures to be more useful to a wider range of users.

A special thanks to article contributor Kim Lamplough.




Marcum LLP is one of the largest independent public accounting and advisory services firms in the nation, with offices in major business markets throughout the U.S., Grand Cayman and China.

Learn More


750 3rd Avenue, 11th Floor
New York, NY 10017

Find an Office

(855) MARCUM1


Marcum Foundation


Leading Edge Alliance


© 2016 Marcum LLP. All Rights Reserved.
Privacy | Legal | Sitemap