United States

GASB revises GAAP hierarchy


The hierarchy of generally accepted accounting principles (GAAP) lists the order of priority for pronouncements and guidance to which a government should look when preparing financial statements. The Governmental Accounting Standards Board (GASB) recently issued GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, which reduces the GAAP hierarchy for state and local governments to two categories of authoritative GAAP from the four categories under GASB Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The first category of authoritative GAAP consists of GASB Statements of Governmental Accounting Standards. The second category consists of GASB Technical Bulletins and Implementation Guides, as well as guidance from the American Institute of Certified Public Accountants that is specifically cleared by the GASB. 

These changes are expected to improve financial reporting for governments by clearly identifying the appropriate accounting guidance to apply. The standard also improves implementation guidance by elevating its authoritative status and, therefore, requiring that all implementation guidance be exposed for public comment. This change in the authoritativeness level of implementation guidance necessitated certain changes to existing guidance. Therefore, the GASB also recently cleared an accompanying implementation guide, Implementation Guide No. 2015-1, which incorporates changes resulting from feedback received during the public exposure of all implementation guidance previously issued. 

The requirements of the new pronouncements are effective for reporting periods beginning after June 15, 2015.