Basics of Generally Accepted Accounting Principles for USA

By Prof. G. S. Mentz, Esq.

06 January, 2007

Basics of Generally Accepted Accounting Principles for USA and AICPA & Governmental Issues.

Edited and Prepared by: Prof. Mentz

The term "generally accepted accounting principles" has a specific meaning for accountants and auditors. The AICPA Code of Professional Conduct prohibits members from expressing an opinion or stating affirmatively that financial statements or other financial data "present fairly... in conformity with generally accepted accounting principles," if such information contains any departures from accounting principles promulgated by a body designated by the AICPA Council to establish such principles.

The AICPA Council designated FASAB as the body that establishes accounting principles for federal entities. The AICPA's hierarchy of generally accepted accounting principles in Statement of Auditing Standards (SAS) No. 91, The Federal GAAP Hierarchy, governs what constitutes GAAP for U.S. government reporting entities. The hierarchy lists the priority sequence of sources that an entity should look to for accounting and reporting guidance.

For financial statements of federal governmental entities, the GAAP hierarchy is:

Category (a), officially established accounting principles, consists of Federal Accounting Standards Advisory Board (FASAB) Statements and Interpretations, as well as AICPA and FASB pronouncements specifically made applicable to federal governmental entities by FASAB Statements or Interpretations. FASAB Statements and Interpretations will be periodically incorporated in a publication by the FASAB.

Category (b) consists of FASAB Technical Bulletins and, if specifically made applicable to federal governmental entities by the AICPA and cleared by the FASAB, AICPA Industry Audit and Accounting Guides and AICPA Statements of Position.
fn 9.

Category (c) consists of AICPA AcSEC Practice Bulletins if specifically made applicable to federal governmental entities and cleared by the FASAB, as well as Technical Releases of the Accounting and Auditing Policy Committee of the FASAB.

Category (d) includes implementation guides published by the FASAB staff, as well as practices that are widely recognized and prevalent in the federal government.
"In the absence of a pronouncement covered by rule 203 [ET section 203.01] or another source of established accounting principles, the auditor of financial statements of a federal governmental entity may consider other accounting literature, depending on its relevance in the circumstances. Other accounting literature includes, for example, FASAB Concepts Statements; the pronouncements referred to in categories (a) through (d) of paragraph .10 when not specifically made applicable to federal governmental entities by the FASAB; FASB Concepts Statements; GASB Statements, Interpretations, Technical Bulletins, and Concepts Statements; AICPA Issues Papers; International Accounting Standards of the International Accounting Standards Committee; pronouncements of other professional associations or regulatory agencies; Technical Information Service Inquiries and Replies included in AICPA Technical Practice Aids; and accounting textbooks, handbooks, and articles. The appropriateness of other accounting literature depends on its relevance to particular circumstances, the specificity of the guidance, and the general recognition of the issuer or author as an authority. For example, FASAB Concepts Statements would normally be more influential than other sources in this category. [Paragraph added, effective April 2000, by Statement on Auditing Standards No. 91.]"

About the Authors
George Mentz is a licensed attorney and is trained in Internatinal Law and Business. Mentz has an earned MBA from an AACSB Accredited Business School and holds a Doctorate Degree or Juris Doctorate Degree from an ABA Accredited USA Law School. Prof. Mentz has faculty appointments and credentials in Silicon Valley, Miami, Chicago, Denver, Hong Kong, Singapore, and The Bahamas. . Prof. Mentz is a consultant providing expertise to Fortune 100 companies in several countries. The first person in the United States to achieve "Quad Designation" Status as a JD, MBA, licensed financial planner, and Certified Financial Consultant. Prof. Mentz has authored/published over 15 Books and has been featured or quoted in the Wall Street Journal, The Hindu National, El Norte Latin America, the Finanical Times, The China Daily, & The Arab Times. His research, publications, and speeches have been syndicated into over 100 countries. Prof. Mentz has recently been elected to the advisory board of the GFF Global Finance Forum in Switzerland and the World E-Commerce Forum in London, England. He also is on the Advisory Board of The ERISA Fiduciary Guild. Mentz was Editor and Chief for the Original Tax and Estate Planning Law Review at Loyola University (A Loyola University Chartered Organization). One of the First Lawyers in the USA to be credentialed and compliant to teach law in all 50 states in law school, graduate and undergraduate colleges and universities. Holds professor faculty appointment at Graduate LLM Law Program . Prof. Mentz has established Certification and Executive Training Accreditation Programs in over 50 Countries around the world including : UK, China, Mexico, Africa, Singapore, Taiwan, USA, Bahamas, India, Russia, EU, Philippines, Saudi Arabia, Canada, Vietnam, The Bahamas and more. General Counsel and Attorneyand Board of Standards Chair Prof. Mentz has recently been awarded a National Faculty Award, a Distinguished Faculty Award and a Meritorious Service Medal for Charitable Service. Prof Mentz has taught over 150 college and graduate courses in his faculty career.