New GAAP to be Launched in July – What Does This Mean?
Posted by Jason Kruger on December 23, 2008 in Business Financing, Business News, Financial Services, Taxes [ 0 Comments ]
The Financial Accounting Standards Board has recently announced that it plans to release its codification of accounting standards in July of 2009. The codification does not change Generally Accepted Accounting Principles (GAAP), rather it re-organizes, codifies, and simplifies the existing structure of guidance which had become a labyrinth of convoluted accounting literature. The new codification will be based on a topical format rather than the existing format that is organized by standards. So, how does this affect our San Diego accounting firm, other San Diego accountants, CPAs, and others within the industry? And is this a change for the better?
To begin, once released, the codification will supersede all existing guidance from the Financial Accounting Standards Board (FASB), the American Institute of Certified Public Accountants, emerging issues task forces, and other related sources. So, say goodbye to every acronym that once went by FASB, FIN, EITF, SOP, ARB, SAB, etc, etc, etc… All of this literature will now be considered non-authoritative. This puts all of those in the accounting environment on a level playing field in terms of locating certain accounting related literature and guidance, as we all must now familiarize ourselves with the changes so that we are ready for the transition.
Next, as opposed to the current format, the new codification will be topical in format, reorganizing U.S. GAAP into about 90 accounting topics. This will greatly simplify the research process. As opposed to running the risk of being unaware of existing guidance, the researcher can now take comfort that all information on the related topic is organized together, thus reducing the risk of noncompliance with standards and reducing time and effort in research.
Once released on July 1, the codification will become the single official source of nongovernmental U.S. generally accepted accounting principles, superseding existing literature from FASB, the American Institute of Certified Public Accountants, emerging issues task forces and related sources. After that date, all other literature will be considered non-authoritative.
The current codification changes are a step towards simplifying and organizing GAAP as it has become today. In addition, it is a switch toward the more topical approach, which is consistent to the eventual plan of converting to the International Financial Reporting Standards (IFRS). Most of the younger generation accounting and financial personnel will applaud the change as overdue. Some seasoned veterans of the profession may grumble about having to find where everything is again. Overall, this is a positive step for the FASB and will assist in easing the transition into IFRS.