Question

Refer to FASB 162 (the hierarchy of accounting information). Why is this hierarchy important, and how can it be applied to conducting research?

Answer 1

ANSWER:

Given;

Refer to FASB 162 (the hierarchy of accounting information). Why is this hierarchy important, and how can it be applied to conducting research?

The hierarchy in this Statement comes as a relief to those preparing financial statements. The AICPAs Statement on Auditing Standards No. 69, The Meaning ofPresent Fairly in Conformity With Generally Accepted Accounting Principles has been greatly criticized as being more applicable to auditors of financial statements rather than the entity itself. It was also considered to be rather complex. Statement 162 was provided as a relief and is meant to be directed to the entities since the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. The hierarchy contains the sources of accounting principles that are generally accepted and they are categorized in descending order of authority. The hierarch is important for conducting research because it gives you a roadmap in a sense. If you are unable to find the information you need in category (a), then you proceed to category (b) through (d). If the information is still not available it instructs you to find similar events or transactions as a reference. This is very helpful when conducting research because it allows you to organize the information based on authority. If the information you are seeking is difficult to locate or maybe non-existent, the hierarchy gives you an idea of where to go next.