The Financial Accounting Standards Board (FASB) organizes its authoritative
generally accepted accounting principles (GAAP) in the Accounting Standards
Codification (ASC). A citation such as
ASC 606-10-25-1 carries structure: Topic 606, Subtopic 10, Section 25, and
paragraph 1. Sections organize recurring kinds of guidance, including scope,
recognition, initial and subsequent measurement, presentation, disclosure,
implementation guidance, and examples.
Recognition means including an item in the financial statements with an amount and a label. A recognition paragraph may depend on a defined term or a scope restriction, such as the kinds of transactions covered. Read those conditions before applying the paragraph. Section 55 implementation guidance and illustrations are part of the Codification, not a lower-authority source simply because of their location.
A reproducible research trail
Record the company's question, the relevant facts, the paragraphs used, and how those paragraphs support the conclusion. Include the date accessed and check which requirements apply to the company's reporting period. Another reader should be able to follow the reasoning and identify any missing facts.
An Accounting Standards Update explains changes to the Codification, including when to apply them. The update is not itself authoritative GAAP; use the applicable Codification paragraphs to support the accounting requirement. The update remains useful for understanding the change and its effective date.
Put the concept to work
Understand this concept
- Read the Topic, Subtopic, Section, and paragraph in a Codification citation, and distinguish the Codification from an Accounting Standards Update.
Apply this concept
- Find the relevant accounting paragraphs, check their scope and effective dates, and explain how they apply to the company's facts.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Authoritative accounting guidance — Understand
To understand this concept: Required. The learner must understand why the Codification has governing status before navigating its structure.
- FASB Accounting Standards Codification — Understand
To apply this concept: Required. Reliable navigation depends on recognizing the hierarchy encoded in a locator.
Lessons
Worked examples and cases
Practice
Common mistaken ideas
Sources
Broader topics
Related concepts
Use this idea next
- Accounting research memo — Create
Required level here: apply. Required. The memo requires a reproducible path to applicable authoritative guidance.
- FASB Accounting Standards Codification — Apply
Required level here: understand. Required. Reliable navigation depends on recognizing the hierarchy encoded in a locator.
- Financial statement disclosure — Analyze
Required level here: apply. Required. Required disclosures depend on scoped and effective authoritative paragraphs.
Used in these readings
These chapters explain or apply this concept. The label states how the chapter uses it.