Fenn Gallery of Contemporary Art

Last week the FASB issued yet another accounting pronouncement, SFAS 162 – The Hierarchy of GAAP. The statement does not offer much in the line of new content, though it does provide increased simplification. To make a long story short, the hierarchy of accounting guidance from most to least authority is…drumroll…..

1) FASB statements, interpretations and staff positions, and accounting research bulletins and board opinions from the American Institute of Certified Public Accountants that are not superseded by FASB, are given the greatest weight.

2) FASB technical bulletins,certain AICPA statements of positions and accounting guides and AICPA practice bulletins cleared by FASB and consensus positions of the FASB emerging issues task force.

3) Implementation guides published by FASB staff and AICPA accounting interpretations, accounting guides and statements of position that have not been cleared by FASB

4) Industry Best Practices

The focus of the new standard is on accountants, rather than auditors (as was the case with the AICPA’s SAS 69).

Of course, this will all become obsolete if the U.S. adopts international reporting standards.

Eavesdrop on the discussions going on in the boardrooms of U.S. public companies these days and you may walk away with one thought: U.S. Generally Accepted Accounting Principals are going the way of the dinosaur (i.e. extinct).  As the FASB burns away on its’ convergence project to ratchet-down the technicalities of U.S. GAAP to the more principles-based International Financial Reporting Standards (IFRS), once cannot help but hear the clock ticking for GAAP.  The tell tale signs are becoming more frequent….

2001 – International Accounting Standards Board established.

2003 – Members of the European Union begin conversion to IAFS, with a deadline of 2005

2007 – Foreign SEC clients no longer required to even reconcile their IAFS statements to GAAP

The April 2008 article of CFO magazine paints a pretty bleak picture for US accounting principles as well.  The article notes that Big 4 experts expect the SEC to mandate that public companies confirm with IFRS in as little as 5 years.  The reasons are many: the infamous “increase in comparability”, maintenance of the presumption that U.S. companies remain players in the world economy, ease of bookkeeping for multi-nationals. 

Whatever the eventual outcome is, one thing is clear: the emerging accounting elite in the U.S. should keep an ear to the ground on this one.  Don’t expect major changes to impact you in the near future, but don’t expect this to go away.

About the Author:

The Big 4 Guru is a NY State CPA, proud Big 4 alumni and seasoned industry professional. His passion is helping new accounting professionals achieve their career goals.

http://www.big4guru.com

Article Source: ArticlesBase.com – Sfas 162 – the Hierarchy of Gaap

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