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Generally Accepted Accounting Principles

preparation of financial statements and that have come to are available individually from the AICPA as published. In
be known as GAAP. addition, Statements of Position are included collectively
The GAAP hierarchy includes four successive cate- in AICPA Technical Practice Aids.
gories (A to D), each of which establishes a different level FASB Technical Bulletins provide timely guidance for
of authority. Generally speaking, if there is a conflict applying Category A accounting principles and resolving
between accounting principles relevant to the circum- accounting issues not directly addressed in those princi-
stances from one or more sources in Categories A, B, C, ples. The following kinds of guidance may be provided in
or D, the treatment specified by the source in the higher a Technical Bulletin:
category is then followed. In other words, Categories A
through D of the hierarchy descend in authority. There- • Guidance that clarifies, explains, or elaborates on an
fore, Category A takes precedence over all others, Cate- underlying standard.
gory B takes precedence over Categories C and D, and • Guidance for a particular situation (usually a spe-
Category C takes precedence over Category D. If a situa- cific industry) that differs from the general applica-
tion is not covered by guidelines in Categories A through tion required by the standard in an ARB, APB
D, other accounting literature should be considered. Opinion, or FASB Statement or Interpretation. For
However, that literature should be consulted only when example, the guidance in a Bulletin may specify that
guidelines in higher categories are not applicable. the standard does not apply to enterprises in a par-
ticular industry or may provide for deferral of the
Category A. Category A consists of the following officially effective date of a standard for that industry.
established accounting principles: (1) FASB Statements of • Guidance that addresses areas not directly covered
Financial Accounting Standards, (2) FASB Interpreta- by existing standards.
tions, (3) APB Opinions, and (4) AICPA Accounting
Research Bulletins. All of those accounting principles are The AICPA’s Accounting Standards Executive Com-
included in Volumes I and II of Original Pronouncements, mittee (AcSEC), which works closely with the FASB and
which is updated annually and published by the FASB. In its staff, is the senior technical committee of the AICPA
addition, FASB Statements and Interpretations are avail- authorized to set accounting standards and to speak for
able individually from the FASB as published. the AICPA on accounting matters. AcSEC’s standard-
The accounting principles included in Category A are setting activities are often industry-specific or narrow in
often referred to as “Rule 203 pronouncements” because scope, whereas the FASB’s activities result in standards
the bodies responsible for establishing those principles that are more general and broader in scope. AcSEC issues
have been so designated by the AICPA Council, pursuant AICPA Statements of Position, which present conclusions
to Rule 203 of the AICPA Code of Professional Conduct. with respect to an emerging problem or diversity in prac-
Specifically, from September 1939 to August 1959 the tice. In addition, AcSEC issues AICPA Audit and
AICPA committees on terminology and on accounting Accounting Guides, which either interpret GAAP as
procedure were responsible for issuing fifty-one Account- applicable to a specific industry or, in some cases, establish
ing Research Bulletins (ARBs). In 1953, the first forty- industry-specific GAAP. For example, Guides have been
two of those were revised, restated, or withdrawn and now published for agricultural producers and cooperatives, air-
appear as ARB No. 43, Restatement and Revision of lines, casinos, construction contractors, and health care
Accounting Research Bulletins. On September 1, 1959, the organizations.
AICPA committees were superseded by the APB, which
issued thirty-one Opinions until it ceased operations in Category C. Category C consists of (1) AcSEC Practice
June 1973. At that time, the FASB took over the respon- Bulletins that have been cleared by the FASB and (2) con-
sibilities of standard setting from the APB and as of sensus positions of the FASB Emerging Issues Task Force
March 31, 2000, had issued 137 Statements of Financial (EITF). AcSEC Practice Bulletins are available individu-
Accounting Standards and forty-four Interpretations. ally from the AICPA as published and are also included
collectively in AICPA Technical Practice Aids. Consensus
Category B. Category B consists of (1) FASB Technical positions of the EITF are available individually from the
Bulletins and, if cleared by the FASB, (2) AICPA State- FASB as published and are included collectively in EITF
ments of Position and (3) AICPA Industry Audit and Abstracts, which is published by the FASB.
Accounting Guides. Technical Bulletins are available indi- The EITF was established by the FASB in 1984 to
vidually from the FASB as published and are also included assist in the early identification of emerging issues affect-
collectively in Volume II of Original Pronouncements. ing financial reporting and of problems in implementing
Statements of Position and Audit and Accounting Guides authoritative pronouncements. Each EITF Abstract sum-

340 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION