A First Look at FASBís GAAP Codification
FASBís Accounting Standards Codification will soon affect every CPA who practices, teaches or researches accounting in accordance with U.S. GAAP. Hereís what you need to know about the changes ahead.
by Bruce Pounder/Journal of Accountancy
By April 2009, FASB is expected to make the codification the single source of authoritative Generally Accepted Accounting Principles (GAAP), overriding all existing literature. This codification content, not including the original pronouncements from which the content was derived, will be GAAP. And the online codification research system — not including books, loose-leaf services or CDs — will be the primary way that accountants access GAAP.
For many historical reasons, GAAP has become a minimally organized collection of many kinds of accounting pronouncements issued by various standard setters over many decades, as well as "widely recognized and prevalent" industry practices that are not the product of any formal standard-setting process. The present components of GAAP vary greatly in format, structure, completeness, authority and accessibility. As a result, practicing CPAs and financial statement preparers who attempt to apply GAAP often find themselves confused and frustrated. Likewise, accounting students frequently struggle to learn GAAP.
If a standard setter were to develop a body of accounting standards from scratch today, those standards presumably would not resemble the challenging jumble that GAAP has become. Rather than start from scratch, FASB has done the next best thing in an attempt to make GAAP more understandable and user-friendly — FASB has sought to simplify the structure of GAAP by codifying it.This article has been excerpted from the Journal of Accountancy. Read the full article here.