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Demystifying the Accounting Standards Codification

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Title: Demystifying the Accounting Standards Codification


1
Demystifying the Accounting Standards Codification
  • Peggy Gallagher, CPA
  • mgallagher_at_amper.com

2
Demystifying the Accounting Standards Codification
  • What is it?
  • When is it effective?
  • How will it affect me?
  • Resources

3
Overview of the Codification
  • FASBs Accounting Standards Codification (ASC)
  • Does not change US GAAP
  • Integration and categorization
  • Includes most SEC content

4
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

5
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

6
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

7
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  • Content amended or superseded by FIN 48, SFAS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

8
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

9
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

10
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)

11
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

12
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

13
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

14
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

15
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

16
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)

17
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22
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

23
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)

24
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

25
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

26
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

27
Afraid to Change?
  • Two ways of linking ASC materials to old
    standards
  • Cross reference tool
  • Select Printer friendly with Sources view

28
Effective Date
  • Became authoritative on July 1, 2009
  • Mandatory for interim and annual periods ending
    AFTER September 15, 2009
  • For public companies Q3

29
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

30
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

31
Not Just for Financial Reports
  • Other documents impacted by ASC
  • Internal policy manuals, memos, etc
  • Managements Discussion and Analysis (MDA)
    (public companies only)

32
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

33
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

34
QUESTIONS ?????????
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