US accounting and reporting standards are undergoing a major restructuring, and the Financial Accounting Standards Board (FASB) is alerting constituents to significant changes that are expected to occur next year. On 1 July 2009, the FASB Accounting Standards Codification is expected to officially become the single source of authoritative nongovernmental US generally accepted accounting principles (GAAP), superseding existing FASB, American Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF), and related literature. After that date, only one level of authoritative GAAP will exist. All other literature will be considered non-authoritative.
“When the Codification goes live on 1 July 2009, US GAAP will be completely reconfigured in a way that will vastly improve the ease of researching US GAAP issues, superseding existing authoritative literature – including FASB’s Original Pronouncements,” states FASB chairman Robert Herz. “Preparers and auditors of financial statements need to familiarize themselves with the changes so that they are ready for the switch.”
On 15 January 2008, the FASB made the Codification available for free for an extended verification period, during which time constituents have been urged to provide feedback on the new system to confirm that the Codification accurately reflects existing US GAAP for nongovernmental entities. After addressing issues raised during the constituent feedback process, the FASB expects to approve the Codification as the single authoritative source of US GAAP prior to the 1 July 2009 launch.
The Codification reorganises the thousands of US GAAP pronouncements into roughly 90 accounting topics and displays all topics using a consistent structure. Also included is relevant Securities and Exchange Commission (SEC) guidance that will follow the same topical structure in separate sections in the Codification. To prepare constituents for the change, the FASB has provided:
- Online tutorials available on the Codification website.
- A notice to constituents that includes a significant amount of background.
- Numerous presentations.
The Codification does not change GAAP; instead, it introduces a new structure – one that is organised in an online research system. The FASB expects that the new system will reduce the amount of time and effort required to research an accounting 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, and assist the FASB with the research efforts required during the standard-setting process.
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