The Accounting Standards Codification is about to become the new rulebook for accountants, yet many who use and research accounting standards still have a lot to learn about what it is and how it works.

“I compare it to October of 1999, and you’re asking CFOs ‘Are you aware of the Y2K problem?’” says Bruce Pounder, president of accounting education firm Leveraged Logic. “This is very, very significant operationally,” yet many accountants still haven’t yet learned to use it, he says.

The codification is the online research tool established by the Financial Accounting Standards Board that will become the sole, final authority for everything in U.S. Generally Accepted Accounting Principles, starting July 1. FASB spent four years developing the tool, tapping the expertise of more than 200 people and reorganizing all of GAAP’s chronologically delivered pronouncements into rules sorted by topic.

Eubanks

“The time to get started familiarizing yourself with this was months ago,” says Amy Eubanks, director of accounting and auditing publications for the American Institute of Certified Public Accountants.

If you still haven’t started, now is a good time to give yourself a crash-course in this monumental shift in how accounting rules are organized, researched, interpreted, and referenced.

The Codification deconstructed every existing GAAP pronouncement and rebuilt them into nearly 90 topics, grouped under four broad categories: presentation, financial statement line items, broad transactions, and industry. More than one-third of the topics fall into the industry category alone, immediately narrowing the volume of information that might apply to any given entity.

Under presentation, for example, topics focus on how to present information. Each of the basic financial statements has its own topic. So does comprehensive income, notes to financial statements, earnings per share, interim reporting, segment reporting, and several other common accounting areas. Under financial statement line items, topics are organized under assets, liabilities, equity, revenue, and expenses.

“Broad transactions” include business combinations, consolidation, derivatives and hedging, fair value measurements and disclosures, leases, and so on. The industry topics address matters specific to airlines, entertainment, financial services, real estate, software, and others. Some industry-specific topics also address accounting for pension plans and other health and welfare benefit plans.

Each topic is then further divided into sub-topics. Under leases, for example, sub-topics include operating leases, capital leases, and overall lease rules. Those sub-topics are further divided into sections and sub-sections as necessary; that structure is carried out for each topic throughout the codification.

Eubanks says the best way to get started learning the codification is simply to go to FASB’s Website, find it on the home page, and start navigating it to learn its features. FASB provides a tutorial (accessible from the homepage of the Website) to provide a quick overview of how it works. Eubanks also recommends FASB’s “Notice to Constituents,” a 50-page primer on the codification, as a good starting point. Most of the major accounting firms and professional groups have conducted Webcasts or are making training or other resources available as well, both to their own staff and to clients or constituent groups.

“The most important thing for folks to do is to get in and try the codification out to get an understanding of how it works.”

— Susan Cosper,

Partner,

PricewaterhouseCoopers

Randy Elder, accounting professor at Syracuse University, is requiring his current students to get familiar with the codification. He believes some accountants may be stalling because they’re familiar with GAAP as it’s currently organized and don’t want to change. But, Elder insists, “given a little time people will say accounting research has become far easier with this.”

Putting Codification to Work

Cosper

Susan Cosper, a partner with the national professional services group at PricewaterhouseCoopers, says a quick browse through FASB’s tutorial and the Codification tool itself should ease any misgivings. “The most important thing for folks to do is to try the codification out to get an understanding of how it works,” she says. “Once they do that it probably will take away a lot of the anxiety they may have.”

The learning curve is steeper for accountants who still like the feel of a GAAP rulebook over an electronic search tool, Elder admits. “People who are not comfortable with electronic tools may need to go through some training,” he says. “It’s a lot like using the Internet or Google. I can’t imagine needing more than an hour to navigate this thing.”

The information in the codification can be searched in a number of ways, Pounder explains. Users can do keyword searches, much like how one searches the Internet. Or they can browse the topics, sub-topics, sections and sub-sections, as if skimming the table of contents in a book. “If you happen to know the numerical reference in the codification, it’s very easy to find it,” he says.

Elder

Beyond basic searching or browsing, Pounder and Elder offer some specific suggestions on codification tools or features that accountants should explore to help ease the transition into using the codification. First, says Elder, accountants should get familiar with the cross-referencing feature, where all rules are mapped in a way that shows where they were placed in GAAP originally and where they are placed in the codification.

COZYING UP TO CODIFICATION

CW sources provide their viewpoint on navigating through the new FASB Codification:

Log onto FASB’s Website and get acquainted with the new Codification tool

Peruse FASB’s “Notice to Constituents,” a 50-page primer on the codification

Familiarize yourself with FASB’s Codification tutorial

Do keyword searches

Browse through the topics, sub-topics, sections, and sub-sections

Check out the cross-referencing section, which show where rules were placed in GAAP and where they appear in the Codification

Learn the “Join All Sections” feature, which displays all the sections contained under a single subtopic on a single Webpage

“You can go to the mapping document to see that statement that you’re comfortable looking at, and see how it has been placed into the codification,” Elder says. He suspects many accountants who know the existing layout for GAAP like the back of their hand will rely on that feature heavily to orient themselves to the new structure. “That will be key for assuring those who are uncomfortable,” he says.

Pounder

Pounder says accountants also should learn a feature called “join all sections,” which displays all the sections contained under a single sub-topic on a single Webpage. There can be a large number of sections under a single sub-topic, so the codification doesn’t automatically display all of them unless the user selects the “join all sections” feature, he says.

“It’s not automatic, and it’s not necessarily obvious that that’s what you need to do, particularly when browsing content,” Pounder cautions. “That’s my No. 1 tip to folks who are just learning the codification. It’s an efficiency issue, and a big one.”

FASB has said that some basic version of the online research tool will remain freely accessible to the public. The board is considering making more advanced search features available for a fee, and may even offer a print version of the codification, but those details haven’t been determined.

And for any Luddites out there—no, a paper version of the Codification won’t be a comfortable substitute for the online tool, Pounder says. As FASB continues to change its standards, a paper version will quickly become out-of-date.

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