• The GAAP hierarchy is a four-level structure for choosing the principles that accountants should use when preparing the financial statements of non-government organizations.

  • Since several organizations regulate parts of the world of accounting, it has become necessary to determine the most appropriate standards for various accounting topics.
  • The GAAP hierarchy determines which standards and best practices are the most authoritative for a particular case or issue.
  • If information on a topic is not provided at higher levels, the accountant should apply to the next level for appropriate statements.