ARB, APB, SFAS, SOP, EITF, FSP, AIN, FIN, CON, SAB, AAER, FRP, ASR, S-X. These are all authoritative sources of GAAP, and I probably left some out. So, four years ago, the FASB began work on its project to simplify the process of finding answers to accounting questions by creating a single, authoritative on-line Codification—with the significant exception of SEC literature. On January 15th, the FASB launched a one-year “verification” period, during which the Codification Research System will be available online free of charge. To access the Codification, a user must first register at http://asc.fasb.org.
I have by no means done a thorough review of the Codification software, but I decided to replicate a research project I recently performed for a client as a test of its usability. My client had a series of questions about an anticipated sale of part of their operations, and in particular whether presentation as discontinued operations was specified for the current and future periods. My resulting first impressions of the Codification as a research tool are these:
- Response time is slow. I’m concerned that as more users access the codification, performance will degrade even further.
- The organization of topics could be more logical. For example, the FASB is working toward an asset/liability approach to recognition and measurement; so, why are revenues and expenses discussed separately from their balance sheet counterparts? However, I was able to navigate to the place where discontinued operation guidance resides very quickly.
- The ability to place the cursor over a defined term and read its definition without clicking is very convenient. The organization of each topic in a systematic series of sections and subsections appears logical, consistent and potentially helpful. However, reading off the computer screen gets old very quickly, in no small part because the subsections are too granular to be reader-friendly. For my task, I chose to simplify things by using the command to join all subsections together — and then dump everything to paper along with citations to the source documents. I suppose that if you are looking for a particular sentence or two in answer to a very narrow question, reading off the screen and jumping around using hyperlinks could work fine; but I wonder if that’s more the exception than the rule. Usually, I need to be able to scan the entire content with my eyes before I can hone in on the words I need.
Overall, the codification project continues to hold high promise and is proceeding apace. A logical next step for the SEC would be to determine how they can reasonably make accounting researcher more efficient and definitive by incorporating their own literature into the FASB’s codification. At present,the Codification does include "authoritative" content issued by the SEC (though not all), as well as selected SEC staff interpretations. Under the current regime, GAAP can be created in an instant practically every time an enforcement action takes place; or a commissioner or high ranking staff member opes their ruby lips to offer their two cents worth about accounting.
Come to think of it, my discontinued operations project is one example of potentially important gaps (pardon the pun) in the Codification filled by obscure SEC utterance. The Codification is silent on the presentation of discontinued operations in the statement of cash belows, but luckily, I just happen to remember that a staff member gave a speech a couple of years ago describe how the SEC thinks it should be done. So, I’m off to SEC.gov to find it. What year was it? Who gave it? Was it actually a speech, or some letter? What a system.