US GAAP Overview
GAAP and auditing standards requirements
1
Contents
US GAAP – Overview
2
ASC Codification – Origin of the codification
3
Accounting Standards Codifications (ASC)
4
ASC and Standards issued by Securities and
5 Exchange Commission
Accounting Standards Updates (ASU)
6
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GAAP and Auditing Standards Requirements
SEC
Auditing
FASB Standards IASB
U.S. GAAP IFRS
PCAOB
Foreign Private
U.S. Issuers SASs Issuers
(AICPA)
Foreign Non
US Non Public
ISAs Public
Enterprises*
(IAASB) Enterprises
*Certain non public enterprises can utilize IFRS
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US GAAP
Overview – A snapshot (1/2)
► US Generally Accepted Accounting Principles (US GAAP) is currently the FASB Accounting Standards
Codification (‘ASCs’ / ‘Codification’)
► Financial Accounting Standards Board (FASB) issued “FASB Statement No. 168: Accounting Standards
Codification (ASC)” in June 2009 which notified that the Codification will replace and supersede all
existing non-SEC accounting standards. (Effective for periods ending after Sep 15, 2009)
► FASB Statement No. 168 replaced the earlier FASB Statement No. 162: The Hierarchy of Generally
Accepted Accounting Principles
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US GAAP
Overview – A snapshot (2/2)
► Rules and interpretative releases of the SEC (Securities & Exchange Commission) are also authoritative
GAAP for SEC registrants
► In addition, SEC staff issue “Staff Accounting Bulletins (SABs)” containing views on certain accounting
issues for SEC registrants [based on SEC staff announcements and observer comments of Emerging
Issues Task Force ‘EITF’]
► Accounting Standard Updates (ASUs) are updates issued after the notification of the Codification and will
serve to update the Codification along with providing additional clarifications, background information
and basis of conclusions
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US GAAP
Overview – Origin of the Codification (1/4)
► Before the Codification, the authoritative US GAAP was a proliferation of thousands of standards and
publications issued by various standard setters for over 50 years, it lacked a consistent and logical
structure
► In the 20 years before Codification significant financial reporting guidance has been issued increasing
the difficulties in using US GAAP
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US GAAP
Overview – Origin of the Codification (2/4)
The Codification of the standards was aimed to achieve the following objectives:
a. Reduce the amount of time and effort required to research accounting issues
b. Mitigate the risk of non-compliance through improved usability of the literature
c. Provide accurate information & real-time updates when new standards are released
d. Assist the FASB with research & convergence during the standard setting
e. Become the authoritative source of literature for the completed XBRL taxonomy
f. Make clear that guidance not in the Codification is not considered as authoritative
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US GAAP
Overview – Origin of the Codification (3/4)
Codification was done based on the standards as on July 1, 2009. As of that date the guidance composed of the following
literature issued by various standard setters:
► Financial Accounting Standards Board (FASB)
a. Statements (FAS)
b. Interpretations (FIN)
c. Technical Bulletins (FTB)
d. Staff Positions (FSP)
e. Staff Implementation Guides (Q&A)
f. Statement No. 138 Examples.
► Emerging Issues Task Force (EITF): (a) Abstracts and (b) Topic D.
► Derivative Implementation Group (DIG) Issues
► Accounting Principles Board (APB) Opinions
► Accounting Research Bulletins (ARB)
► Accounting Interpretations (AIN)
► American Institute of Certified Public Accountants (AICPA)
a. Statements of Position (SOP)
b. Audit and Accounting Guides (AAG)—only incremental accounting guidance
c. Practice Bulletins (PB), including the Notices to Practitioners elevated to Practice Bulletin status by Practice Bulletin 1
d. Technical Inquiry Service (TIS)—only for Software Revenue Recognition.
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US GAAP
Overview – Origin of the Codification (4/4)
Standards Issued by SEC
► Codification organises all the authoritative GAAP by all standard setters other than the Securities & Exchange
Commission (SEC)
► To increase the utility of the Codification for public companies, relevant portions of authoritative content issued by the
SEC and selected SEC staff interpretations and administrative guidance have been included for reference in the
Codification, such as:
► Regulation S-X (SX)
► Financial Reporting Releases (FRR) / Accounting Series Releases (ASR)
► Interpretive Releases (IR)
► SEC Staff guidance in:
► Staff Accounting Bulletins (SAB)
► EITF Topic D and SEC Staff Observer comments
The SEC Sections do not contain the entire population of SEC rules, regulations, interpretive releases, and staff
guidance. For example, the Codification does not include all content related to matters outside the basic financial
statements, such as Management's Discussion and Analysis (MD&A), or to auditing or independence matters.
The Codification does not replace the SEC guidance and there may be delays between announcements by SEC/
changes in SEC guidance & corresponding updates to the Codification
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ASC / SEC Guidance for Public Companies (1/2)
ASC paragraph 105-10-05-01 Rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative GAAP for SEC registrants. In addition to the SEC’s rules
and interpretive releases, the SEC staff issues SABs that represent practices followed by the staff in
administering SEC disclosure requirements, and it utilizes SEC Staff Announcements and Observer
comments made at EITF meetings to publicly announce its views on certain accounting issues for SEC
registrants.
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ASC / SEC Guidance for Public Companies (2/2)
► SEC content is provided within the Codification in separate “SEC sections” (designated by an
“S” preceding the Section number) for each topic
► Information is provided for convenience and relates only to SEC registrants
► The SEC sections are NOT the authoritative sources of such content and do not contain the
entire population of SEC rules, regulations, interpretive releases, and staff guidance
► Content in these sections are expected to change over time
► May be delays between the SEC and staff changes to guidance and the Codification update (through
issuance of an ASU)
► Therefore, the Codification does NOT replace or affect guidance issued by the SEC or its staff for
public entities in their filings with the SEC
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How is the ASC Organized?
ASC 105 ASC 205-280 ASC 305-740 ASC 805-860 ASC 905-995
Financial
Areas
Main General
Presentation Statement
Broad
Industry
principles Transactions
Accounts
► Relate to
► Assets
multiple f/s
Relate to broad Liabilities Guidance for
Topics
►
Relate only to accounts
conceptual ► Equity specific
presentation ► Usually
matters ► Revenue industries
transaction-
► Expense
oriented
Subtopic
Subsets of a topic and are generally distinguished by type or scope. For example, Operating Leases
and Capital Leases are two Subtopics of the Leases Topic.
Section
Sections are standard across each Topic or Subtopic.
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ASC Codification Topics
General principles and Presentation
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ASC Codification Topics
Financial Statement Accounts (1/2)
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ASC Codification Topics
Financial Statement Accounts (2/2)
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ASC Codification Topics
Broad transactions
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ASC 842 – Leases
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ASC Codification Topics
Industry
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ASC Codification: Standard Section
XXX-YY-00- Status
XXX-YY-05- Overview and Background
XXX-YY-10- Objectives
XXX-YY-15- Scope and Scope Exceptions
XXX-YY-20- Glossary
XXX-YY-25- Recognition
XXX-YY-30- Initial Measurement
XXX-YY-32- Measurement
XXX-YY-35- Subsequent Measurement
XXX-YY-40- Derecognition
XXX-YY-45- Other Presentation Matters
XXX-YY-50- Disclosure
XXX-YY-55- Implementation Guidance and Illustrations
XXX-YY-60- Relationships
XXX-YY-65- Transition and Open Effective Date Information
XXX-YY-70- Grandfathered Guidance
XXX-YY-75- XBRL Definitions
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Accounting Standard Updates (ASU)
► The FASB issues an ASU to formally announce and describe each major change to the authoritative
Codification content
► An ASU is issued when the FASB approves and implements a change to the FASB guidance in the
Codification
► ASUs are also issued when the SEC issues changes to SEC guidance that is included in the
Codification.
► Each ASU is assigned a numeric identifier consisting of the four-digit calendar year of issue, followed by
a hyphen, followed by a two-digit sequential number reflecting the order of issuance in the calendar year
► For example, the fifteenth ASU issued in 2010 is ASU 2010-15, the fifth ASU to be issued in 2020 will be
ASU 2020-05, and so forth
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ASU 2017-04 Intangibles - Goodwill
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Private Company Council (PCC)
► PCC was established to improve the process for setting accounting standards for private companies
► FASB and PCC issued the Private Company Decision Making Framework to act as a guide in
determining when accounting alternatives should be considered for private companies
► ASU 2013-12 established a new definition for a public business entity in the ASC Master Glossary
► Identifies the types of business entities not eligible to use private company exceptions and alternatives
issued by FASB
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Accounting Standard Updates (ASU)
Content screen on FASB website
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Thank You
