In connection with its effort to improve the quality of financial accounting standards and the standard-setting process, the FASB has published an Exposure Draft, The Hierarchy of Generally Accepted Accounting Principles.

The GAAP hierarchy, which currently resides in the AICPA's Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles (SAS 69), ranks the relative authority of accounting principles issued from multiple standard-setters.

Recently, the SEC reaffirmed the FASB as the designated private-sector standard setter for public companies and the FASB has implemented procedures to narrow the types of accounting principles that it issues.

Further, the FASB’s codification and retrieval project will integrate existing U.S. GAAP into a single authoritative retrievable source, thereby creating a single authoritative codification of GAAP. This proposed Statement, in connection with those developments and efforts, represents a necessary step towards achieving the ultimate vision for simplification of standard setting: one process and one form of guidance.

The Exposure Draft carries forward the GAAP hierarchy as set forth in SAS 69, subject to certain modifications that are not expected to result in a change in current practice.

The comment period for the Exposure Draft ends June 27, 2005. The document is available on the FASB’s web site at www.fasb.org.

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