Financial Accounting Standards Board Codification

Financial Accounting Standards Board Codification

The Financial Accounting Standards Board (FASB) was created in 1973. FASB is responsible for reviewing significant standards from the post-implementation review (PIR). Their primary mission is to review revenue recognition and credit losses. They play a crucial role in determining the assets included in the financial statement as contributing to revenue. The main aim is to ensure that reporting of the financial information is done most effectively and appropriately (FASB, n.p). A key factor is recognizing the organization’s credit losses so that they do not affect the books of account. Proper recognition of the elements of a financial statement effectively reduces fraud and misappropriation of funds. A key consideration is the dynamics of risk management. Organizations are supposed to use a protocol when reporting their financial statements. Codification is the primary source of authoritative United States accounting and reporting standards. However, other guidelines are issued by the Securities and Exchange Commission (SEC) (Committee of Sponsoring Organizations of the Treadway Commission (COSO), n.p). Codification aims to improve the usability of literature and the research process by reducing the amount of time spent resolving an issue.

There are eight fiscal accounting and reporting sections in codification. Also, there are general principles that are effective in explaining the accepted standards. The focus of the assignment is on the industry category. The section has fifteen topics, and each has its subtopics. The distinction in the subtopics is made based on the scope and type (Financial Accounting Standards Board (FASB), n.p). The topics in the section are unique because they focus on the industry-specific guidance incremental. The strategy is effective for codification in the reduction of redundancy. Agriculture is one of the industries that is vibrant in the FASB codification. The industry has a total of 16 subtopics. The two subtopics selected for the assignment include inventory and receivables. The subtopics that have been selected apply to the balance sheet. The receivables subtopic is identified by code 905-310, while that of the inventory is identified by code 905-330 (Financial Accounting Standards Board (FASB), n.p).

Receivables are used to refer to the assets. They represent the amount that is owed to a business. For instance, all the unpaid debts in the balance sheet are treated as receivables. They will contribute to the company’s revenue. It shows what other companies owe the organization. The opposite is payables, which will represent the liabilities. That is because money is flowing out of the company’s accounts. Receivables, on the other hand, represent money that flows into the accounts of the organization. Inventory is a list of stocks, goods, and materials that own the organization. They represent the assets whose ultimate goal is to resale, produce or increase the utilization. Therefore, materials in the inventory need to contribute to the company’s production process, and they are mainly the finished goods that are in possession by the company. They entail the current assets that are found in the organization’s balance sheet.

Accountants in the agriculture industry will focus on the inputs and outputs and how they affect the production rate. In the balance sheet, the focus of the accountant will be a balance between the two. It will be represented by both the credit and the debit side. The area of concern will be if the operation is taking place in equilibrium. The level will be represented by the balance between the credit and the debit side of the balance sheet. The balance sheet will show all the expenses in the production process and the gains indicated by the sales.

References

Committee of Sponsoring Organizations of the Treadway Commission (COSO). (n.d.). ERM Integrated Framework Update. Retrieved from Welcome to COSO. Accessed 23 April 2021.

Financial Accounting Standards Board (FASB). (n.d.) Technical Agenda. Retrieved from Technical Agenda (fasb.org). Accessed 23 April 2021.

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The Financial Accounting Standards Board (FASB) is a domestic, not-for-profit organization based in Connecticut. For more than 40 years, the FASB has helped set reporting standards within the accounting trade. Visit the FASB website and read About the FASB to learn more about its history.

Financial Accounting Standards Board Codification

One of the FASB’s major contributions to the accounting profession is the FASB Codification. Codification content is organized by subject matter in a hierarchy. Think of it as an outline structure that you can drill into to get information regarding your specific topic of interest.

The codification’s hierarchy begins with the following four highest levels:

Area.
Topic.
Subtopic.
Section.
As you research, you will drill down in the hierarchy, beginning with the Area of interest, then picking the Topic within the area, then the Subtopic, and then the Section. Areas, Topics, and Subtopics are simply landing pages that contain tables of contents. Sections are the only pages that have codification content.

For example, if you wanted to research costing inventory, you would drill down by clicking on the following: Assets > 330 Inventory > 10 Overall > 30 Initial Measurement > General > 30-1 Cost Basis.

You would then see the detailed codification specific to costing inventory.

Although there are literally thousands of sections within the hundreds of subtopics, once you practice and get used to moving around in the codification, it is easy to research your accounting topics. You may find yourself utilizing it not only for class research but also for topics you are working on in your professional life and topics that you may simply find interesting.

Note: Once you have drilled down to your subtopic, you may find it useful to click Combine Subsections. This will show the different subsections and their content on one page, allowing you to quickly scan and review areas of interest to you.

The codification is organized within the following nine areas:

General Principles.
Presentation.
Assets.
Liabilities.
Equity.
Revenue.
Expenses.
Broad Transactions.
Industry.
The Industry area identifies 32 industries that have specific items unique to them. These industries range from five different areas of entertainment: mining, financial services, airlines, agriculture, franchisors, software, healthcare entities, and many more.

To complete this assignment, you will need to access the FASB Codification. (Note: A login and password are required to access this site and are available from your professor.)

For this assignment, write a 2–4 page paper in which you:

Select one of the industries that interests you, and briefly explain why.
Identify how many subtopics are in the industry you selected.
Pick two subtopics within your selected industry that are applicable to a balance sheet (something to do with assets, liabilities, or equity).
Identify your chosen subsections by number and title. Explain what they mean in your own words.
Identify what accountants in your selected industry might be focused on as an area or area of concern.
This course requires the use of Strayer Writing Standards (SWS). For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course.