Therefore, Category A takes precedence over all others, Category B takes precedence over Categories C and D, and Category C takes precedence over Category D.

In other words, Categories A through D of the hierarchy descend in authority. Generally speaking, if there is a conflict between accounting principles relevant to the circumstances from one or more sources in Categories A, B, C, or D, the treatment specified by the source in the higher category is then followed. The GAAP hierarchy includes four successive categories (A to D), each of which establishes a different level of authority. From that foundation, the hierarchy formulates a pecking order for all the rules and procedures that are incorporated in the preparation of financial statements and that have come to be known as GAAP. At the foundation of that hierarchy are the principles established by the FASB and its predecessors, the APB and the AICPA Committee on Accounting Procedure. 69, The Meaning of 'Present Fairly in Conformity With Generally Accepted Accounting Principles' in the Independent Auditor's Report (SAS 69). THE GAAP HIERARCHYĪlthough there is no single reference source for GAAP, there is a hierarchy established by the AICPA in Statement on Auditing Standards No.

For the most part, in financial reporting, generally accepted implies substantial authoritative support. 4, Basic Concepts and Accounting Principles Underlying Financial Statement of Business Enterprises, as 'the conventions, rules, and procedures that define accepted accounting practice at a particular time.' GAAP includes not only broad guidelines of general application but also detailed practices and procedures that provide a standard by which to measure financial presentations. However, generally accepted accounting principles is a technical accounting phrase defined in Accounting Principles Board (APB) Statement No. It may seem that accounting principles could be generally accepted because of popular vote or consensus of opinion. For example, although the FASB is responsible for issuing FASB Statements of Financial Accounting Standards, Interpretations, and Technical Bulletins, the American Institute of Certified Public Accountants (AICPA) issues Statements of Position, Audit and Accounting Guides, and Practice Bulletins, and the FASB Emerging Issues Task Force (EITF) issues EITF Abstracts. However, some may not be aware that there is no single reference source for GAAP because these principles are derived from a variety of sources. Most individuals who understand the basics of financial reporting are familiar with the phrase generally accepted accounting principles (GAAP) and will readily identify the Financial Accounting Standards Board (FASB) as the standard-setting body in the United States responsible for establishing accounting principles for nongovernmental entities.

Accounting principles definition