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Business and Policy Areas
Business and Policy Areas

GASB Issues Statement No. 55

April 9, 2009

The Governmental Accounting Standards Board (GASB) has issued Statement No. 55, "The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. "  The standard incorporates accounting and reporting standards included in American Institute of Certified Public Accountants’ (AICPA) Statements on Auditing Standards (SASs) into GASB’s authoritative literature. The result--preparers will find it easier to identify and apply the GAAP hierarchy.

The statement will improve financial reporting by contributing to the GASB’s efforts to codify all GAAP for state and local governments so that they derive from a single source. Prior to the statement, the GAAP hierarchy was set forth in the American Institute of Certified Public Accountants’ (AICPA) Statement on Auditing Standards (SAS) No. 69, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles in the Independent Auditor’s Report," rather than in the authoritative literature of the GASB. Statement 55 moves relevant portions of that SAS to the GASB literature without substantive changes.  Because the GASB chose not to reconsider the guidance provided in the SAS, the order of priority for accounting and financial reporting guidance will remain unchanged in practice. 

Statement 55 is effective immediately.  Contact GASB to obtain a copy of the statement.

Background--from GASB Original Pronouncements, Appendix C:

Paragraph 9:  The hierarchy of GAAP governs what constitutes GAAP for all state and local governmental entities, including governmental colleges and universities, healthcare providers, and utilities. It lists the priority sequence of pronouncements that an entity should look to for accounting and reporting guidance.

Paragraph 10:  In its November 30, 1989 Jurisdiction Determination, the FAF Trustees stated that the jurisdictional division between the GASB and the FASB shall continue to be as set forth in the 1984 GASB Structural Agreement, but that the hierarchy should be changed. The objective of the hierarchy, as stated in the Jurisdiction Determination, is for each Board to have primary responsibility for setting standards for the reporting entities in its jurisdiction; pronouncements of the other Board should not be mandatory unless designated as such by the primary Board.

Paragraph 11:  In January 1992, the AICPA Auditing Standards Board issued Statement of Auditing Standards No. 69, "The Meaning of `Present Fairly in Conformity with Generally Accepted Accounting Principles' in the Independent Auditor's Report." This Statement implements the decision of the FAF Trustees and makes other changes in the hierarchy. With regard to states and local governmental entities, the hierarchy is as follows:

a. GASB Statements and Interpretations. Also, AICPA and FASB pronouncements specifically made applicable to state and local governmental entities by GASB Statements or Interpretations.
b. GASB Technical Bulletins. Also, if specifically made applicable to state and local governmental entities by the AICPA and cleared by the GASB: AICPA Industry Audit and Accounting Guides and AICPA Statements of Position.
c. AICPA AcSEC Practice Bulletins if specifically made applicable to state and local governmental entities and cleared by the GASB. Also, consensus positions of a group of accountants organized by the GASB that attempts to reach consensus positions on accounting issues applicable to state and local governmental entities.
d. Implementation Guides (Q&A's) published by the GASB staff. Also, practices widely recognized and prevalent in state and local government.
e. Other accounting literature, including GASB Concepts Statements and AICPA and FASB pronouncements when not specifically made applicable to state and local governmental entities.

NACUBO Staff ResourceSue Menditto, director, accounting policy.