US GAAP has a very wide ranging literature. The complexities in US GAAP stems from the fact there are multiple standard setting bodies in US GAAP unlike the Indian GAAP where ICAI is the sole standarf setter (of course RBI is involved in setting standards for banks but to a limited extent).
FASB is the supreme standard setting body in US. Besides FASB, there are standards issued by AICPA, Securities Exchange Commission, etc. Due to this there was a need to set up a hierarchy of standards. Standards, interpretaions issued by FASB and its EITF (Ermerging issues task force) were put in the top of the hierarchy of standards.
Codification We are witnessing a dramatic change in the standard setting process under US GAAP. The problem with US GAAP is that a single standard does not address all the issues relating to a particular topic. Some of the standards are partly amended by or superceded by another standard. This created a great diffiiculty in accessing the standard. The codification of US GAAP ensures easy access to all relevent standards. The entire US GAAP has been consolidated in to around 90 topics which are further divided in to sub topics. Thus any literature relavent to a particular topic (for eg.- Financial Instruments) have been consolidated under one topic. Thus all standards related to Financial Instruments like FAS 115, FAS 157(relevent portion), FAS 133, FAS 159 (relevent portion), FAS 107 (relevent portion), FAS 114, related EITFs have been codified under the topic financial instruments. Thus the codification does not change the GAAP literature but provides easy access to all relevent literature.
FAS 168 has been issued to give effect to codification. This is the last standard to be issued under the current series. In future standards will be issued or amended by way of Accounting standards updates which will have the effect of updating the code. FAS 168 provides that there are only two hierarchies of standards viz. 1) authoritative (codified) and 2) non authoritative
All existing literatures which are codified are authoritative. SEC literature although not codified are authoritative for listed cos.) Non authoritative literatures include standards and opinions of industry groups and representatives. Standards issued by FASB, AICPA, ARB,APB, EITF extracts, FASB interprations have all been codified and hence are authoritative.
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