FASB Codification Released; One Year Verification Phase Begins
January 15, 2008
FEI Summary

Late today (January 15), the Financial Accounting Standards Board (FASB) announced the release of its draft codification, and the start of the one year "verification" period in which FASB is "encourag[ing]... use [of] the online Codification Research System free of charge to research accounting issues and provide feedback on whether the codification content accurately reflects existing U.S. generally accepted accounting principles."

The goal of FASB's codification is to put all generally accepted accounting principles (GAAP) issued by various organizations over the years (including FASB, the American Institute of Certified Public Accountants (AICPA) and FASB's Emerging Issues Task Force (EITF)) in one place, in a logically-flowing topical order, and to enhance the accessibility and search capabilities through an interactive electronic platform.

A primary aim of the codification is to assist preparers and auditors in locating applicable GAAP on a particular topic and to assist investors, regulators and other interested parties in doing the same. This, in turn, is hoped to reduce some aspects of complexity in financial reporting, given that there are over 25,000 pages of U.S. GAAP, as pointed out by FASB Chairman Robert Herz at FEI's Global Financial Reporting Conference last September, and in various other venues, and as captured in The Wall Street Journal's Dec. 12, 2007 editorial: "Closing the GAAP."

"The codification does not change GAAP; instead it reorganizes the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics, and displays all topics using a consistent structure. The SEC guidance will follow a similar topical structure in separate SEC sections," says FASB.

FASB says it expects the codification to:

• Reduce the amount of time and effort required to solve an accounting research issue;
• Improve usability of the literature thereby mitigating the risk of noncompliance with standards;
• Provide real-time updates as new standards are released;
• Assist FASB with the research and convergence efforts required during the standard-setting process; and
• Become the authoritative source of literature for the completed XBRL taxonomy.

Access to the codification is available at: http://asc.fasb.org . Through that link, FASB notes, "users are able to review the codification free of charge and provide specific content-related feedback at the individual paragraph level as well as general system-related feedback." Additionally, FASB notes, "During the verification period, codification content will be updated for changes resulting from constituent feedback and new standards."

"The FASB currently expects to approve, and make the codification authoritative in April 2009," states the 52-page "Notice to Constituents v. 1.01" accessible at the codification website linked above.

Upon becoming authoritative, the codification will supercede all existing non-SEC standards, and the superceded standards will be retained in the Codification Retrieval System for archive purposes, notes FASB.

More Guidance From:

KPMG - Defining Issues

Prepared Jan. 15, 2008 by Edith Orenstein, Director, Technical Policy Analysis, Financial Executives International (FEI). This summary does not represent FEI opinion unless specifically noted above.