Prepared for 'codification'--single source of U.S. GAAP?

• Author: Heffes, Ellen M.
• Position: FINANCIAL REPORTING - Generally accepted accounting principles - Securities and Exchange Commission - Financial Accounting Standards Board - Law overview

In less than a month--on July 1--U.S. generally accepted accounting principles will be reorganized in a way that will ultimately make it much quicker and easier to research accounting issues.

On that day, the FASB Accounting Standards Codification is to become the single official source of authoritative, nongovernmental U.S. GAAP.

Pending approval by the Financial Accounting Standards Board, after that date, only one level of authoritative GAAP will exist, other than guidance issued by the U.S. Securities and Exchange Commission. All other literature will be nonauthoritative--including FASB's Original Pronouncements volumes.

"The codification will be a big change for preparers and auditors of financial reports," acknowledges FASB member Larry Smith. However, he said, it will ultimately enable users to spend substantially less time and effort researching answers to accounting questions and problems.

Another benefit of the codification will be the ability to provide timely information with real-time updates as new standards are released. After it becomes GAAP, FASB will no longer issue Statements of Financial Accounting Standards, Interpretations, FASB Staff Positions or Emerging Issues Task Force Abstracts.

Rather, changes to GAAP, regardless of how they've been issued, will take the form of "Codification Updates."

The codification does not change GAAP; instead, it introduces a new structure--one that is organized into an easily accessible, user-friendly online research system. It reorganizes the thousands of U.S. GAAP pronouncements into roughly 90 accounting topics. Topics may be broken down further into subtopics when there is...