RKG Accountants
1. What is ASC 105?
ASC 105 designates Topic 105 in the FASB Accounting Standards Codification as the definitive source of U.S. GAAP. It confirms that authoritative GAAP resides entirely within the Codification's framework for non-governmental entities. Established by FASB Statement No. 168, this topic formalized the Codification as the single reference point after September 15, 2009.
2. Objectives & Scope
ASC 105's goals include declaring that only the Codification's guidance is authoritative, defining the GAAP hierarchy, and guiding preparers and auditors on GAAP reference hierarchy such as SEC releases and FASB Concepts Statements.
3. The GAAP Hierarchy
ASC 105 enforces a streamlined two-level hierarchy: authoritative sources (FASB Codification and SEC rules for registrants) and non-authoritative guidance (industry practices, AICPA literature, textbooks, IFRS). This "Codification-only" model simplifies reference and reduces ambiguity.
4. Historical Context
Pre-2009, multiple sources led to fragmented guidance. In 2009, FASB Statement No. 168 created ASC and centralized U.S. GAAP, and ASC 105 codified that prior materials are superseded unless included within the Codification.
5. GAAP Principles & Key Qualities
Foundational assumptions (economic entity, going concern, monetary unit, time-period), principles (historical cost, revenue recognition, matching, full disclosure), and constraints (objectivity, materiality, consistency, conservatism, cost-benefit) permeate all ASC topics.
6. Legal Authority & Exceptions
Departure from GAAP may only happen in rare cases and must be disclosed, following AICPA Rule 203. SEC registrants must also consider SEC rules and Staff Accounting Bulletins.
7. How ASC 105 Fits in Daily Workflows
Accountants & auditors use ASC 105 to determine whether guidance is authoritative before applying it. Updates are issued via Accounting Standards Updates (ASUs).
8. GAAP vs. IFRS: Hierarchy Differences
GAAP is rules-based with a prescriptive hierarchy; IFRS is principles-based with broader conceptual frameworks. Convergence efforts paused by 2017, keeping GAAP and IFRS separate.
9. Why ASC 105 Matters
Clarity and consistency in codifying U.S. GAAP, efficiency in simplifying research, auditable trail for documenting authoritative sources, and governance for standard-setting via ASUs.
Final Takeaway
ASC 105 doesn't prescribe how to account for assets, but instead defines where you find authoritative GAAP guidance—ensuring clarity, consistency, and control across all U.S. financial reporting.