GAAP hierarchy definition

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What is the GAAP Hierarchy?

The GAAP hierarchy defines the level of authority of different accounting pronouncements. When researching an accounting issue, you should first look for relevant advice at the top of the GAAP hierarchy. If there is no relevant information at the top of the hierarchy, then work down through the various levels of the hierarchy until you find the relevant pronouncement.

Levels of the GAAP Hierarchy

There are four levels within the GAAP hierarchy, where the highest levels contain the most authoritative guidance. In descending order, the levels are as follows:

  1. FASB Statements of Financial Accounting Standards and Interpretations, FASB Staff Positions, and AICPA Accounting Research Bulletins and Accounting Principles Board Opinions that are not superseded by actions of the FASB.

  2. FASB Technical Bulletins and AICPA Industry Audit and Accounting Guides and Statements of Position.

  3. AICPA Accounting Standards Executive Committee Practice Bulletins, consensus positions of the FASB Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts.

  4. Implementation guides (Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB, and practices that are widely recognized and prevalent either generally or in the industry.

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The reason for the hierarchy is that the top-level pronouncement are intended for broader issues, and so may not address smaller technical topics. The lesser pronouncements are designed to deal with these technical issues, and so can be a rich source of information.

The acronyms noted in the preceding hierarchy are expanded upon as follows:

  • AICPA - American Institute of Certified Public Accountants

  • EITF - Emerging Issues Task Force

  • FASB - Financial Accounting Standards Board

  • GAAP - Generally Accepted Accounting Principles

A longer explanation of the GAAP hierarchy is contained within the FASB's Statement of Accounting Standards No. 162.

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