Demystifying the Accounting Standards Codification Peggy Gallagher, CPA mgallagher@amper.com

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

Overview of the Codification FASB’s Accounting Standards Codification (“ASC”) Does not change US GAAP Integration and categorization Includes most SEC content

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

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

What’s 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

What’s 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 FASB used 12-31-08 as a target date for authoring Content amended or superseded by FIN 48, SFAS 141(R) Pre-SFAS 158 literature (employers’ accounting for DB plans) Generally, most other grandfathered material

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 SEC Standards

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

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)

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

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

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

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

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

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)

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

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)

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@listserv.lists.fasb.org confirmation email will be sent back to you all newly issued ASUs, Exposure Drafts and FASB Activity will be emailed to you

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

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

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

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

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

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…”

Not Just for Financial Reports Other documents impacted by ASC: Internal policy manuals, memos, etc Management’s Discussion and Analysis (MD&A) (public companies only)

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

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

QUESTIONS ????????? “The material contained in this presentation is for general information and should not be acted upon without prior professional consultation.”