FASB Proposes Framework for GAAP Hierarchy
May 4, 2005
On April 28, the Financial Accounting Standards Board published the Exposure Draft "The Hierarchy of Generally Accepted Accounting Principles." FASB is the designated private sector standard-setter under the Securities and Exchange Commission rules. Consequently, the draft addresses how the GAAP hierarchy should reside in the accounting literature established by FASB. The comment period for the draft ends June 27. The document is available on FASB’s Web site at www.fasb.org.
American Institute of Certified Public Accountants Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles (SAS 69), ranks the relative authority of accounting principles issued from multiple standard-setters. Because the Securities and Exchange Commission reaffirmed FASB as the designated private sector standard-setter for public companies, the board concluded that the GAAP hierarchy should reside in the accounting literature established by FASB.
FASB believes that improving the GAAP hierarchy is an important element of strengthening the quality of accounting standards and the standard-setting process. The draft is considered a necessary step toward the objective of simplification of standard setting: one process and one form of guidance.
Please share your comments or concerns with Sue Menditto, director, accounting policy.
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