Project Pages

GAAP Hierarchy

Project Description: This project considers possible modifications to the hierarchy ofgenerally accepted accounting principles (GAAP hierarchy), as set forth in Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. It reexamines the hierarchy levels to assess whether the standards-setting process and the governmental financial reporting environment have sufficiently evolved since the establishment of the original hierarchy by the American Institute of Certified Public Accountants (AICPA) in 1992 to warrant reconsideration or reconfiguration of certain aspects of the structure.

Status:
Exposure Draft approved December 2013
Added to Current Agenda: April 2012
Added to Research Agenda: April 2011

GAAP Hierarchy—Project Plan


Background
: At the beginning of the project that resulted in Statement 55 and Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards, the Board evaluated two approaches. One approach considered was to adopt the GAAP hierarchy essentially as it currently exists in the AICPA’s auditing literature. The other approach considered was to reexamine the hierarchy levels to assess whether they should be reconsidered or reconfigured based on changes to the standards-setting process and the governmental financial reporting environment since the hierarchy was set forth. The Board recognized that taking the first approach would not significantly affect practice but the latter approach, involving redeliberation, could have resulted in changes in practice. The Board concluded that the transition from the audit literature to the accounting and financial reporting standards should be as undisruptive as possible; therefore, the first approach was taken.

This project entails pursuing the latter course of action and could result in changes to the structure of the GAAP hierarchy.

Accounting and Financial Reporting Issues:
  1. Should some categories be combined to provide for fewer levels?
  2. Should Implementation Guides (Q&As) be elevated to a higher level (currently level D)? Should AICPA pronouncements be elevated to a higher level (currently in levels B and C)? Should GASB Technical Bulletins be elevated to a higher level (currently level B)?
  3. Should the FASB Accounting Standards Codification be added to paragraph 6 as “other accounting literature?”
Project History:
  • Pre-agenda research approved: April 2011
  • Added to current technical agenda: April 2012
  • Task force established? Yes
  • Deliberations began: August 2012
  • Exposure Drafts approved: December 2013
  • Comment period: February–December 2014

Work Plan:
 

Board meetings

Topics to be considered

January–March 2015: Redeliberation of issues raised in response to the Exposure Drafts.
April 2015: Redeliberation of issues raised based on respondent feedback.
June 2015: Review ballot drafts and issue final Statement and Implementation Guide.

GAAP Hierarchy—Recent Minutes


Minutes of Meeting, December 20, 2013

The Board reviewed a ballot draft of the Exposure Draft, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. After making minor clarifying changes, the Board members voted unanimously to issue the Exposure Draft.

The Board also reviewed a ballot draft of the Exposure Draft, Implementation Guide XX-1. Subject to minor clarifications agreed to at the meeting, the Board members unanimously agreed to not object to the issuance of the Exposure Draft.

Minutes of Meeting, December 10-12, 2013

The Board considered feedback from the GAAP Hierarchy Advisory Committee in response to the draft of the standards section of the Exposure Draft, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, presented at the October 2013 Board meeting and also discussed the preballot draft of the Exposure Draft. Subject to clarifications and revisions agreed to at the meeting, the Board directed the project staff to prepare a ballot draft for consideration at the December 20, 2013 Board teleconference.

The Board also discussed the preballot draft of the Exposure Draft, Proposed Implementation Guide, and reviewed recommended modifications to selected Q&As. Subject to clarifications and revisions agreed to at the meeting, the Board directed the project staff to prepare a ballot draft for consideration at the December 20, 2013 Board teleconference.

Minutes of Meeting, October 29-31, 2013

The Board considered issues related to the effective date and transition provisions for the proposed Exposure Draft, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, and the effective date and transition provisions for the proposed Comprehensive Implementation Guide. The Board tentatively agreed the proposed Statement and the proposed Comprehensive Implementation Guide would be effective for periods beginning after June 15, 2015, and that the transition provisions would permit early application.

The Board continued its discussion by reviewing a preliminary draft of the proposed Statement, tentatively agreeing upon clarifying edits. The Board then directed the project staff to prepare a preballot draft of the proposed Statement for consideration at the December meeting.

In addition, the Board discussed the staff analysis of the remaining portion of the questions-and-answers (Q&As) in Chapter 8 of the Comprehensive Implementation Guide on an individual Q&A basis. Chapter 8 addresses employer and plan accounting and reporting for postemployment benefits other than pensions. The Board tentatively did not object to proposing the staff recommendations regarding the items reviewed in Chapter 8, subject to clarifications and revisions agreed to at the meeting.

Minutes Archive

GAAP Hierarchy—Tentative Board Decisions to Date


The Exposure Draft, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, was approved in December 2013.