Did the FASB Codification Reduce the Complexity of Applying U.S. GAAP?
Forthcoming in Journal of Accounting Research
56 Pages Posted: 10 Nov 2021 Last revised: 5 Apr 2023
Date Written: March 16, 2023
Abstract
We examine whether the Financial Accounting Standards Board (FASB) Codification made it easier for preparers and auditors to locate relevant accounting guidance. We find that areas of U.S. GAAP with more dispersed and voluminous guidance before the Codification experience a larger post-Codification reduction in restatements. We find a similar decline in SEC comment letter questions referencing areas of U.S. GAAP with more dispersed and voluminous pre-Codification guidance. Our results suggest that before the Codification, preparers and auditors had difficulty in locating the appropriate accounting guidance and that the Codification mitigated this difficulty.
Keywords: Complexity, FASB Codification, Restatements, SEC Comment Letters
JEL Classification: M40, M41, M48, N22
Suggested Citation: Suggested Citation