The Financial Accounting Standards Board has issued FASB Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles," intended as a replacement for the American Institute of CPAs' GAAP hierarchy.

The new standard is intended to improve financial reporting by identifying a consistent framework for selecting accounting principles to be used in preparing financial statements for nongovernmental entities in accordance with U.S. GAAP.

Prior to the issuance of Statement 162, GAAP hierarchy was defined by the AICPA's Statement on Auditing Standards No. 69. However, FASB noted that SAS 69 has been criticized because it is directed to the auditor rather than the entity. FASB Statement 162 establishes that the GAAP hierarchy should instead be directed to entities.

Statement 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board's amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles." It is only effective for nongovernmental entities. Therefore, the GAAP hierarchy will remain in SAS 69 for state, local and federal governmental entities.

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