The Financial Accounting Standards Board (FASB) Essay

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To help accounting professionals easily navigate through 50-plus years of unorganized US generally accepted accounting principles (GAAP) and standards the Trustees of the Financial Accounting Foundation approved the Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification.) By codifying authoritative US GAAP, FASB will provide users with real-time and accurate information in one location. Concurrently, FASB developed the FASB Codification Research System; a web-based system allowing registered users to electronically research accounting issues. Since 2009, the codification became the single source of nongovernmental authoritative GAAP. Various standard setters issue authoritative literature that is …show more content…
The Codification is organized in a hierarchy, first by topic, second by subtopic, next by section, and lastly by subsection. Exhibit 2 illustrates the landing page for Capitalization of Interest and highlighted in yellow is the hierarchy structure. Topic is the highest level in the hierarchy and is the broadest categorization of related content. It is assigned a three-digit code starting with 100 and ending in the 900s. The topics reside in five main areas:
1. General Principles – Topic is related to GAAP
2. Presentation – Topics relates to presentation of financial statements
3. Financial Statement Accounts – Topics are in a financial statement order starting with Assets, Liabilities, Equity, Revenue, and ending with Expenses.
4. Broad Transactions – Are transaction-oriented topics that are related to multiple financial statement accounts.
5. Industry – Topics that relate to accounting that is unique to an industry

The second level in the hierarchy is the subtopic. The subtopic is a subset of a topic and is differentiated by type or by scope. Subtopics use classification numbers beginning with 00 through to 99. Every Subtopic has a Section, which is the third level. Sections correlate to the nature of the content in a Subtopic and are the same for every Subtopic. The Subsections is the last level in the hierarchy and provides more detail to Sections. They are not always present in a Section and will not be numbered.