Chapter 3 (Codification)

Question 1

How many areas are included in the Codification?

Answer 1

9

Question 2

How to properly cite from the Codification?

Answer 2

Topic—Subtopic—Section—Paragraph

Ex. FASB ASC 450-20-30-1

Question 3

What is the Codification?

Answer 3

The sole source for authoritative GAAP for nongovernmental entities

Question 4

Unmodified Audit Opinion

Answer 4

No major problems with how information was reported and disclosed (clean opinion)`

Question 5

Why was the Codification created?

Answer 5

There are so may complex and diverse sources, the Codification makes it easier to research standards

Question 6

What is it called when FASB updates rules?

Answer 6

Accounting Standards Update (ASU)

Question 7

When rules are required by the SEC, how is that notated?

Answer 7

There is an “S” right before the section number

Ex. FASB ASC 450-20-S30-1

Question 8

Who does the SEC pertain to?

Answer 8

Only public companies

Question 9

What is the best way to find information in the Codification?

Answer 9

Browse

Keyword search

Question 10

Where do you typically find the answers to your research?

Answer 10

Paragraphs

Question 11

Basis for Conclusions (BC)

Answer 11

The FASB reasoning for updating the Codification—found in ASU or statements themselves

Question 12

6 Steps Researching Process

Answer 12

1. Establish and understand the facts
2. Identify the Issue: What is the research question?
3. Search the authoritative literature
4. Evaluate the results of the search
5. Develop conclusions
6. Communicate results of the research

Question 13

Where will you find your BC’s?

Answer 13

FASB website—ASU issued

Question 14

100

Answer 14

General Principles

Question 15

200

Answer 15

Presentation

Question 16

300

Answer 16

Assets

Question 17

400

Answer 17

Liabilities

Question 18

500

Answer 18

Equity

Question 19

600

Answer 19

Revenue

Question 20

700

Answer 20

Expenses

Question 21

800

Answer 21

Broad Transactions

Question 22

900

Answer 22

Industry

***ASC includes industry-specific guidance for specific industries (airlines, financial services, NFP, real estate, software) that must be followed in addition to other general accounting requirements applicable to other entities

Question 23

Navigating a Subtopic

Answer 23

1. Read the Overview section
2. Review the Scope section to confirm that your specific transaction is within the scope of this guidance
3. Then, determine if your issue concerns Recognition, Initial Measurement, etc.
4. Read any related preceding paragraphs
5. Skim the rest of the section to ensure you have considered all relevant guidance
6. Skim or review the Implementation Guidance section (section 55)
7. For public companies, scan the S sections for relevant SEC guidance.

Question 24

Research is important in accounting because _____

In​ addition, the business environment is constantly​ changing, ______

​Therefore, accounting professionals must be able to find the answers to technical accounting questions _______

Answer 24

There is a significant volume of accounting standards making it impossible to memorize them all

Requiring revisions of accounting standards

In order to function effectively on a​ day-to-day basis.