In an effort to simplify and organize financial information for private organizations and government entities, the Financial Accounting Standards Board (FASB) launched a comprehensive appraisal of the standards that the industry had operated under for nearly 60 years. This process first involved assessing the US GAAP system, and measuring whether or not it served the needs of organizations, customers, and governing bodies.
Appraisal Economics has developed this page, and our Accounting Standards Codification (ASC) overview page, to expand your understanding of the reasons why the FASB began the US GAAP codification, as well as which parties were involved in transitioning towards the new standards, including these sections of law:
Financial Industry Needs
The FASB worked with industry experts, professors, and many other financial authorities in order to accurately catalog and define standards. There were several reasons for transitioning to the Accounting Standards Codification (ASC), including:
- Confusing Terminology: Even to seasoned professionals, understanding US GAAP standards was cumbersome and required extensive research. Part of the problem stemmed from the vocabulary and syntax of the system. At the time, financial standards (including SFAS 141(R), 142, and 123(R), etc) were explained in complex terms that made it difficult for the average person to understand.
- Fragmented Resources: Reassessing and codifying FASB standards into the Accounting Standards Codification would provide the opportunity to centralize resources, improving access to information. This new framework could also take advantage of electronic databases so the ASC codes could be retrieved and updated in real-time.
Financial Authorities & Organizations
After interviewing influential members of the financial industry, the FASB deemed that the US GAAP was outdated. To ensure that the Accounting Standards Codification was accurate, timely, and performed by experts – they enlisted help from these professionals, amongst others:
- Instructors from institutions of higher learning
- Managers of appraisal and valuation companies
- Financial professionals and experts who were retired
After proposing a transition from the FASB system into the ASC codes, the FASB then had the materials reviewed by editorial teams, as well as individual board members from the FASB. This step was instrumental in determining what portions of the old system should be deleted or retained with the new ASC codes.
Valuation Services Under ASC Codes
Because the transition from US GAAP into the ASC code was such a comprehensive undertaking, it’s important to hire an independent valuation firm that understands the fundamental differences between these sections of regulatory standards. From ASC 805 and 718 to ASC 350, and lesser-used standards – the experienced team at Appraisal Economics is familiar with how valuation and tax laws impact your organization.