What is the Hierarchy Of GAAP

The Hierarchy of GAAP refers to a four-level framework that classifies FASB and AICPA pronouncements on accounting practice by their level of authority. Top-level pronouncements typically address broad issues while those at lower levels deal with the nitty-gritty of technical issues.


The Hierarchy of Generally Accepted Accounting Principles (GAAP) is designed to improve financial reporting. It consists of a framework for selecting the principles that public accountants should use in preparing financial statements in line with U.S. GAAP.

At the top of the GAAP hierarchy are statements by the Financial Accounting Standards Board (FASB) and opinions by American Institute of Certified Public Accountants (AICPA). The next level consists of FASB Technical Bulletins and AICPA Industry Audit and Accounting Guides and Statements of Position. On the third level are AICPA Accounting Standards Executive Committee Practice Bulletins and positions of the FASB Emerging Issues Task Force (EITF). Also included are Topics discussed in Appendix D of EITF Abstracts. On the lowest level are FASB implementation guides, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB. Also included are practices that are widely recognized.

Accountants are directed to first consult sources at the top of the hierarchy and then proceed to lower levels only if there is no relevant pronouncement at a higher level. The FASB's Statement of Accounting Standards No. 162 provides a detailed explanation of the hierarchy.