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• Content amended or superseded by FIN 48, SFAS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
(No Transcript)
18
(No Transcript)
19
(No Transcript)
20
(No Transcript)
21
(No Transcript)
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 ?????????