| INTRODUCTION | ||
| 1. |
This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). | |
| STANDARDS OF FINANCIAL ACCOUNTING AND REPORTING | ||
| 2. | Scope This Statement applies to financial statements of nongovernmental entities that are presented in conformity with GAAP. |
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| The GAAP Hierarchy | ||
| 3. | The sources of accounting principles that are generally accepted are categorized in descending order of authority as follows: | |
| a. | FASB Statements of Financial Accounting Standards and Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions, and American Institute of Certified Public Accountants (AICPA) Accounting Research Bulletins and Accounting Principles Board Opinions that are not superseded by actions of the FASB | |
| b. | FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry Auditand Accounting Guides and Statements of Position | |
| c. | AICPA Accounting Standards Executive Committee Practice Bulletins that have been cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts (EITF D-Topics) | |
| d. | 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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| 4. | If the accounting treatment for a
transaction or event is not specified by a pronouncement in category (a), an
entity shall consider whether the accounting treatment is specified by an
accounting principle from a source in another category. In such cases, if categories (b)–(d) contain accounting principles that specify accounting treatments for a transaction or event, then the entity shall follow the accounting treatment specified by the accounting principle from the source in the highest category—for example, follow category (b) treatment over category (c) treatment. |
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| 5. | If the accounting treatment for a transaction or event is not specified by a pronouncement or established in practice as described in categories (a)–(d), an entity shall first consider accounting principles for similar transactions or events within categories (a)–(d) and then other accounting literature. An entity shall not follow the accounting treatment specified in accounting principles for similar transactions or events in cases in which those accounting principles either prohibit the application of the accounting treatment to the particular transaction or event or indicate that the accounting treatment should not be applied by analogy. Other accounting literature includes, for example, FASB Concepts Statements, AICPA Issues Papers, International Financial Reporting Standards (IFRSs) of the International Accounting Standards Board (IASB), pronouncements of other professional associations or regulatory agencies, Technical Information Service Inquiries and Replies included in AICPA Technical Practice Aids, and accounting textbooks, handbooks, and articles. The appropriateness of other accounting literature depends on its relevance to particular circumstances, the specificity of the guidance, and the general recognition of the issuer or author as an authority. For example, FASB Concepts Statements would normally be more influential than other sources in this category. | |
| Effective Date and Transition | ||
| 6. | This Statement shall be effective
60 days following the SEC’s approval of the Public Company Accounting Oversight Board
(PCAOB) amendments toAU Section 411, The
Meaning of
Present Fairly in
Conformity With Generally Accepted Accounting Principles. |
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| 8. | Any effect of applying the provisions of this Statement shall be reported as a change in accounting principle in accordance with FASB Statement No. 154, Accounting Changes and Error Corrections. An entity shall follow the disclosure requirements of that Statement, and additionally, disclose the accounting principles that were used before and after the application of the provisions of this Statement and the reason why applying this Statement resulted in a change in accounting principle. |