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ASC 105 - Generally Accepted Accounting Principles

Below is an overview of FASB Accounting Standards Codification Topic 105, Generally Accepted Accounting Principles, as well as a list of FASB Accounting Standards Updates (ASUs) and proposed ASUs related to this Topic.

Overview

Accounting Standards Codification Topic 105 (ASC 105) is the only Topic within the General Principles area of the FASB Accounting Standards Codification. The main purpose of this Topic is to define the authority of the Accounting Standards Codification as the sole source of generally accepted accounting principles in the United States for nongovernmental entities, as noted within ASC 105:

 

This Topic establishes the Financial Accounting Standards Board (FASB) Accounting Standards Codification® (Codification) as the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. In addition to the SEC’s rules and interpretive releases, the SEC staff issues Staff Accounting Bulletins that represent practices followed by the staff in administering SEC disclosure requirements, and it utilizes SEC Staff Announcements and Observer comments made at Emerging Issues Task Force meetings to publicly announce its views on certain accounting issues for SEC registrants.

The Codification contains the authoritative standards that are applicable to both public nongovernmental entities and nonpublic nongovernmental entities. Content contained in the SEC Sections (designated by an “S” preceding the Section number) is provided for convenience and relates only to SEC registrants. The SEC Sections do not contain the entire population of SEC rules, regulations, interpretive releases, and staff guidance. Content in the SEC Sections is expected to change over time, and there may be delays between SEC and staff changes to guidance and Accounting Standards Updates. The Codification does not replace or affect guidance issued by the SEC or its staff for public entities in their filings with the SEC.

ASC 105 also defines what guidance is nonauthoritative under U.S. GAAP:

 

Accounting and financial reporting practices not included in the Codification are nonauthoritative. Sources of nonauthoritative accounting guidance and literature include, for example, the following:

  1. Practices that are widely recognized and prevalent either generally or in the industry
  2. FASB Concepts Statements
  3. American Institute of Certified Public Accountants (AICPA) Issues Papers
  4. International Financial Reporting Standards of the International Accounting Standards Board
  5. Pronouncements of professional associations or regulatory agencies
  6. Technical Information Service Inquiries and Replies included in AICPA Technical Practice Aids
  7. Accounting textbooks, handbooks, and articles.

The appropriateness of other sources of accounting guidance depends on its relevance to particular circumstances, the specificity of the guidance, the general recognition of the issuer or author as an authority, and the extent of its use in practice.

The FASB does not consider Accounting Standards Updates as authoritative in their own right. Instead, new Accounting Standards Updates serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the Codification. All nongrandfathered non-SEC accounting guidance not included in the Codification is superseded and deemed nonauthoritative.

ASC 105 provides further information on applying guidance in the Codification by analogy:

 

If the guidance for a transaction or event is not specified within a source of authoritative GAAP for that entity, an entity shall first consider accounting principles for similar transactions or events within a source of authoritative GAAP for that entity and then consider nonauthoritative guidance from other sources. An entity shall not follow the accounting treatment specified in accounting guidance for similar transactions or events in cases in which those accounting principles either prohibit the application of the accounting treatment to the particular transaction or event or indicate that the accounting treatment should not be applied by analogy.

The full text of ASC 105 can be found in the FASB Accounting Standards Codification (link to FASB Web site; registration required). Also, the full text of the Codification and Deloitte-authored Q&As related to the Codification are available in the Deloitte Accounting Research Tool (DART) Web site (subscription required).

Content from the FASB Accounting Standards Codification® included at http://www.usgaapplus.com is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, and is reproduced with permission.

FASB Accounting Standards Updates

The following ASUs amended the guidance in this Topic:

Proposed FASB Accounting Standards Updates

No current proposed ASUs on Topic 105.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.