GASB PROPOSES NEW GAAP HIERARCHY FOR STATE AND LOCAL GOVERNMENTS AND EXPOSES ENTIRE IMPLEMENTATION GUIDE FOR PUBLIC COMMENT
Norwalk, CT, February 27, 2014—The Governmental
Accounting Standards Board (GASB) today issued an Exposure Draft, The
Hierarchy of Generally Accepted Accounting Principles for State and Local
Governments. The hierarchy of generally accepted accounting principles
(GAAP)—or "GAAP hierarchy"—comprises the types of guidance that state and local
governments follow when preparing financial statements. The GAAP hierarchy lists
the order of priority for pronouncements to which a government should look for
guidance.
The proposed Statement would reduce 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 would consist of
GASB Statements of Governmental Accounting Standards. The second category would
consist of GASB Technical Bulletins and Implementation Guides, as well as
guidance from the American Institute of CPAs that is specifically cleared by the
GASB.
These proposed changes would improve financial reporting for
governments by clearly identifying the appropriate accounting guidance to apply.
The proposal also would improve implementation guidance by elevating its
authoritative status and, therefore, requiring that all implementation guidance
be exposed for public comment.
"Applying accounting standards can
sometimes be complex but identifying the right standards to apply should not
be," said GASB Chairman David A. Vaudt. "The GAAP hierarchy proposal will help
stakeholders be more efficient by bringing all authoritative accounting and
financial reporting literature together in one place."
The GASB also
issued an accompanying proposed implementation guide, Implementation
Guide No. 20xx-1, which is a culmination of all implementation guidance
to date. The Board´s decision to elevate the level of the implementation
guidance in the GAAP hierarchy would require that implementation guides be
exposed for a period of broad public comment, as with other GASB pronouncements.
The change in the authoritativeness level of implementation guidance
necessitated certain changes to the existing guidance; a list and description of
changes can be found in Appendix C of the proposed implementation
guide.
"Providing stakeholders with a greater opportunity to submit their
input on the GASB´s implementation guidance will undoubtedly improve its
usefulness," said Mr. Vaudt.
The requirements of the proposed guidance would
be effective for financial statements for periods beginning after June 15, 2015.
Both the Exposure Draft and the proposed implementation guide are
available free on the GASB website. Stakeholders are encouraged to review the
proposals and provide comments by December 31, 2014.
About
the Governmental Accounting Standards Board
The GASB is the
independent, not-for-profit organization formed in 1984 that establishes and
improves financial accounting and reporting standards for state and local
governments. Its seven members are drawn from the Board´s diverse constituency,
including preparers and auditors of government financial statements, users of
those statements, and members of the academic community. More information about
the GASB can be found at its website, http://www.gasb.org/.