1. What is the FASB Accounting Standards Codification?
The FASB Accounting Standards Codification® is the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied to nongovernmental entities. 2. When did the codification become effective?
The Codification is effective for interim and annual periods ending after September 15, 2009. 3. The FASB had three primary goals in developing the Codification. Identify them. a. Simplify user access by codifying all authoritative US GAAP in one spot. b. Ensure that the codified content accurately represented authoritative US GAAP as of July 1, 2009. c. Create a codification research system that is up to date for the released results of standard-setting activity. 4. Among other things, the Codification is expected to do what? a. Reduce the amount of time and effort required to solve an accounting research issue b. Mitigate the risk of noncompliance through improved usability of the literature c. Provide accurate information with real-time updates as Accounting Standards Updates are released d. Assist the FASB with the research and convergence efforts. 5. When you consider the Topical Structure Hierarchy, “Topics” represent a collection of related guidance. For example, Leases is a Topic. The Topics correlate very closely to standards issued by the International Accounting Standards Board (IASB). Identify the five main areas that “Topics” reside in? a. General Principles (Topic Codes 105–199). These Topics relate to broad conceptual matters. Topics include Generally Accepted Accounting Principles. b. Presentation (Topic Codes 205–299). These Topics relate only to presentation matters and do not address recognition, measurement, and derecognition matters. Topics include Income Statement, Balance Sheet, Earnings per Share, and so forth. c. Financial Statement Accounts (Topic Codes 305–799). The Codification organizes Topics in a financial statement order including Assets, Liabilities, Equity, Revenue, and Expenses. Topics include Receivables, Revenue Recognition, Inventory, and so forth. d. Broad Transactions (Topic Codes 805–899). These Topics relate to multiple financial statement accounts and are generally transaction-oriented. Topics include Business Combinations, Derivatives, Nonmonetary Transactions, and so forth. e. Industry (Topic Codes 905–999). These Topics relate to accounting that is unique to an industry or type of activity. Topics include Airlines, Software, Real Estate, and so forth.
Now step back to the Codification (and leave the “Notice to Constituents (Adobe Acrobat format)” document. Click on “Assets”, “Investments”, “Investments in Debt and Equity Securities” and “Overall.”
6. Click on “Overview and Background”. The Codification contains several Topics for investments due to the differing accounting treatment for various forms of investment. The Topics include? a. Investments—Debt and Equity Securities
b. Investments—Equity Method and Joint Ventures
7. Click on “Recognition”. At acquisition, an entity shall classify debt securities and equity securities into one of three categories. Name and briefly discuss them. a. Trading securities. If a security is acquired with the intent of selling it within hours or days, the security shall be classified as trading. However, at acquisition an entity is not precluded from classifying as trading a security it plans to hold for a longer period. Classification of a security as trading shall not be precluded simply because the entity does not intend to sell it in the near term. b. Available-for-sale securities. Investments in debt securities and equity securities that have readily determinable fair values not classified as trading securities or as held-to-maturity securities shall be classified as...
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