what is the hierarchy of gaap 
the hierarchy of generally accepted accounting principles gaap refers to a four level framework that classifies the financial accounting standards board fasb the u s securities and exchange commission sec and the american institute of certified public accountants aicpa guidance on accounting practices and standards by their level of authority top level guidance typically addresses broad accounting issues while those at a lower level deal with more technical issues understanding the hierarchy of gaapwith 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 additionally each regulatory body releases accounting guidance in multiple formats that have varying levels of authority the hierarchy of gaap is designed to improve consistency and comparability within financial reporting it is a framework for selecting the principles that accountants should use in preparing financial statements of nongovernmental entities in conformity with u s gaap the fasb formed in 1973 is an independent nonprofit organization that is responsible for establishing accounting and financial reporting standards for public and private companies and nonprofit organizations in the united states this allows for more standardized reporting enabling investors and other financial statement users to better compare the financial statements of multiple companies within a common sector or industry the sec created in 1934 is an independent federal government agency responsible for protecting investors maintaining fair and orderly functioning of the securities markets and facilitating capital formation the sec sets forth reporting standards and regulations for public companies the aicpa founded in 1887 is the non profit professional organization that represents certified public accountants cpas in the united states among other tasks the aicpa develops standards for external audits of private companies requirements for the hierarchy of gaapthere are four levels of the gaap hierarchy the top of the hierarchy is the most authoritative guidance an accountant researching a given topic should consult first with the highest level for relevant advice if no information on the topic is given at the higher levels the accountant should look to the next level for relevant pronouncements the fasb s statement of accounting standards no 162 provides a detailed explanation of the hierarchy 