Prior to the codification of the US GAAP standards, industry professionals and regulatory entities experienced extreme hardship when retrieving and understanding the system of financial laws. Based on feedback from over 1,400 business, non-profit, and academic professionals, the Financial Accounting Standards Board (FASB) determined it was time to codify the laws into a more user-friendly catalog. With over 2,000 pieces of law to sift through, it quickly became apparent that a comprehensive process was needed to accommodate a project of this scope.
As part of our Accounting Standards Codification overview, this resource details the steps that the FASB used to transition to the ASC (805, 718, 350, and other) financial codes and ensure that it was completed in a timely and accurate manner.
Planning & Organization
Before the Accounting Standards Codification (ASC), four-out-of-five financial professionals believed that the US GAAP system was confusing and outdated. This feedback was a large part of the reason why the FASB decided that a codification of laws and standards was critical. For example, ASC 350 (formerly FASB 142) is now categorized under ‘accounting topics of assets’ while ASC 718 (formerly SFAS 123) resides within the ‘accounting topics of expenses’ section. This reorganization allows both financial professionals and the average person to better find the relevant information that applies to their financial situation.
Mapping & Content Tracking
After hiring a software firm to catalog and house the updated content, the project team began collecting or ‘premapping’ fragmented portions of financial codes. Whether it was a paragraph about goodwill amortization from ASC 350 or a single sentence regarding ASC 718, certain portions of law were assigned to members of the team, which they then mapped to the appropriate section of the new system.
Once mapping was completed and reviewed by experts on each section of law, the project moved into the content authoring and review phase. Because the primary project goal was to integrate the existing GAAP into a usable system, and not re-write those financial standards, the team didn’t make sweeping changes within the ASC code. Instead, many of the edits related to the formatting of information. This meant that authors would create lists and hypertext links while also making modifications to awkward or confusing word choices.
Final Review & Conversion
Reviews and revisions were undertaken so that the ASC was accurate, understandable, and retrievable. Each section, including ASC 805, 718, and other sections were converted into a content management system that would catalog the information digitally. The subsequent verification process involved thorough testing in which subject authorities assessed the content and its organization. FASB also installed an electronic feedback feature that lends the ability to make continued updates and corrections.
Valuation Services Following ASC
When securing valuation services for your organization, it’s important to hire an independent firm that’s familiar with the steps that FASB took to developing ASC 805, 718, and the other codifications. At Appraisal Economics, we know the importance of following those standards accurately and explaining them to our clients. It’s a part of our commitment to providing valuation services that are defensible, dependable, and understandable.