FIN-6.02 - Generally Accepted Accounting Principles (GAAP) Hierarchy

Administrative Rules Adopted by City Council (ARC)
Policy number
Administrative Rule Adopted by Council

The purpose of this administrative rule is to establish minimum standards for the use of Generally Accepted Accounting Principles (GAAP) to guide City accounting transactions and reporting.

Authority for this administrative rule is established in the City Charter and City Code. This administrative rule has been approved by the City Council.

The Accounting Division of the Bureau of Financial Services of the Office of Management and Finance (Accounting Division) will periodically monitor bureaus to assess compliance with the minimum standards of this rule. As instances of non-compliance are identified, bureaus will be required to develop and implement a corrective action plan. The Accounting Division will provide assistance to bureaus, if requested, to develop this plan. The Controller will report all instances of non-compliance annually to the Chief Financial Officer (CFO) and City Council.

"AICPA" means the American Institute of Certified Public Accountants. The AICPA issues authoritative standards, especially through its Auditing Standards Board.
"FASB" means the Financial Accounting Standards Board. The FASB is the authoritative accounting and financial reporting standard-setting body for business enterprises and not-for-profit organizations. The GASB has elected to apply many of the standards issued by the FASB to governmental accounting.
"GAAP" means Generally Accepted Accounting Principles, the standards, rules and procedures that serve as the norm for the fair presentation of financial statements.
"GAAP Hierarchy" means the relative authority of the standards, rules, procedures, and other literature on financial accounting and reporting, as set forth in the Statement on Auditing Standards No. 69.
"GASB" means the Governmental Accounting Standards Board. The GASB is the ultimate authoritative accounting and financial reporting standard-setting body for state and local governments.

General Guidelines
  1. Statement on Auditing Standards (SAS) No. 69 issued by the AICPA established a GAAP hierarchy for state and local governmental entities. The City of Portland follows this hierarchy for accounting transactions and reporting. In addition, governments have the option of following subsequent private sector guidance for proprietary funds; however, the City has elected to not follow subsequent private sector guidance.
  2. Level 1 pronouncements are the top level of authority, and take precedence over lower levels of announcements.
  3. If an accounting issue is addressed in multiple levels, guidance in the highest level must be followed.
  4. Pronouncements within any level carry equal weight.

GAAP Hierarchy
1. Level 1 pronouncements include the following:
  • GASB Statements
  • GASB Interpretations
  • FASB pronouncements if made applicable by the GASB
  • AICPA pronouncements if made applicable by the GASB
2. Level 2 pronouncements are followed when Level 1 provides no guidance. They include:
  • GASB Technical Bulletins
  • AICPA Audit and Accounting Guides if they apply to state and local governments and have been cleared by the GASB
  • AICPA Statements of Position if they apply to state and local governments and have been cleared by the GASB
3. Level 3 pronouncements are followed when Levels 1 and 2 provide no guidance. Currently there are no Level 3 pronouncements in effect. Future guidance would include the following:
  • GASB Emerging Issues Task Force consensus positions
  • AICPA Practice Bulletins if they apply to state and local governments and have been cleared by the GASB
4. Level 4 guidance applies when Levels 1, 2 and 3 provide no guidance. Level 4 currently includes:
  • GASB Implementation guides, which are generally in a question and answer format
  • Widely recognized and prevalent practices, consistent with GAAP
5. Other accounting literature provides the lowest level of guidance. This includes:
  • GASB Concepts Statements
  • Pronouncements of the FASB that have not been made applicable to state and local governmental accounting by the GASB
  • Accounting textbooks or articles

Resolution No. 36248, originally adopted by Council September 1, 2004.
Revised by Resolution No. 36435, adopted by Council September 6, 2006.

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