An accounting conclusion needs authority appropriate to the entity and period. For nongovernmental entities reporting under US generally accepted accounting principles (GAAP), the Financial Accounting Standards Board (FASB) organizes authoritative guidance in its Accounting Standards Codification. Securities and Exchange Commission (SEC) requirements also apply to companies subject to that agency's reporting rules. Governmental and tax reporting use different requirements; do not assume that a rule for one reporting system governs another.
A Concepts Statement explains objectives and concepts but is nonauthoritative. A textbook can teach a method but does not establish GAAP. An audit firm's guide can make difficult guidance navigable but cannot silently replace the cited paragraph. A search-engine excerpt can locate a lead but does not establish scope, context, or effective date.
Does the guidance apply to this question?
Finding an authoritative paragraph is the beginning of analysis. The researcher must establish which entity, transaction, account, period, and policy choice it governs. Defined terms, scope exclusions, transition provisions, implementation guidance, examples, and references to other Topics may change the result.
For example, a requirement can take effect in different years for different types of entities. Before applying it, establish the company's reporting status and the effective date that applies to it. Record the transaction facts and the paragraphs supporting the conclusion. If a needed fact is missing, identify it instead of treating the first search result as a complete answer.
Put the concept to work
Understand this concept
Analyze this concept
- Establish whether cited guidance applies by testing entity scope, transaction scope, jurisdiction, effective date, elections, exceptions, and interaction with more specific requirements.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Authoritative accounting guidance — Understand
To analyze this concept: Required. Applicability analysis starts by separating governing guidance from useful but nonauthoritative explanation.
- Financial reporting institution — Understand
To understand this concept: Helpful. Authority depends on which institution has a recognized role in the stated reporting system.
Lessons
Worked examples and cases
Practice
Common mistaken ideas
- Mistaken idea: Accounting research stops at a keyword hit
- Mistaken idea: An issued ASU applies to every current case
- Mistaken idea: Issued guidance is current for every entity
Show 1 more mistaken ideas
Sources
More specific topics
Related concepts
Use this idea next
- Accounting research memo — Understand
Required level here: understand. Required. A technical memo must distinguish governing criteria from explanatory material.
- Authoritative accounting guidance — Analyze
Required level here: understand. Required. Applicability analysis starts by separating governing guidance from useful but nonauthoritative explanation.
- Cash-flow standards clock — Understand
Required level here: analyze. Required. The clock applies the accounting authority hierarchy.
Show 4 more next steps
- FASB Accounting Standards Codification — Understand
Required level here: understand. Required. The learner must understand why the Codification has governing status before navigating its structure.
- Recognition — Analyze
Required level here: analyze. Required. Specific GAAP governs whether and when a qualifying item is recognized.
- Subsequent event — Analyze
Required level here: analyze. Required. Specialized Topic guidance can govern an event instead of the general Topic 855 model.
- Unit of account — Analyze
Required level here: analyze. Required. The learner must apply the relevant Topic or Subtopic to determine the required aggregation or separation.
Used in these readings
These chapters explain or apply this concept. The label states how the chapter uses it.