Federal Accounting Standards Board Codification System

This paper will define what the Federal Accounting Standards Board Codification System is. Then the purpose of the FASB Codification System will be detailed. The nine content areas will be identified and items that are found in each content area will be given.

The Federal Accounting Standards Board Codification System is defined as the only source of the general accounting principles that has an authoritative purpose and is used by nongovernmental entities. It suspended all previous Generally Accepted Accounting Principles. The FASB Codification System was created by over 200 people from different entities. This wide variation of contributors allows for principles to be defined that relate to all types of entities. The system took over 5 years to be completed.

The FASB Codification System's main purpose is to provide an easier more understandable way to access the US GAAP standards. The standards are listed by topical index. There are nine content areas of the Codification System. They are as follows: general principles, presentation, assets, liabilities, equity, revenue, expenses, broad transactions, and industry. The Presentation content shows the directions on how to prepare an income statement, disclosure notes on financial statements, and the details on how to calculate earnings per share. The Assets content gives details about information on accounting receivables, investments, and inventory. Liabilities content area gives information on asset retirement and environmental obligations, contingencies, and shows the difference between liabilities and equity. This section is greatly used by the accounting profession. The Equity section describes the status, recognition, and SEC materials needed to record the transactions of equity-based payments to non-employees. The Revenue area gives the professionals in accounting the correct way to record revenue recognition and updates to accounting standards that affect revenue recognition. Expenses describe procedures used to report compensation, including compensation from stock, research and development, and for preparing income taxes. The Broad Transactions content area directs the definition of business combinations, consolidation, fair value measurements and disclosures, financial instruments, and leases. The last area is the industry area. In this area the defining use of the data related to different types of industrial businesses, that includes oil and gas, broker and dealers, and depository and lending.

Works Cited

Received from https://asc.fasb.org/home&agreed=1 on April 29, 2012