On August 18, the Securities and Exchange Commission issued interpretive guidance addressing the effect of the transition to Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (Codification), upon the SEC’s rules, regulations, releases and staff bulletins. The guidance states that all references to specific pre-Codification GAAP standards in the SEC’s rules, releases and staff bulletins, including Regulation S-X, should be understood to mean the corresponding references under the Codification. In particular, the SEC is directing users to the cross-reference finding tool in the subscription version of the Codification which matches prior GAAP standards to their new Codification references. In the future, the SEC intends to embark on a long-term initiative to revise and update its rules and staff guidance to refer to the Codification.

The FASB adopted the Codification, which supersedes all existing U.S. GAAP standards previously issued by the FASB and other accounting standard-setters, in June 2009, although it has been available for review since January 2008. Along with SEC rules and regulations, the Codification will serve as the primary source of authoritative GAAP principles in the United States. The Codification, which is effective for all financial statements issued for interim and annual periods ending after September 15, incorporates and reorganizes prior GAAP standards but does not create new accounting and reporting guidance.

In its June and August meetings with the SEC Regulations Committee of the Center for Audit Quality, the SEC staff affirmed its stance that all citations of GAAP standards in financial statements for financial statement periods ending after September 15 should use new Codification references. The SEC staff has also stated that companies are not expected to revise or amend financial statements for periods ending prior to September 15 which refer to pre-Codification GAAP literature, even if such financial statements are incorporated by reference into future registration statements.

Click here to read the SEC’s guidance regarding the transition to the Codification. Additionally, click here to read the free access portions of the Codification.