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GAAP Hierarchy


Minutes of Meeting, August 6-8, 2013

The Board examined paragraph 5 of GASB Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, and tentatively decided to propose clarifying language to emphasize that if the guidance for a transaction or event is not specified within a source of authoritative GAAP for governmental entities, a governmental entity should first consider accounting principles for similar transactions and then may consider other accounting literature.
The Board continued its discussion by providing comments and recommendations regarding the staff analysis of the first half of the questions-and-answers (Q&As) in Chapter 7 of the Comprehensive Implementation Guide on an individual Q&A basis. Chapter 7 addresses basic financial statements and management’s discussion and analysis.

Minutes of Meeting, June 25-27, 2013

The Board provided comments and recommendations regarding the staff analysis of Chapter 10 of the Comprehensive Implementation Guide on an individual Q&A basis. Chapter 10 addresses accounting and financial reporting for derivative instruments.

Minutes of Meeting, May 14-16, 2013

The Board provided comments and recommendations regarding the staff analysis of Chapters 1 and 6 of the Comprehensive Implementation Guide on an individual Q&A basis. Chapter 1 addresses disclosures related to deposits with financial institutions, investments (including repurchase agreements), and reverse repurchase agreements. Chapter 6 addresses accounting and financial reporting for certain investments and for external investment pools.

Minutes of Meeting, April 2-4, 2013

After adding a second level to the authoritative section of the hierarchy of generally accepted accounting principles (GAAP hierarchy) at the February 2013 meeting, the Board tentatively agreed to propose retaining GASB Technical Bulletins in this level. The Board also addressed the placement of the Comprehensive Implementation Guide (CIG), and tentatively decided to propose the promotion of the CIG to the second level of authoritative literature, below GASB Statements in the GAAP hierarchy. The Board also tentatively agreed to propose that Technical Bulletins and the CIG would remain staff documents subject to clearance by the Board, which means they would be issued if four or more GASB members do not object to their issuance.

Based on the revised methodology for analyzing the CIG on an individual question-and-answer (Q&A) basis identified at the February 2013 meeting, the Board reconsidered specific questions in Chapters 2, 3, and 4 of the CIG. The Board concluded discussions by providing comments and suggestions regarding the staff analysis of Chapters 9 and Z of the CIG on an individual Q&A basis.

Minutes of Teleconference, March 11, 2013


The Board discussed the analysis of Chapter 4 of the Comprehensive Implementation Guide on a question-and-answer basis and tentatively agreed with the staff recommendations contained in the issues papers with the understanding that certain questions marked for removal would be reviewed further by staff and presented for reconsideration at the April meeting.

Minutes of Meeting, February 19-21, 2013

The Board considered revisions to the method used when conducting the analysis of the Comprehensive Implementation Guide (CIG) on an individual question-and-answer (Q&A) basis. The Board tentatively elected to modify the current criteria to include the ability to improve the guidance provided in a Q&A, separate an illustration from authoritative guidance, combine Q&As, and remove Q&As that only provide the basis for conclusions or the applicability of nonauthoritative literature. The Board furthered discussions by reviewing the analysis of Chapter 3 of the CIG within the context of the revised methodology.

The Board deliberated the current role of the AICPA in the standards-setting process and governmental financial reporting environment and evaluated alternatives for placement of GASB-cleared AICPA Pronouncements within the GAAP hierarchy. The Board tentatively agreed to propose that the AICPA continue to be recognized as an organization that promulgates authoritative accounting and financial reporting guidance; however, this status would be dependent on the authoritative pronouncements being subject to a mutually agreed-upon due process and continuing to be cleared by the GASB.

The Board concluded its discussion by addressing the creation of a second authoritative level, below authoritative GASB pronouncements, in the GAAP hierarchy. The Board tentatively agreed to propose that AICPA pronouncements cleared by the GASB be placed within the second authoritative level.

Minutes of Meeting, January 8-9, 2013

The Board examined alternatives for the presentation of nonauthoritative literature and discussed whether specific nonauthoritative sources should be more influential or be given preference over others. The Board tentatively agreed that compliance with GASB Concepts Statements prior to all other nonauthoritative literature should not be mandatory as this requirement would create a definitive hierarchy within the nonauthoritative literature.

The Board also discussed and tentatively agreed to eliminate the example that states that GASB Concepts Statements are normally more influential than other nonauthoritative sources as it did not add clarity to the evaluation of appropriateness of nonauthoritative literature. The Board further discussed if consistency with the GASB Concepts Statements should be considered along with relevance to particular circumstances, specificity of the guidance, and the general recognition of the issuer or author as an authority when evaluating the appropriateness of nonauthoritative literature. The Board tentatively decided to propose a modified paragraph that would provide that governments should consider consistency with the GASB Concepts Statements when evaluating the appropriateness of a nonauthoritative source.

The Board also considered and tentatively decided that the qualitative characteristics and substance over form should not be specifically mentioned in the evaluation of nonauthoritative literature because to do so would be redundant with the consideration of the GASB Concepts Statements.

The Board continued its discussion by addressing the existing wording in paragraph 5 of GASB Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, and tentatively decided to propose amending paragraph 5 to clarify that nonauthoritative guidance should not conflict with or contradict authoritative GAAP for governments.

The Board concluded its discussion by considering the appropriate method of incorporating existing GASB Technical Bulletins into authoritative literature. The Board tentatively decided to propose incorporating existing GASB Technical Bulletins by reference, in a manner similar to that used to incorporate NCGA Statements and Interpretations into authoritative literature.

Minutes of Meeting, November 28-30, 2012

The Board discussed the potential methods to be used when conducting the analysis of the Comprehensive Implementation Guide (CIG) on an individual question-and-answer (Q&A) basis. The methods primarily differed in terms of overall approach: one method would result in Q&As being categorized as authoritative only if they possess characteristics of authoritative literature, while the other method would result in Q&As being categorized as authoritative unless they only contain guidance that is directly stated in the related pronouncements or is illustrative. The Board considered the fact that under the existing hierarchy of generally accepted accounting principles (GAAP), the CIG is considered authoritative. The Board tentatively decided to use the method that results in the Q&As being categorized as authoritative unless they only contain guidance that is directly stated in the related pronouncements or is illustrative. The Board also discussed the analysis conducted with this methodology within the context of Chapter 2 of the CIG.

Minutes of Meeting, October 2-4, 2012

The Board discussed the communication methods (that is, types of documents) of the GASB, specifically Statements, Interpretations, Technical Bulletins, and the Comprehensive Implementation Guide, and considered whether each communication method is necessary in a proposed two-level GAAP hierarchy.

The Board discussed the merits of GASB Statements being a communication method of the GASB, and tentatively decided to retain GASB Statements as a communication method.
The Board continued its discussion by considering the merits of GASB Interpretations being a communication method of the GASB, as well as the potential ramifications of discontinuing the use of GASB Interpretations. The Board tentatively decided to propose ceasing the use of Interpretations as a communication method of the GASB.

The Board also tentatively decided to propose that the current purpose of GASB Interpretations can and will be accomplished and communicated most appropriately through GASB Statements.

The Board also discussed the merits of GASB Technical Bulletins being a communication method of the GASB, as well as the potential ramifications of discontinuing the use of GASB Technical Bulletins. The Board tentatively decided to propose ceasing the use of Technical Bulletins as a communication method of the GASB. The Board also tentatively decided to propose that the current purpose of GASB Technical Bulletins can and will be accomplished and communicated most appropriately through GASB Statements.

The Board furthered its discussion by considering the appropriate method of incorporating existing GASB Interpretations and GASB Technical Bulletins into authoritative literature. The Board tentatively decided to propose incorporating the existing GASB Interpretations by reference, in a manner similar to that used to incorporate NCGA Statements and Interpretations into authoritative literature. The incorporation of existing GASB Technical Bulletins into authoritative literature will be further discussed at a future date.

The Board also discussed the merits of the GASB Comprehensive Implementation Guide being a communication method of the GASB, as well as the potential ramifications of discontinuing the use of the Comprehensive Implementation Guide. The Board tentatively decided to retain the use of the GASB Comprehensive Implementation Guide as a method of communication of the GASB.

The Board concluded its discussion by considering the process of exposing the GASB Comprehensive Implementation Guide for public comment, including the determination of the authoritative status of the Q&As. The Board tentatively decided that Board analysis of the GASB Comprehensive Implementation Guide should be done on an individual Q&A basis, prior to public exposure, and that the entire Comprehensive Implementation Guide will be exposed for public comment. The Board also tentatively decided that each Q&A will be subjected to a formal set of criteria and that the Q&As may need to be modified prior to exposure for public comment.

Finally, the Board tentatively decided that the Q&As will be segregated by chapter, as currently presented, and then by level of authority (authoritative content first, followed by nonauthoritative illustrative content).

Minutes of Meeting, August 22-24, 2012

The Board reviewed and discussed the various characteristics of accounting guidance and tentatively agreed to propose that for a source of guidance to be categorized in the highest level of the GAAP hierarchy, the source should be (1) formally approved by the Board for the purpose of creating, amending, superseding, interpreting, clarifying, explaining, or elaborating on standards and (2) exposed for a period of public comment.

The Board also discussed the structure of the existing GAAP hierarchy, as presented in Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, and explored potential revisions to it. The Board tentatively agreed to propose to reduce the GAAP hierarchy to two levels: authoritative and nonauthoritative. While the Board tentatively agreed to propose the requirements for a source of accounting guidance to be categorized in the highest level of the GAAP hierarchy, the Board will explore the merits of classifying nonauthoritative sources of accounting guidance in order of preference at a later date.

After tentatively agreeing to propose a modified GAAP hierarchy, the Board discussed the characteristics of the following sources of guidance and where the guidance should be categorized in the GAAP hierarchy: GASB Concepts Statements, GASB Technical Bulletins, GASB Implementation Guides, AICPA Industry Audit and Accounting Guides, AICPA Statements of Position, AICPA Practice Bulletins, and the FASB Accounting Standards Codification.

The Board considered GASB Concepts Statements and their placement within the tentatively proposed GAAP hierarchy. Even though GASB Concepts Statements meet the tentative requirements to be considered the highest level of GAAP, the Board tentatively agreed to propose that GASB Concepts Statements remain nonauthoritative to avoid confusion when applying guidance. The Board will discuss potential revisions to the existing language in Statement 55 regarding the status of GASB Concepts Statements within nonauthoritative guidance at a later date.

The Board also considered the existing due process for GASB Technical Bulletins as well as the intended purpose of the Technical Bulletins. The Board tentatively agreed to propose that the due process for GASB Technical Bulletins be amended to include formal approval by the Board, rather than Board clearance. The Board also tentatively agreed to propose that GASB Technical Bulletins be categorized in the highest level of the GAAP hierarchy.

After discussion of the placement of GASB Implementation Guides, the Board tentatively agreed to propose that the due process be amended to include public exposure and formal approval by the Board pending discussions on the approach needed to operationalize this proposal at a later date. The Board also discussed various AICPA sources of accounting guidance within the proposed GAAP hierarchy and agreed to revisit these issues at a later date.

The Board also considered the placement of the FASB Accounting Standards Codification (ASC) within the proposed GAAP hierarchy, as the FASB ASC did not exist at the time of issuance of GASB Statement 55. The Board tentatively agreed to propose that the FASB ASC be categorized as nonauthoritative “other accounting literature” in the tentative GAAP hierarchy.

The Board discussed the existing placeholder in the existing GAAP hierarchy in Statement 55 for consensus positions of a group of accountants organized by the GASB that attempts to reach consensus positions on accounting issues applicable to state and local governmental entities. After determining that the standards-setting process has sufficiently evolved since the inclusion of the placeholder language, the Board tentatively agreed to propose that the tentative GAAP hierarchy exclude any reference to consensus positions of that group of accountants organized by the GASB.

Finally, the Board considered the inclusion of prevalent practice within the existing GAAP hierarchy as authoritative to be inappropriate as determining prevalent practice requires a significant amount of judgment. Accordingly, the Board tentatively agreed to propose that prevalent practice be categorized as nonauthoritative in the tentative GAAP hierarchy.