Question

With the issuance of FASB 168, all other accounting literature that is not in the Codification immediately became non-authoritative.

What are the three main reasons to pursue a codification?

Answer 1

As we know that codification was implemented in 2009 as the single authoritative US GAAP literature. So as a result former publications were no longer authoritative subsequent to that date. It should be also noted that regular annual review and update processes take place in the codification system.

There are several reasons to pursue a codification because codification results into some benefits in accounting reporting & research system. So let’s see three main reasons to pursue a codification;

1. Main purpose of codification is to rearranged the existing publications into a user-friendly structure to facilitate consistency and completeness, so that future accounting research work can be done smoothly.

2. There are already existing multiple types of standards, multiple indexing schemes, different levels of authority. So that codification becomes necessary to easily identify relevant and necessary information.

3. Codification helps in reducing time in further accounting research work that is why adoption of codification becomes necessary. As we know that codification will result into relevant & efficient accounting information in time so time of research work will be performed in less period of time.