This video discusses the Accounting Standards Codification (ASC) which contains the generally accepted accounting principles (GAAP) for companies in the United States. The Financial Accounting Standards Board (FASB) codified the accounting standards into one central location in 2009. Prior to the ASC, there was a hierarchy of GAAP with certain things being more authoritative than others. Now that the codification has taken place, there is a single layer of GAAP. The FASB periodically amends the ASC with an Accounting Standards Update (ASU).
The Accounting Standards Codification (ASC) is the source of Generally Accepted Accounting Principles (GAAP) for non-governmental organizations in the United States. Prior to the codification, GAAP was an amalgamation of standards, technical bulletins, implementation guides, interpretations, consensus positions, etc. issued by the FASB and other organizations. It was about as neat and orderly as a cafeteria after a food fight that involved mashed potatoes, gravy, and a clown on a tricycle. Some of the sources were more authoritative than others—an FASB standard outranked an FASB technical bulletin—which was so confusing that the FASB actually had to issue a standard explaining the pecking order.
This “hierarchy of GAAP” was replaced in 2009 when the FASB codified the rules into a single source. Now if you want to know the rules for inventory accounting you simply go to the section of the ASC that deals with inventory, whereas before you would have needed to look up all the standards, interpretations, bulletins, etc. that involved inventory (which is a great way to spend the day if you ever get bored on a weekend). The ASC is a single-layer of GAAP that is organized into 9 areas, then further organized by topic, subtopic, section, and paragraph. Inventory, for example, is found in the “Assets” area and is Topic 330. When the FASB wishes to issue an accounting rule, it amends the ASC with an Accounting Standards Update (ASU). Thus, we don’t end up with an additional accounting standard that we need to keep track of because the FASB simply updates the ASC to reflect the rule change.
Unfortunately, you have to pay money to get full access to the ASC online. But the cost is insignificant compared to all the fun you will have discussing the codification with people at social gatherings. Then you can thank the FASB for supercharging your social life.