The Financial Accounting Standards Board (FASB) has issued an Exposure Draft titled “The Hierarchy of Accepted Accounting Principles,” as part of an effort to improve the quality of accounting standards and the standard-setting process.
Recently, the Securities and Exchange Commission (SEC) has reaffirmed the FASB as the designated private-sector standard-setter for public companies. The FASB, in turn, has implemented procedures to narrow the types of accounting principles it issues. The Statement proposed in the Exposure Draft, along with these efforts, is a step toward the simplification of the standard setting process whose goal is having one process and one form of guidance.
The Exposure Draft carries forward the GAAP Hierarchy ranking the relative authority of accounting principles from multiple standard-setters, currently residing in the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 69 (SAS 69).
“The proposed statement is an important first step towards improving the GAAP hierarchy. Several other FASB projects, such as the codification and retrieval project, aim to simplify standards and the standard-setting process. This proposed statement facilitates those future improvements,” FASB Chairman Robert Herz said in a written statement about the Exposure Draft.
The comment period for the Exposure Draft ends June 27, 2005. A copy of the Exposure Draft can be obtained from the FASB website.