Key Takeaways

  • The Financial Accounting Standards Board (FASB) voted Wednesday to move forward with more than 30 technical adjustments to the Accounting Standards Codification, the authoritative source of U.S. GAAP. The adjustments are based on feedback on dozens of topics from a previously proposed update. The board also authorized staff to draft a final update, which will be voted on at a later meeting.
  • According to preliminary decisions announced by FASB, the changes aim to clarify how companies account for a variety of issues, including earnings per share when there are losses from continuing operations, retirement of excess treasury stock, and certain lease receivables that the board believes should be excluded from enhanced disclosure requirements.
  • FASB spokesperson Christine Klimek said the amendments to the Codification would be effective for annual reporting periods beginning after December 15, 2026, including interim periods within those annual periods, for public companies and other entities.

Deep Dive

The Codification (sometimes called the "cod") is effectively the "bible" for preparers of financial reports that follow GAAP. The online document, launched in 2009, replaced FASB's paper-based system of numbering and printing each accounting standard in chronological order, as previously reported by CFO Dive. FASB's standing technical agenda project, "Codification Improvements," can be viewed as an annual "housekeeping" project, Klimek said in an email.

"The online Codification system provides a mechanism for stakeholders to point out areas of guidance they believe may be unclear or misunderstood," Klimek said. "FASB staff collect this feedback throughout the year. Subsequently, staff present the board with a list of minor changes they believe the board should consider. Minor changes include clarifications or corrections to wording that may have unintended consequences but are not expected to have a significant impact on current accounting practice or result in significant administrative costs for most entities."

Meanwhile, board Chair Rich Jones highlighted the complexity of the process during the meeting. "We had 33 separate standard-setting projects; we just happened to combine them into one," Jones said.

She said that during Wednesday's meeting, the board discussed feedback from accounting firms and other users of the guidance on the proposed improvements issued earlier this year. An Accounting Standards Update (ASU) containing the changes will be issued later this year, after which the changes will be incorporated into the Codification, she added.

The board dropped some previously proposed changes related to not-for-profit organizations.

The board decided not to clarify the accounting for certain receivables of not-for-profit organizations by amending a section to reference Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost, although it did decide to clarify that "receivables arising from exchange transactions are within the scope of the financial instruments guidance." Additionally, the board did not proceed with a limited-scope change to the equity and debt securities guidance in the not-for-profit guidance.