FASB Statement No. 168: Accounting Standards Codification

August 2008

FASB Accounting Standards Codification

The codification contained in FASB Statement No. 168 changes the way auditors perform accounting research

On June 30, 2009, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162.

On the effective date of this standard, FASB Accounting Standards Codification™ (ASC) will become the source of authoritative U.S. accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the Securities and Exchange Commission (SEC). FASB ASC significantly changes the way financial statement preparers, auditors and academics perform accounting research.

Major restructuring. FASB ASC is a major restructuring of accounting and reporting standards designed to simplify user access to all authoritative U.S. generally accepted accounting principles (GAAP) by providing the authoritative literature in a topically organized structure. Among other things, FASB ASC aims to:

reduce the amount of time and effort required to solve an accounting research issue;
mitigate the risk of noncompliance with standards through improved usability of the literature;
provide accurate information with real-time updates as new standards are released;
assist FASB with the research and convergence efforts required during the standard setting process;
become the authoritative source of literature for the completed XBRL taxonomy; and
make clear that guidance not contained in FASB ASC is not considered to be authoritative.

Statement No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Nonpublic nongovernmental entities that have not previously followed the guidance included in paragraphs .38 to .76 of the AICPA Technical Questions and Answers section 5100, “Revenue Recognition” (AICPA, Technical Practice Aids), which is now included in FASB ASC as authoritative, should account for the adoption of that guidance as a change in accounting principle, on a prospective basis, for revenue arrangements entered into or materially modified in those fiscal years beginning on or after December 15, 2009, and interim periods within those years.

If an accounting change results from the application of this guidance, an entity should disclose the nature and reason for the change in accounting principle in their financial statements. This new standard flattens the GAAP hierarchy to two levels: one that is authoritative (in FASB ASC) and one that is non-authoritative (not in FASB ASC). Exceptions include all rules and interpretive releases of the SEC under the authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants, and certain grandfathered guidance having an effective date before March 15, 1992. This standard creates Topic 105, Generally Accepted Accounting Principles, in FASB ASC.

FASB Statement No. 168 is the final standard that will be issued by FASB in that form. There will no longer be, for example, accounting standards in the form of statements, staff positions, Emerging Issues Task Force abstracts, or AICPA Accounting Statements of Position. Instead, FASB will issue Accounting Standards Updates.

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