Question

Describe the structure of codification. Codification of accounting standards reduces the time and effort of researching the vast database of GAAP. Do you agree?

Answer 1

Structure of codification

1. Roughly 90 accounting topics.

2. Contains four groupings and numbers

(i) the topic

(ii) the sub topic

(iii) the section and

(iv) the paragraph

The code 450-20-25-2 refers to the topic 450 (which is contingencies) sub topic 20 (which is loss contingencies) section 25 (which is recognition) and 2 (refers to the second paragraph).

The codification of accounting standards is a system of coding all of the accounting standards contained within Generally Accepted Accounting Principles (GAAP). The intent of the codification was to organize the thousands of accounting standards that had been provided by various experts over the years by a variety of committees and entities, such as statements of accounting standards, technical bulletins, practice bulletins, consensus positions, and implementation guides. The codification also includes the accounting positions taken by the Securities and Exchange Board which can be useful for those companies that are publicly held. Adopting of codification for accounting has made it much easier to research GAAP information.

Yes, codification of the accounting standards helps in reducing the time and effort of researching the vast database. Over the lapse of time accounting standards are getting vast and hence it makes problems for people and corporate to find out the correct remedies given. But with the procurement of the codification of the accounting standards it has made much easier to look into the vast standards chart.

Easily the various codes can be located in the standard as the standards got codes to each and every standards.

Benifits of codification.

1. Reduces the time and effort required to research and solve the accounting issue.

2. Improves the usability and reduces the risk of non compliance.

3. Provide accurate information as real time updates as accounting standards update are released.

4. Assist FASB ( Finincial Accounting Standards Boards) with research and convergence efforts.

5. Eliminates redundancy.

6. Simplify user access to all authoritative GAAP.

7. Clarify that guidance not contained in the GAAp is not authoritative.