Attorneys, including those who specialize in real estate laws, should have a basic understanding of generally accepted accounting principles, or GAAP, to ensure that their clients meet all contractual provisions.

However, it takes more in-depth knowledge and experience to protect lawyers and their practice from problems arising from irresponsible or inaccurate accounting practices in daily operations.

FASB and ASC

The Accounting Standards Codification, or ASC, was recently launched by the Financial Accounting Standards Board. Before this, it was all but impossible for non-accounting professionals to keep track of all GAAP sources and their respective pronouncements, of which there were thousands. Today, all authority rests with the ASC as the go-to resource for generally accepted accounting principles. In the future, pronouncements will be discarded in favor of additions, revisions, and deletions to the ASC.

Taking Advantage of the ASC

The good news is that accessing ASC is relatively straightforward and can be done either in print or via an electronic method; Many attorneys prefer digital access, which can be achieved in one of three ways through the FASB website. For lawyers, two of these three options are available: Basic View, which is free but has limited functionality, and Professional View, which adds several search features and viewing options.

Content, style, and structure: GAAP may not have changed much with the introduction of the ASC, but it has had a significant impact on the way the principles are organized and presented for use. These are divided into topics, subtopics, and sections. For example, you might find guidance on the topic of financial statements, using a subtopic to locate a specific type of financial statement, each broken down into several sections.

The personal annotation feature: Some attorneys argue that the ability to create personal annotations alone is worth the cost of Professional registration with the ASC. The feature allows for fast access to commonly cited items. For example, you might use this feature to easily access items related to real estate purchase or transfer contracts.

Awareness: Any updates to the existing GAAP will be accessible through the FASB and ASC website. You can access updates sequentially, check in periodically, or subscribe for updates. Note that both existing and new versions of GAAP will be available and visible in the Codification; the existing, outdated version will only be removed once the new guidance is completely in effect.

As always, we are here to provide guidance for escrow accounting and other financial functions essential to running your law practice.