GAAP Hierarchy – What Is the Hierarchy of GAAP?

The GAAP hierarchy specifies the relative level of authority of accounting principles and guidelines under the Generally Accepted Accounting Principles that govern accounting standards in the United States.

What is the GAAP Hierarchy?

The GAAP hierarchy defines the level of authority of different accounting pronouncements. When researching an accounting issue, the individual should first look for relevant advice at the top of the GAAP hierarchy. If there is no relevant information at the top of the hierarchy, then the researcher works down through the various levels of the hierarchy until the relevant pronouncement is found.

Generally accepted accounting principles, or GAAP, are standards that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.

U.S. law requires businesses to release financial statements to the public and companies publicly traded on stock exchanges and indices to follow GAAP guidelines. GAAP incorporates the following 10 concepts:

GAAP Hierarchy

The Four Levels of the GAAP Hierarchy

The highest level of the GAAP hierarchy, which supplies the most authoritative guidance for accounting principles and practices, includes the Statements of Financial Accounting Standards as put forth by the Financial Accounting Standards Board, along with official interpretations of the standards issued by the FASB.

Level One

Level one also includes the Accounting Research Bulletins and the official Opinions from the American Institute of Certified Public Accountants, as long as they do not conflict with the official statements and interpretations issued by the FASB. In instances where a conflict of guidance might arise, the guidance from the FASB takes precedence.

Level Two

The second level of the GAAP hierarchy includes Technical Bulletins published by the FASB and the Industry Audit and Accounting Guides and Statements of Position that are issued by the AICPA. Again, the premier governing authority is the FASB.

The AICPA’s Statements of Position aim to clarify and improve accounting guidance provided previously or elsewhere, and they are frequently later incorporated into the FASB’s basic accounting standards.

Level Three

The third level of the hierarchy comprises further, more detailed guidelines that are put forth in publications from both the AICPA and the FASB. The governing AICPA documents at the third level are the periodically issued Accounting Standards Executive Committee Practice Bulletins.

The third level of guidance from the FASB is found in the FASB’s Consensus Positions, which come from the FASB Emerging Issues Task Force (EITF), and in the accounting, topics discussed in detail in EITF Abstracts, Appendix D.

Level Four

The fourth and final level of the GAAP hierarchy consists of Implementation Guides published by the FASB, the official Accounting Interpretations issued by the AICPA, and the Industry Audit and Accounting Guides and Statements of Position, also from the AICPA.

The fourth level of the hierarchy also includes any and all accounting practices that are widely and generally recognized and commonly in use, either in general accounting or within a specific industry or market sector.

The GAAP hierarchy is discussed in detail in the FASB’s Statement of Financial Accounting Standards No. 162, published in May of 2008.

The Four Levels of the GAAP Hierarchy

The Entities Governing Accounting Standards in the United States

Of the three entities that provide accounting regulations, standards, principles, and professional guidance for accountants, only the SEC is an official government entity with legal enforcement powers. The SEC’s interest in accounting standards is primarily limited to accounting requirements for publicly traded companies.

The FASB is a non-profit organization founded in 1973 to establish standardized accounting and financial reporting practices for both for-profit and non-profit entities. Its authoritative position in reference to accounting standards and practices gradually increased over the years until it ultimately became the preeminent body for interpreting the GAAP.


  • The GAAP hierarchy is a four-tiered framework for selecting the principles that accountants should use in preparing financial statements of nongovernmental entities.
  • 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 hierarchy of GAAP identifies which standards and best practices are the most authoritative for a particular instance or problem.
  • If no information on the topic is given at the higher levels, the accountant should look to the next level down for relevant pronouncements.

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