Rule Atlas
FASB ASC 842: GAAP Hierarchy and Standard-Setting: GASB, FASAB, and FASB
Under FASB ASC 842 (GASB / FASAB / GAO / OMB), gAAP Hierarchy and Standard-Setting: GASB, FASAB, and FASB establishes the authoritative rules tested on the AGA CGFM. Explaining the roles and authoritative guidance of GASB, FASAB, and FASB for government financial managers. VoraPrep verifies every threshold, worked table, and practice question below against the current AGA CGFM blueprint.
Core Statutory Concepts
| Hierarchy Level | State & Local Government (GASB) | Federal Government (FASAB) |
|---|---|---|
| Level A | GASB Statements, Interpretations, Technical Bulletins | FASAB Statements of Federal Financial Accounting Standards (SFFAS) |
| Level B | GASB Implementation Guides, Practice Bulletins | FASAB Technical Bulletins, Implementation Guides |
| Level C | AICPA Statements of Position, Industry Audit and Accounting Guides (if cleared by GASB) | AICPA Literature (if cleared by FASAB) |
| Level D | Other accounting literature (e.g., textbooks, articles) | Other accounting literature |
A financial manager at the U.S. Department of Veterans Affairs (VA) is tasked with implementing new financial reporting requirements. To ensure compliance, the manager needs to identify the primary authoritative body responsible for establishing generally accepted accounting principles (GAAP) specifically for federal government entities.
Practitioner Application: GAAP Hierarchy and Standard-Setting: GASB, FASAB, and FASB
A county government is preparing its annual financial statements and is unsure whether a new leasing agreement should be accounted for under GASB 87 or if private sector leasing standards (FASB ASC 842) are applicable for certain components. Simultaneously, a financial manager at the Department of Defense is analyzing the accounting treatment for an intra-governmental transfer. Understanding which standard-setting body's guidance takes precedence is crucial for accurate financial reporting and avoiding audit findings.
- Governmental accounting in the United States is governed by a distinct set of standards, primarily established by two independent bodies: the Governmental Accounting Standards Board (GASB) for state and local governments, and the Federal Accounting Standards Advisory Board (FASAB) for the U.S. federal government. The Financial Accounting Standards Board (FASB) sets standards for private sector entities, and while its standards generally do not apply to governmental entities, it's important to understand the distinctions.
- 1. Governmental Accounting Standards Board (GASB) Purpose: Sets generally accepted accounting principles (GAAP) for state and local governmental entities in the U.S. This includes states, cities, counties, public authorities, and school districts. Authority: Established in 1984, the GASB is recognized by the American Institute of Certified Public Accountants (AICPA) and state boards of accountancy as the official source of GAAP for state and local governments. Key Focus: Addresses specific governmental issues such as fund accounting, modified accrual basis, interperiod equity, and the accountability of governmental resources. GASB standards such as GASB 34 (basic financial statements), GASB 54 (fund balance), GASB 84 (fiduciary activities), GASB 87 (leases), and GASB 96 (subscription-based IT arrangements) are fundamental.
Common AGA CGFM Distractors on FASB ASC 842
- 1GASB sets GAAP for state and local governments (e.g., cities, states, school districts).
- 2FASAB sets GAAP for the U.S. federal government (e.g., federal agencies, departments).
- 3FASB sets GAAP for private sector entities and non-governmental NFPs; it generally does not apply to government entities unless specifically adopted.
- 4The GAAP hierarchy defines the order of authority for accounting pronouncements; Statements from GASB/FASAB are Level A and supersede other guidance.
- 5Always identify the entity type first to determine the correct standard-setting body.
Frequently Asked Questions: FASB ASC 842
What is the core rule under FASB ASC 842 (GAAP Hierarchy and Standard-Setting: GASB, FASAB, and FASB)?
Under FASB ASC 842 (GASB / FASAB / GAO / OMB), gAAP Hierarchy and Standard-Setting: GASB, FASAB, and FASB establishes the authoritative rules tested on the AGA CGFM. Explaining the roles and authoritative guidance of GASB, FASAB, and FASB for government financial managers. VoraPrep verifies every threshold, worked table, and practice question below against the current AGA CGFM blueprint.
How is FASB ASC 842 tested on the AGA CGFM?
GASB sets GAAP for state and local governments (e.g., cities, states, school districts). FASAB sets GAAP for the U.S. federal government (e.g., federal agencies, departments).
Where can I practice AGA CGFM questions on GAAP Hierarchy and Standard-Setting: GASB, FASAB, and FASB?
Test yourself instantly with the free playable AGA CGFM question on this page, or launch VoraPrep's full AGA CGFM adaptive question bank, interactive lessons, and 1:1 exam simulator at voraprep.com/cgfm.