GASB Seeks New GAAP Hierarchy for State, Local GovernmentsTax Professionals Resource
March 12, 2014 — 2,178 views
The new guidance that local governing bodies and state governments will follow while drawing up their financial statements would overwrite the guidance given by GASB back in March, 2009. This earlier guidance was part of the GASB statement no. 55. The hierarchy is basically the priority order that governments should follow for their pronouncements. According to GASB, the two categories of hierarchy will include statements of accounting standards, apart from bulletins, guides for implementation and AICPA guidance.
Officials at GASB firmly believe that implementation and application of standards for accounting is complex and should be done the right way. They believe the new proposal will help all those involved in enhancing standards of efficiency. The proposal of hierarchy will also come with a proposed guide for implementation. The new guidance that has been proposed by GASB will be put into effect for statements of periods that start post June 15 of next year. All the stakeholders will have time till the end of this year to review the proposal and come up with comments to GASB.
The board has issued a draft which is available on its website for free. The list and explanation of changes are found in an appendix (c) of the guide for implementation that has been proposed. At present, till the new proposal kicks in, there are four categories for GAAP hierarchy.
For the draft that GASB issued in August 2008, the Board got 25 responses, and the Statement of 2009 was prepared after incorporating comments from organizations. Till then, the hierarchy of GAAP existed in the literature of auditing in AICPA, the American body that represents public accountants.
The inclusion of this content related to hierarchy of GAAP into GASB’s own literature was aimed at bringing more clarity and helping those who prepare statements of finances to look for sources of principles they need to apply. For the earlier statement no. 55, GASB had decided to adopt hierarchy of GAAP from AICPA literature as it existed there, so that the transition would be smooth. GASB is a non-profit independent organization that was started in 1984 to improve accounting practices among the local governing bodies and state governments.