Still news--the Codification and environmental liabilities

In July this year, the Financial Accounting Standards Board (FASB) changed things by releasing a new source of instructions for recognizing, measuring, and disclosing liabilities, including environmental liabilities, for compliance with U.S. generally accepted accounting principles (US GAAP). That new source of instructions is the Accounting Standards Codification, or the Codification (FASB, 2009a). Its release capped a 5-year project effort by FASB.

The Codification replaced and supersedes all other non-SEC (U.S. Securities and Exchange Commission) instructions, e.g., all preceding FASB standards and guidance. It pertains for entities for interim and annual reporting periods ending after September 15, 2009, i.e., now.

This is still news because the Codification’s organization of information is substantially different than before, requiring entities to adjust. For application to environmental liabilities, is this new organization of instructions simpler for entities? Better?

First, why was the Codification created, i.e., why the change by FASB?

Before beginning the Codification project, FASB solicited and obtained feedback from entities about its project need and scope. It heard that the “then-current structure of US GAAP was unwieldy, difficult to understand, and difficult to use” to the “vast majority” of respondents (FASB, 2009b). Respondents “believed that they may have missed relevant literature when they performed research,” because of the dispersed nature of US GAAP (FASB, 2009b). The “volume, complexity, and lack of integration made it difficult” for professionals to stay current and train personnel (FASB, 2009b). It “increase[d] financial reporting risks and create[d] inefficiencies that [led] to increased costs,” respondents contended (FASB, 2009b).

For FASB, these responses confirmed the need to create for entities simpler access to US GAAP instructions, logically by locating “all the authoritative literature related to a particular Topic in one place.” (FASB, 2009b)

Next, where are the Codification’s instructions for environmental liabilities?

[Sources: FASB (Financial Accounting Standards Board), Accounting Standards Codification, http://asc.fasb.org (accessed December 4, 2009); and FASB, Accounting Standards Codification, Notice to Constituents (v. 3.0), About the Codification, October 2009.]