The Governmental Accounting Standards Board has finalized a new standard that aims to simplify the structure of the hierarchy of Generally Accepted Accounting Principles for state and local governments.

The GAAP hierarchy identifies the sources of guidance that state and local governments follow when preparing financial statements in conformity with GAAP and lists the order of priority for pronouncements to which a government should look for guidance.

GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, reduces the GAAP hierarchy 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 includes GASB Technical Bulletins and Implementation Guides, along with guidance from the American Institute of CPAs that is cleared by the GASB.

The standard also addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP.

GASB noted that the changes are intended to improve financial reporting for governments by establishing a framework for the evaluation of accounting guidance that will result in governments applying that guidance with less variation. The new hierarchy promises to improve the usefulness of financial statement information for making decisions and assessing accountability and enhance the comparability of financial statement information among governments. Statement No. 76 also aims to improve implementation guidance by elevating its authoritative status to a level that requires it be exposed for a period of broad public comment prior to issuance, as is done for other GASB pronouncements.

“Applying accounting standards can sometimes be complex, but identifying the right standards to apply should be straightforward,” said GASB Chairman David A. Vaudt. “Statement 76 goes a long way toward making that a reality.”

In connection with Statement 76, GASB also recently cleared Implementation Guide No. 2015-1, which incorporates changes resulting from feedback received during the public exposure of all of implementation guidance previously issued.

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

Statement 76 is available and the new Implementation Guide soon will be available free of charge on GASB’s Web site. Printed copies of the Statement will be available for purchase in the coming weeks.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access