1. Demystifying the Accounting Standards Codification
Peggy Gallagher, CPA

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

3. Overview of the Codification
FASB’s 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. 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

7. What’s Not in the ASC (cont.)
FASB used 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Content amended or superseded by FIN 48, SFAS 141(R)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
SEC Standards

9. How the ASC is Structured
New citations: “ASC ” 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)

22. Future Codification Updates
Accounting Standard Updates or “ASUs”
Numbered by year of issuance, ASU 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 )

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 to
confirmation will be sent back to you
all newly issued ASUs, Exposure Drafts and FASB Activity will be ed 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
Management’s Discussion and Analysis (MD&A) (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 ?????????
“The material contained in this presentation is for general information and should not be acted upon without prior professional consultation.”