GAAP, Created by and GAAP Hierarchy Prior and after the Codification Process

What is GAAP :

According to Auditing Standards Board (ASB), AU Section 411, The phrase “generally accepted accounting principles” is a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. It includes not only broad guidelines of general application, but also detailed practices and procedures. Those conventions, rules, and procedures provide a standard by which to measure financial presentations.

In general "GAAP" means Generally Accepted Accounting Principles, the standards, rules and procedures that serve as the norm for the fair presentation of financial statements.

GAAP was created by

•          Committee on Accounting Procedure
•          Accounting Principles Board
•          Financial Accounting Standards Board
•          American Institute of Certified Public Accountants (AICPA)
•          Emerging Issues Task Force (EITF)
•          Other sources
•          Accounting Standards Codification

"GAAP Hierarchy" means the relative authority of the standards, rules, procedures, and other literature on financial accounting and reporting.

GAAP 5 Hierarchy Level Prior to Codification (Prior to July 1^st 2009):

1. Level 1 includes the following:

• GASB Statements
• GASB Interpretations
• FASB pronouncements if made applicable by the GASB
• AICPA pronouncements if made applicable by the GASB

2. Level 2 are followed when Level 1 provides no guidance. They include:

• GASB Technical Bulletins
• AICPA Audit and Accounting Guides if they apply to state and local governments and have been cleared by the GASB
• AICPA Statements of Position if they apply to state and local governments and have been cleared by the GASB

3. Level 3 pronouncements are followed when Levels 1 and 2 provide no guidance. Currently there are no Level 3 pronouncements in effect. Future guidance would include the following:

• GASB Emerging Issues Task Force consensus positions
• AICPA Practice Bulletins if they apply to state and local governments and have been cleared by the GASB

4. Level 4 guidance applies when Levels 1, 2 and 3 provide no guidance. Level 4 currently includes:

• GASB Implementation guides, which are generally in a question and answer format
• Widely recognized and prevalent practices, consistent with GAAP

5. Other accounting literature provides the lowest level of guidance. This includes:

• GASB Concepts Statements
• Pronouncements of the FASB that have not been made applicable to state and local governmental accounting by the GASB
• Accounting textbooks or articles

The Hierarchy of GAAP after Codification: On July 1, 2009, the FASB Accounting Standards Codification became the single official source of authoritative, nongovernmental US generally accepted accounting principles (GAAP). It superseded all extant FASB, AICPA, EITF, and related literature. After that date, only one level of authoritative GAAP existed, excluding the guidance issued by the Securities and Exchange Commission (SEC). All other literature is nonauthoritative. In effect, therefore, the formerly five-level US GAAP hierarchy was compressed to two levels.