What is the first step a governmental entity should take if guidance for a transaction is not specified in authoritative GAAP?

When guidance for a transaction is not specified in authoritative Generally Accepted Accounting Principles (GAAP), the first step a governmental entity should take is to consider accounting principles for similar transactions within GAAP. This approach is fundamental because GAAP emphasizes the importance of consistency and comparability in financial reporting.

By looking at similar transactions that are already addressed by GAAP, entities can apply the relevant accounting principles to ensure their financial statements remain in alignment with established standards. This enhances the integrity of the financial reporting process and helps maintain the trust and reliability expected by users of financial information.

While consulting nonauthoritative literature or engaging a financial advisor may provide additional insights, these steps could lead to less rigorous conclusions without the backing of established principles. Reviewing external accounting standards may also provide useful context but does not directly apply GAAP, which prioritizes the application of existing authoritative standards to maintain consistency in financial reporting for governmental entities.