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
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
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
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.
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
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.