It is a framework for selecting the principles that accountants should use in preparing financial statements of nongovernmental entities in conformity with U.S. The hierarchy of GAAP is designed to improve consistency and comparability within financial reporting. A similar provision appears in GASB Statement 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. Additionally, each regulatory body releases accounting guidance in multiple formats that have varying levels of authority. With multiple regulatory bodies overseeing various parts of the accounting profession, there was a need to pinpoint the most relevant and authoritative guidance on accounting topics. If no information on the topic is given at the higher levels, the accountant should look to the next level down for relevant pronouncements.The hierarchy of GAAP identifies which standards and best practices are the most authoritative for a particular instance or problem.Because multiple organizations regulate separate parts of the accounting world, there was a need to identify the most relevant standards for various accounting topics.The GAAP hierarchy is a four-tiered framework for selecting the principles that accountants should use in preparing financial statements of nongovernmental entities. Generally accepted accounting principles (GAAP) are the standard framework of guidelines for financial accounting used in any given jurisdiction generally known as accounting standards or standard accounting practice.
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