One of accounting’s most complex and significant projects — the codification of the country’s generally accepted accounting principles — is about to step into daylight.After four years of intense and technically complex labor, the Financial Accounting Standards Board is about to release the massive compilation of standards, statements, issues, interpretations, bulletins, positions, guides, abstracts and opinions.

Actually, “compilation” may be too simple a description. The board has done more than bring together all existing authoritative GAAP pronouncements and restructure them as a single, massive standard. It has also revamped the organization of these principles into some 90 topics, the elements of which are interlinked in a complex web.

By late 2007 or early 2008, FASB will make a tentative version of codification available online for constituents to “verify” by using it for research and reporting any glitches, redundancies, absences or confusions.

Thomas Hoey, director of the project, said that FASB began it over four years ago after a survey indicated that constituents considered GAAP confusing, unnecessarily large, and hard to keep up with as it changed on many fronts.

“When I give presentations, I show all the multiple versions of types of documents that exist right now,” Hoey said. “There are over 20 types of documents, and each type has different indexing schemes. They were written at different times over the years, and they have different styles and purposes. And there are over 2,000 documents, 2,000 actual standards, out there.”

Hoey emphasized that the codification does not alter GAAP; rather, it reorganizes it, eliminates redundancy and makes it easier for constituents to access information that was once spread throughout as many as 20,000 pages of guidance. “We’re taking GAAP and we’re putting it into different buckets,” Hoey said, “but we’re not changing the nature of it.”

James Green, sole proprietor of an accounting firm in Chicago, was one of 20 authors who had the job of dismantling GAAP and distributing it into those buckets without changing its meaning.

“[We had to] take a subject such as receivables and think of all the literature that has addressed anything to do with it since 1973 [when FASB was created] or even before,” he explained. “And then find all those pieces of the literature, decide that they all presumably belong under the receivables topic, take it all apart and go through the system to bring those fragments back together in a way that flows and integrates them.”

“I think this is a great project for FASB to have undertaken,” Green said. “I think it will really be a big step forward for the usability of the literature.”

FASB said that the codification would mitigate the risk of inadvertent noncompliance, provide ongoing updates, facilitate convergence with international standards, and definitively establish that guidance not included in the codification is not authoritative.

The codification will eventually link to tagged XBRL information found in financial reports, directing the users of those statements to relevant accounting principles.

Terms and topics used in the codification will be extensively “hot-linked” to related terms. At any given point, a researcher can follow links to related topics. A given topic would also show all the topics that link into it from other points in the codification.

The verification process will continue for about a year.

“It’s very important that people provide feedback,” Hoey said, “so that by the time the codification goes live, people will have gone in, used it, provided comments.”

FASB hopes to finalize and release the codification in mid-2009. It has not been decided whether it will ever be available as a hard-copy document, but FASB expects audit firms, publishers and other vendors to use and package the digital codification for their various purposes.

Once the definitive codification is issued, it will be continuously updated with guidance from all authoritative sources. FASB will no longer issue “statements” that deal with given issues or stand as independent documents. Rather, it will update the codification by distributing the elements of new principles through the related topics. The consequent codification will be a single source of authoritative guidance.

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