Researching FASB’s ASC

1. Researching FASB’s ASC Effective for FS issued after 9/15/09The “codification” replaces previous standards

2. Evolution of U.S. GAAP 2009 36years 21 years 14 years Codification Effective 2009 1938 1959 1973 CAP APB FASB 5 to 6 per year formed formed formed CAP APB FASB Issued Issued Issued 168 51 31 ____ ARBs Opinions Statements

4. FASB’s Accounting Standard Codification • The ASC is the single source of authoritative nongovernmental U.S. GAAP, except for SEC guidance • The “GAAP Hierarchy” now has only 2 levels: • Everything in ASC is “equally authoritative” • If it isn’t in ASC, refer to textbooks, concept statements, industry practices, IFRS, etc. • FASB Statement No. 168 made it “official” and is the “last ever” in the series – future changes will be made through “ASC Updates”

5. Benefits of the ASC • All non-SEC authoritative guidance is now in one place! • Updates and additions to guidance will be incorporated into appropriate topics instead of a new document number to add to the existing 168 standards • Users can have more confidence that all authoritative guidance has been reviewed or considered in researching an accounting matter

6. Codification generally didn’t change GAAP • Language from the original pronouncements was edited for consistency and certain words were changed (for example, “should” and “must” were replaced with “shall”) • Exception is software revenue recognition guidance from an AICPA Technical Inquiry Serivce (TIS) document which was not previously followed by some nonpublic companies

7. What is included in ASC? • FASB Statements, Interpretations, Technical Bulletins, FSPs, EITFs, DIG and other implementation guidance, some older material from AICPA Committee on Accounting Procedures and Accounting Principles Board, AICPA SOPs, etc. • Some SEC guidance is included for convenience but safer to check SEC.GOV

8. What you won’t find • FASB concept statements • Government accounting standards • Grandfathered material • Standards that were outdated or superseded as of December 31, 2008 • Guidance for non-GAAP matters such as cash or income tax basis accounting • Some of the “basis for conclusion” material

9. Hold Public Hearings Place topic on Analysis of agenda public response Appoint Task Hold public Modify exposure Force hearing draft Vote Conduct Analysis of (approval requires Research public response 5 of 7) Issue Issue Exposure Issue Accounting Standard Update (ASU) Discussion Draft of ASU Memorandum Due Process in Standard Setting

10. ASU = accounting standards update • Changes to the codification are still being made • 16 ASUs issued in 2009 • 24 ASUs issued so far in 2010 • Multiple major topics are underway as part of convergence with IFRS including • Leases • Revenue recognition • Fair value for financial instruments • Financial statement display • NOTHING IS MORE CERTAIN THAN CHANGE!

13. Standardized Section Numbers

14. Referencing the “authoritative” guidance in the ASC • Examples from Grant Thornton

18. Let’s go to FASB.ORG

19. Research questions • What is a leveraged lease? • What is a “sale-leaseback” arrangement? • In a sale-leaseback situation, how does one classify the lease for the lessee?

20. Research questions • A company is leasing real estate with the following fair values: Land $400,000 Building $800,000 The terms of the lease permit the lessee to acquire the property at the end of the 20-year lease for $300,000. The annual payments will be $139,724. How will the lessee go about classifying this lease? Step 1 – FIND the material!

21. Research questions • A company is leasing real estate with the following fair values: Land $400,000 Building $800,000 The terms of the lease permit the lessee to acquire the property at the end of the 20-year lease for $300,000. The annual payments will be $139,724. How will the lessee go about classifying this lease? Step 2 – APPLY standard to the facts