The Financial Accounting Standards Board has compiled all of the GAAP guidance into one spot, creating a one-stop source to which accountants can turn with their accounting questions. Begun nearly six years ago, FASB’s codification project aims to simplify financial reporting.
The codification will be released publicly for review next week, FASB chairman Robert Herz said on Tuesday.
For one year, FASB’s constituents will be able provide input on whether all the rules the board has pulled from its own literature and that of the American Institute of Certified Public Accountants, the Emerging Issues Task Force, and the Securities and Exchange Commission guidance fully represent U.S. generally accepted accounting principles. To provide feedback, visitors to the new FASB system will use a free online tool to review the content and submit comments electronically.
Once the codification becomes official, which is expected to happen in 2009, there will no longer be a GAAP hierarchy; currently, accountants looking up an obscure accounting rule are not always sure which guidance to follow — whether to turn to FASB or AICPA, for example, for the answer.
The project is meant to reduce some of the complexity associated with GAAP, a problem that prompted the SEC to create a committee for proposing ways of simplifying financial reporting in the United States.
In fact, the head of the committee, Robert Pozen, largely blamed the myriad of GAAP interpretations and guidance for the proliferation of restated financials by public companies in recent years. “We have too much GAAP running around,” Pozen said during the committee’s first meeting last summer. “We need to figure out what is and isn’t GAAP and grab hold of it.”
Once approved, the new system will clarify that only the guidance included in the codification is considered GAAP, according to FASB. The board predicts the project will mean accountants won’t have to spend so much time on research or risk not complying with a standard because they’re not sure of which rule to use. The system will also give the standard-setters an easier and quicker way to update guidance.