The Environment of Financial Framework

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C1-9 GAAP Hierarchy: Financial reporting rules: What are they, where can you find them, and which ones are more important?

The financial accounting rules are called generally accepted accounting principles (GAAP). “They are the guidelines, procedures and practices that companies are required to use in recording and reporting accounting information in its audited financial statements. GAAP defines accepted accounting practices and provides a standard by which to report financial results” (Nikolai, 2010, p. 9).

It took several policy-making bodies to write all the accounting standards. These bodies include Financial Accounting Standards Board (FASB), Accounting Principles Board (APB) American Institute of Certified Public Accountants (AICPA), and Securities and Exchange Commission (SEC). There is no single document that includes all the accounting standards. But the FASB has released its Accounting Standards Codification for verification by its constituents. Currently there are data bases, such as the FASB Financial Accounting Research System (FARS) that includes most accounting standards (Nikolai 2010). The FASB standards are published each year as a part of the FASB Accounting Series (Nikolai, et. al. 2010, p.13).
GAAP Hierarchy: Categories | Authoritative Sources (Pronouncements) | A | “FASB Statements of Accounting Standards & Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions, and APB Opinions and CAP (AICPA) Accounting Research Bulletins not to be superseded by actions of the FASB (as well as SEC releases such as Regulation S-X, Financial Reporting Releases, and Staff Accounting Bulletins for companies that file with the SEC)” (Nikolai, 2010, p. 10). | B | “FASB Technical Bulletins, and, if cleared by the FASB, AICPA Industry Audit and Accounting Guides, and AICPA Statements…...

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