ASC 105
Active
Generally Accepted Accounting Principles
Establishes the FASB Accounting Standards Codification as the single source of authoritative U.S. GAAP for nongovernmental entities, governing the structure, amendment process, and hierarchy of US GAAP.
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Purpose & Conceptual Role
The single source of truth for US GAAP
ASC 105 establishes the FASB Accounting Standards Codification (the "Codification" or "ASC") as the SINGLE SOURCE of authoritative U.S. generally accepted accounting principles (GAAP) for nongovernmental entities, in addition to guidance issued by the SEC. Before the Codification, authoritative GAAP was scattered across thousands of separate pronouncements from multiple standard-setters, issued over more than 50 years – ASC 105 is the provision that collapsed all of that into one, consistently structured research system.
Codification did not create new GAAP
Critically, the Codification launch did NOT change GAAP – it reorganised EXISTING authoritative literature into a new structure. Any change in practice upon adoption resulted from the Codification's reorganisation and elimination of redundant/superseded guidance, not from any new technical requirement. This is analogous in spirit to how the IFRS Conceptual Framework and Preface are non-technical, orientation documents – except ASC 105, unlike those, IS itself part of the authoritative literature.
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Scope – Nongovernmental Entities vs GASB
Who the Codification applies to
The Codification applies to NONGOVERNMENTAL entities – private companies, public companies, and not-for-profit organisations. This includes commercial, industrial, and financial entities in corporate or other organisational forms.
Governmental entities – a separate standard-setter entirely
STATE AND LOCAL GOVERNMENT entities in the US do NOT follow the FASB Codification – they instead follow standards issued by the GOVERNMENTAL ACCOUNTING STANDARDS BOARD (GASB), a separate, sister standard-setting body also operating under the Financial Accounting Foundation (FAF). GASB's own codification is structured and numbered independently, and the two frameworks (FASB GAAP and GASB GAAP) are NOT interchangeable.
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Before the Codification – the Pre-2009 GAAP Hierarchy
The old four-level hierarchy under SAS 69
Before July 2009, determining "the" authoritative source on a given topic required navigating a FOUR-LEVEL hierarchy of pronouncements (established by AICPA Statement on Auditing Standards No. 69), often issued by different bodies with overlapping or even conflicting guidance.
CategorySources (highest authority first)
Category AFASB Statements of Financial Accounting Standards (SFAS), FASB Interpretations (FIN), FASB Statement 133 Implementation Issues, APB Opinions, AICPA Accounting Research Bulletins (ARB)
Category BFASB Technical Bulletins; AICPA Industry Audit and Accounting Guides and Statements of Position (SOP), if cleared by the FASB
Category CConsensus positions of the FASB Emerging Issues Task Force (EITF); AICPA Practice Bulletins, if cleared by the FASB
Category DAICPA Accounting Interpretations; FASB/AICPA "Q&A" guides; widely recognised, prevalent industry practice
This structure made research genuinely difficult – the same topic could be addressed piecemeal across an SFAS, an EITF consensus, AND an AICPA SOP simultaneously, each carrying different authority. ASC 105 exists specifically to eliminate this fragmentation.
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What the Codification Did
Flattening the hierarchy into a single authoritative level
Effective for financial statements covering interim and annual periods ending AFTER SEPTEMBER 15, 2009, the Codification became the SINGLE, exclusively authoritative source of nongovernmental U.S. GAAP – eliminating the four-category hierarchy in Section 3 entirely. All content within the Codification carries EQUAL authority (subject only to the SEC-content distinction in Section 8); there is no longer a "Category A vs Category D" ranking within GAAP itself. Superseded, duplicative, and internally inconsistent legacy guidance was eliminated in the process.
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Sources Incorporated Into the Codification
What went into the single system
Legacy sourceIssuing body
Statements of Financial Accounting Standards (SFAS)FASB
FASB Interpretations (FIN)FASB
FASB Technical BulletinsFASB
FASB Staff Positions (FSP)FASB staff
EITF Abstracts and TopicsEmerging Issues Task Force
Derivatives Implementation Group (DIG) IssuesFASB-sponsored working group
Accounting Principles Board (APB) OpinionsAICPA's Accounting Principles Board (pre-FASB, pre-1973)
Accounting Research Bulletins (ARB)AICPA Committee on Accounting Procedure (pre-1959)
AICPA Statements of Position (SOP), cleared by FASBAICPA
AICPA Accounting and Auditing Guides (accounting content only), cleared by FASBAICPA
AICPA Practice Bulletins, cleared by FASBAICPA
This range of source bodies illustrates why pre-Codification research was so fragmented – five or more different issuing bodies, spanning six decades, all contributed literature that could bear on a single accounting question.
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Codification Structure – Topics, Subtopics, Sections, Paragraphs
A consistent four-level citation format
CITATION FORMAT
ASC XXX-YY-ZZ-PP → Topic (XXX) – Subtopic (YY) – Section (ZZ) – Paragraph (PP)
LevelWhat it represents
TopicA collection of related guidance on a broad subject – e.g. Topic 842, Leases
SubtopicA subset of a Topic, generally distinguished by type or scope – e.g. within Leases, Subtopic 20 (Lessee) vs Subtopic 30 (Lessor)
SectionThe NATURE of the content – Sections are numbered consistently across every Subtopic (e.g. -05 Overview, -15 Scope, -25 Recognition, -30 Initial Measurement, -35 Subsequent Measurement, -45 Presentation, -50 Disclosure)
ParagraphThe individual numbered paragraph within a Section – the most granular citation level
The consistent Section numbering (e.g. -25 is always Recognition, -50 is always Disclosure, no matter which Topic) is one of the Codification's most distinctive design features – a researcher who knows this pattern can navigate ANY Topic predictably.
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The 9 Areas & ~90 Topics at a Glance
The top-level organisational map
Area (number range)Broad content
100 General PrinciplesTopic 105 only – the Codification's own governing provisions (this poster's subject)
200 PresentationFinancial statement presentation topics – 205, 210, 215, 220, 225, 230, 235, 250, 255, 260, 270, 272, 274, 275, 280
300 Assets305–360 – cash, receivables, investments, inventory, intangibles, PP&E
400 Liabilities405–480 – general liabilities, asset retirement obligations, contingencies, guarantees, debt, liability/equity distinction
500 Equity505 only
600 Revenue605 (legacy), 606 (current – Revenue from Contracts with Customers), 610
700 Expenses705–740 – cost of sales, compensation, R&D, income taxes
800 Broad Transactions805–860 – business combinations, consolidation, derivatives/hedging, fair value, financial instruments, foreign currency, leases, related parties, subsequent events
900 Industry905–995 – specialised guidance for ~25 industries (agriculture, airlines, financial services, health care, not-for-profit, real estate, software, etc.)
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SEC Content Within the Codification
Included for convenience, not FASB-authoritative
The Codification also includes relevant SECURITIES AND EXCHANGE COMMISSION (SEC) guidance, organised using the SAME topical structure, in separate clearly-labelled sections. This SEC content – Regulation S-X, SEC Staff Accounting Bulletins (SAB), SEC Staff Observer comments, and similar material – is included purely as a CONVENIENCE for registrants and is NOT itself authoritative GAAP issued by the FASB; it is authoritative for SEC REGISTRANTS by virtue of separate SEC rulemaking authority, but does not apply to non-public entities.
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Non-Authoritative Guidance – When the Codification Is Silent
A structured fallback, not a free-for-all
If the guidance for a transaction or event is NOT specified within a source of authoritative GAAP for that entity, an entity FIRST considers whether the guidance for SIMILAR transactions or events within the Codification can be applied by analogy. If accounting treatment is still not specified, an entity may consider OTHER accounting literature – but only after first considering the FASB CONCEPTS STATEMENTS (Section 10). Other non-authoritative sources an entity may consider include: practices widely recognised as GAAP for governmental entities or other non-GAAP jurisdictions, pronouncements of professional associations/regulatory agencies, AICPA Technical Practice Aids, and accounting textbooks/articles – applied based on the FACTS AND CIRCUMSTANCES, and consistently applied.
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FASB Concepts Statements vs the Codification
The Concepts Statements are NOT authoritative GAAP
The FASB's Statements of Financial Accounting Concepts (the "CON" series, CON 1 through CON 8) form the FASB's own conceptual framework – parallel in role to the IASB's Conceptual Framework. Like the IASB's framework, the CON series is explicitly EXCLUDED from the Codification and is NOT itself a source of authoritative GAAP. It is consulted for its underlying reasoning and, per Section 9, is the FIRST non-authoritative source considered when the Codification is silent and no analogous guidance exists.
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Amending the Codification – Accounting Standards Updates
ASUs, not new standalone standards
Since the Codification's launch, the FASB no longer issues new "Statements" or "Interpretations" as separate documents. Instead, all changes to U.S. GAAP are issued as ACCOUNTING STANDARDS UPDATES (ASUs), which amend the Codification text directly (deleting, replacing, or adding paragraphs within the relevant existing Topics/Subtopics) rather than existing as freestanding new pronouncements. An ASU is NOT itself authoritative until its provisions are incorporated into the Codification – the ASU is essentially a transmittal/cover document explaining the amendment and its background.
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US GAAP Statement Naming Conventions
How US GAAP statement names differ from IFRS – the reference table for this entire library
StatementIFRS terminology (this library's badges)US GAAP terminology (ASC Topic)
Position statementStatement of Financial Position (SOFP)Balance Sheet – ASC 210; "Statement of Financial Position" is used occasionally but "Balance Sheet" is the dominant, codified term (ASC 210's own Topic title)
Performance statementStatement of Profit or Loss (SOPL)Income Statement – ASC 225; also commonly called the "Statement of Operations," especially by public companies in SEC filings
Comprehensive incomeOther Comprehensive Income (OCI) – presented in a single statement of P&L and OCI, or two statementsOther Comprehensive Income (OCI) – same term and concept; governed by ASC 220, "Income Statement–Reporting Comprehensive Income"; may be presented in one continuous statement or two consecutive statements, mirroring IFRS's own option
Equity movement statementStatement of Changes in EquityStatement of Shareholders' Equity (or "Statement of Stockholders' Equity") – ASC 215
Cash flow statementStatement of Cash FlowsStatement of Cash Flows – ASC 230; SAME name as IFRS, one of the few statements where terminology fully aligns
NotesNotes to the Financial StatementsNotes to Financial Statements – ASC 235; same term
Going forward, US GAAP posters in this library use the badges BS (Balance Sheet), IS (Income Statement), OCI (Other Comprehensive Income), and SE (Statement of Shareholders' Equity) – the correct native terminology for this framework – rather than the IFRS-native SOFP/SOPL badges used elsewhere in the library.
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Worked Example – Researching an Issue in the Codification
Finding the right citation for a lease classification question
Example: A lessee wants to know how to classify a new equipment lease
A preparer needs to determine how to classify (and subsequently measure) a newly signed 5-year equipment lease under current US GAAP.
Research path: the preparer navigates to Topic 842 (Leases) – the CURRENT leases Topic (Topic 840 is the LEGACY, superseded leases Topic, retained in the Codification only for historical/comparative reference where 842 has not yet been adopted). Within Topic 842, Subtopic 20 (Lessee) applies, since the preparer's entity is the lessee. Classification guidance sits in the -25 (Recognition) Section, giving a full citation of roughly ASC 842-20-25 for the classification test itself, with subsequent measurement in the -30/-35 Sections and disclosure in the -50 Section of the same Subtopic – illustrating how the consistent Section-numbering convention (Section 6) lets a researcher predict where within any Topic to look.
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Worked Example – Applying the Non-Authoritative Hierarchy
A genuinely novel transaction with no direct Codification guidance
Example: A transaction type not directly addressed anywhere in the Codification
An entity enters into a genuinely novel financing arrangement with characteristics not directly addressed by any existing Codification Topic, and no clearly analogous transaction exists elsewhere in the Codification either.
Per Section 9's hierarchy: the entity first confirms no ANALOGOUS Codification guidance applies. Finding none, it next considers the FASB CONCEPTS STATEMENTS (the CON series) for the underlying definitional and recognition principles relevant to the arrangement (e.g. does it meet the CON 6/CON 8 definition of a liability?). Only after considering the Concepts Statements would the entity look to OTHER non-authoritative sources – such as pronouncements of other standard-setters (potentially even IFRS Standards, considered as non-authoritative literature in this context), AICPA Technical Practice Aids, or accounting textbooks – selecting whichever source is most relevant to the entity's specific facts and circumstances, and applying it consistently.
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ASC 105 vs IFRS Preface & Conceptual Framework
Comparison – ASC 105 vs the Preface to IFRS Standards / IASB Conceptual Framework
FeatureASC 105 (US GAAP)Preface / Conceptual Framework (IFRS)
Authoritative statusASC 105 IS itself authoritative GAAP – part of the CodificationNEITHER the Preface nor the Conceptual Framework is a Standard; both are explicitly non-authoritative and yield to any conflicting Standard
Structural philosophyONE integrated Codification; ~90 Topics under one numbering systemMANY separate numbered Standards (IAS/IFRS) plus separate Interpretations (IFRIC/SIC), not unified into one document
Conceptual framework equivalentFASB Concepts Statements (CON 1–8) – explicitly non-authoritative, used only per the Section 9 hierarchyIASB Conceptual Framework – also non-authoritative, but more heavily and directly referenced in day-to-day standard interpretation than the CON series tends to be in US practice
Governing/process document equivalentNo single "Preface" – governance and due process are described in FAF/FASB rules of procedure, separate from the Codification itselfPreface to IFRS Standards, a dedicated document describing IASB structure and due process
Hierarchy for unaddressed issuesExplicit Codification-analogy → Concepts Statements → other non-authoritative literature hierarchy (Section 9)IAS 8 provides an analogous hierarchy: apply requirements of Standards dealing with similar issues, then Conceptual Framework definitions/criteria, then (optionally) other standard-setters' pronouncements not in conflict with IFRS
Both frameworks converge on a broadly similar logical structure for handling gaps (look for analogous specific guidance first, then fall back to conceptual principles, then other literature) – but US GAAP's single-Codification structure makes ASC 105 a much more load-bearing, authoritative document than either of its two IFRS counterparts.
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Related Topics / Cross-Reference Map
Within US GAAP
TopicConnection
ASC 205Governs overall financial statement presentation, the first topic a preparer typically consults after ASC 105 itself
ASC 250Governs accounting changes and error corrections – relevant when applying new ASUs that amend the Codification
ASC 275Risks and Uncertainties – general disclosure principles that interact with the non-authoritative guidance hierarchy in areas of genuine measurement uncertainty
Quick-reference glossary preview
FAF
Financial Accounting Foundation – the independent, private-sector organisation overseeing both the FASB and GASB.
Nongovernmental entity
Any entity other than a state or local government – the scope boundary determining whether FASB GAAP (via the Codification) or GASB GAAP applies.
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Quick-Reference Glossary
Accounting Standards Update (ASU)
The mechanism by which the FASB amends the Codification today – a transmittal document explaining and incorporating a change, rather than a freestanding new pronouncement.
EITF (Emerging Issues Task Force)
A FASB-affiliated group that historically reached 'consensus' positions on emerging accounting issues, incorporated into the Codification as part of its source material.
GASB
Governmental Accounting Standards Board – the separate standard-setter for US state and local government entities, outside ASC 105's scope.
SEC Regulation S-X
The SEC's own rules governing the form and content of financial statements filed by registrants, reproduced for convenience (but not FASB-authored) within the Codification's SEC content.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows