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Generally Accepted Accounting Principles (GAAP)


Purpose and scope

The Constitution of the State of Connecticut, Article Fourth, Section 24, the comptroller shall prescribe the mode of keeping and rendering all public accounts. The basic statutory reference for the Office of the State Comptroller is CGS Chapter 34 - Sections 3-111 through Sections 3-123d. This chapter defines the principles of accounting which underlie the change over to GAAP accounting for the State of Connecticut.

What is an accounting principle?

An accounting principle is defined by the American Institute of Certified Public Accountants (AICPA), as “a general law or rule adopted or proposed as a guide to action; a settled ground or basis of conduct or practice.”

Generally accepted accounting principles (GAAP) are uniform minimum standards of and guidelines to financial accounting and reporting. GAAP establishes appropriate measurement and classification criteria for financial reporting. Adherence to GAAP provides a reasonable degree of comparability among the financial reports of State and local governmental units.


This chapter defines the basis and nature of accounting principles applicable to Connecticut State Government. The accounting principles are intended to facilitate developing and maintaining a reliable, central source of timely fiscal information, which describes the financial condition of the State, reports on the stewardship of public resources, and provides analytical data for legislators, agency administrators, investors and the citizens of Connecticut. These principles underlie developing formats and procedures by which all State agencies must report fiscal information to the Comptroller.

Recognition of authoritative sources

The Office of the State Comptroller researched literature which is generally accepted in governmental accounting and related fields. Some of the sources which have contributed to defining Connecticut's accounting principles include: • Government Finance Officers (GFOA), Governmental Accounting, Auditing and Financial Reporting • Governmental Accounting Standards Board (GASB), Codification of Governmental Accounting and Financial Reporting Standards • AICPA, Audits of State and Local Governmental Units

We also consulted other respected sources such as relevant pronouncements and publications of the AICPA, GFOA, GASB, other publications, articles and individual governmental accounting experts.

GAAP hierarchy

Accounting standards or principles established by the Office of the State Comptroller, in accordance with CGS 3-112, take precedence in the GAAP hierarchy listed below. Unless the Comptroller establishes other accounting standards or principles, and incorporates them into SAM, the GAAP hierarchy will be:

1.Governmental Accounting Standards Board (GASB) Statements and Interpretations. As well as, American Institute of Certified Public Accountants (AICPA) and Financial Accounting Standards Board (FASB) pronouncements specifically made applicable to State and local governmental entities by GASB Statements or Interpretations. For government-wide and proprietary fund reporting, only those applicable FASB pronouncements, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB's) issued on or before November 30, 1989 that do not conflict with or contradict GASB pronouncements, have been specifically included.

2. GASB Technical Bulletins. As well as, AICPA Industry Audit and Accounting Guides and AICPA Statements of Position, if specifically made applicable to State and local governmental entities by the AICPA and cleared by the GASB.

3. AICPA Accounting Standards Executive Committee (AcSEC) Practice Bulletins As well as, practice bulletins specifically made applicable to State and local governmental entities and cleared by the GASB. Also, consensus positions of a group of accountants organized by the GASB that attempts to reach consensus positions on accounting issues applicable to State and local governmental entities.

4. Implementation Guides (Q&A's) published by the GASB staff and practices widely recognized and prevalent in State and local government.

5. Other accounting literature, including GASB Concepts Statements and AICPA and FASB pronouncements when not specifically made applicable to State and local governmental entities.

Evolutionary Nature of Accounting Principles

State government operates in a dynamic environment, in which change is increasingly a factor - organizational and operational changes, procedural changes, and changes in personnel. Principles must underlie a system which will function effectively in a practical environment. The OSC has prescribed accounting principles at a practical level, while recognizing the dynamics of the environment and of the principles themselves. Generally accepted accounting principles have evolved over a period of years. Their current status reflects the historical requirements of financial information users, as well as “best practices” in public sector financial management. As fiscal accountability is monitored more closely, these principles will be continually reviewed, evaluated and refined to meet the requirements for timely, complete and accurate financial information.

Governmental GAAP requires fund accounting

Among the basic principles of governmental GAAP is fund accounting. Because of the diverse nature of governmental operations and the numerous legal and fiscal constraints under which those operations must be conducted, it is impossible to record all governmental financial transactions and balances in a single accounting entity. Therefore, a governmental unit is accounted for through separate funds, each of which is a fiscal and accounting entity with a self-balancing set of accounts.