FASB Codifications & Terms

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FASB

Week 3 Assignment-FASB Codifications & Terms


Abstract

  • In the Course Home tab of your course shell, click on “FASB Codification Access.” Scroll to the bottom of the page and click on “For tutorials please click on the link here.” Watch and listen to the four tutorial modules and answer the following questions with information you learned in the tutorial, your book and through Internet research:
    • Why was codification needed?
    • What is the goal of codification?
    • What authoritative literature does the codification supersede?
    • How is the codification structured? Include as discussion of the topic, subtopics, sections, and subsections in your answer.
    • Describe the numerical indexing system.
    • What is a “landing page?”
    • What is the difference between the “general topics landing page,” the “industry topics landing page” and the “subtopics landing page?”
    • What is “pending content?”
    • How is SEC content differentiated from FASB content?
  • Log into the codification database and perform a search on the following terms and answer the related questions:
    • Warranty expense
      • How many results did you get?
      • Click on “605 Revenue Recognition > 20 Services > 25 Recognition” and summarize what is said in subsection 25-3.
    • Property, plant and equipment
      • How many results did you get?
      • Click on “360 Property, Plant, and Equipment > 10 Overall > S50 Disclosure” and summarize what is said in subsection S50-1.
    • Extinguishments of Liabilities
      • How many results did you get?
      • Click on “405 Liabilities > 20 Extinguishments of Liabilities > 10 Objectives” and summarize what is said in subsection 10-1.

Week 3 Assignment-FASB Codifications & Terms

The FASB is the main authority on non-governmental standard setting. It is designed to establish and improve guidance standards for public financial accounting and reporting. Standards issued by the FASB are considered generally accepted accounting principles. The Codification systems became effective September 15, 2009.

FASB Codification

Why was codification needed?

To alleviate the complications associated with the numerous standard setting bodies issuing guidance without an organized structure. The FASB felt this system led to the misapplication of GAAP. The Codification includes all authoritative literature in one place.

What is the goal of codification?

The goals of the FASB in developing the Codification were to bring together US GAAP in one place to make it easier for users to access the information. Ensure the authoritative GAAP content is represented accurately. Provide a research system that has up to date information on standard setting. Streamlining the system helps reduce inaccuracies and reduces research time by users.

What authoritative literature does the codification supersede?

The Codification was effective after September 15, 2009 and any existing non-SEC accounting standards and reporting are superseded by the Codification. No grandfathered non-SEC literature on accounting is considered any authoritative. FASB Statement No. 168 describes all the accounting standards documents and any accounting literature not contained within the Codification as non-authoritative.

How is the codification structured?

The Codification brings together all the GAAP pronounces. It is a ranking of accounting guidance beginning with Areas and breaking down into Topics, Subtopics, and Sections. Areas contain an assembly of accounting guidance. The following rankings are smaller collections of accounting guidance under Areas. Each of the Codification’s nine Areas is identified by a title. The nine Areas of Codification are General Principles, Presentation, Assets, Liabilities, Equity, Revenue, Expenses, Broad Transactions, and Industry. Excluded information from the Codification is considered nonessential such as historical content.

Include as discussion of the topic, subtopics, sections, and subsections in your answer.

Topics represent a collection of related guidance and are organized into five main areas.

General Principles, Presentation, Financial Statement Accounts, Broad Transactions, and Industry. Subtopics are sections of a Topic illustrated scope or type. Sections exhibit the essence of the content in a Subtopic. Subsections further subdivide a Section and each Section contains at least one Subsection. Paragraph groups are a series of paragraphs under a main paragraph.

Describe the numerical indexing system.

The structure of the indexing systems:

XXX-YY-ZZ-PP where XXX = Topic, YY = Subtopic, ZZ = Section, PP = Paragraph

In the case of SEC content, an "S" precedes the Section number.

Topics—FASB ASC Topic XXX

Subtopics—FASB ASC Subtopic YY

Sections—FASB ASC Section ZZ

Paragraph—FASB ASC paragraph PP

Subparagraph—FASB ASC subparagraph SP

What is a “landing page?”

The landing page is an overview of the FASB Codification providing links to other resources.

What is the difference between the “general topics landing page,” the “industry topics landing page” and the “subtopics landing page?”

The general topics page lists only codification 105 Generally Accepted Accounting Principles. The industry topics land page lists codifications 905 -995. You can click on each codificationfor further breakdown. The subtopics landing page lists the available subtopics for that particular codification, table of contents you can expand or collapse, and a link to join all subtopics.

What is “pending content?”

Changes to the content in the Codification do not immediately take effect once an update is issued. During the waiting period, the updated content will remain in the Codification with current information on when the pending content becomes authoritative.

How is SEC content differentiated from FASB content?

The FASB content is issued by the FASB whereas the SEC. issues the SEC content. The content in the SEC sections relate to financial statement content. Not all of the SEC content is contained in the Codification for public reference. The SEC content is not changed in the Codification but organized into accounting topics in align with non-SEC content. SEC content: Regulation, Financial Reporting Releases, Accounting Series Releases, Interpretive Releases, Staff guidance, Accounting Bulletins, ITF Topic D and Staff Observer comments.

FASB Terms

Warranty Expense

How many results did you get? The system generated 24 results for warranty expense.

Click on “605 Revenue Recognition > 20 Services > 25 Recognition” and summarize what is said in subsection 25-3.

Separately Priced Extended Warranty and Product Maintenance Contracts

Extended warranty or product maintenance contract sellers are obligated to uphold the contract with the purchaser during the said period. The straight-line basis is primarily used to recognize the income over the period of the contract. If costs incurred cannot be adjusted through, the straight-line basis revenue is recognized in proportion to expensed costs over the period of the contract.

Property, plant, and equipment

How many results did you get? The system generated 190 results for property, plant, and equipment.

Click on “360 Property, Plant, and Equipment > 10 Overall > S50 Disclosure” and summarize what is said in subsection S50-1.

Required Disclosure Regarding Basis for Determining Amounts of Property, Plant and Equipment

See paragraph 201-10-S99-01 Regulation S-X 5-02.13(a) as to the required disclosure basis to determining the amounts of property, plant and equipment. 13(a) State the basis of determining the amounts.

Extinguishments of Liabilities

How many results did you get? The system generated 34 for extinguishment of liabilities.

Click on “405 Liabilities > 20 Extinguishments of Liabilities > 10 Objectives” and summarize what is said in subsection 10-1.

Paragraph superseded by Accounting Standards Update No. 2009-16.

Transfers and Servicing Topic 860

This Accounting Standards Update amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140.

The amendment eliminates the exceptions for qualifying special-purpose entities in regards to certain mortgages when transfer of financial assets has not taken place. This standard improves clarity and requires disclosure of assets eligible for sale.

References

FASB Codification. Financial Accounting Standards Professional View. Retrieved January 24, 2014 from https://asc.fasb.org/home.

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