What is the purpose of GASB Statement No. 76?

The purpose of GASB Statement No. 76 is indeed to define the hierarchy of generally accepted accounting principles (GAAP) specifically for state and local governments. This statement establishes a framework that helps ensure consistency in financial reporting among governmental entities. By differentiating between various levels of authoritative guidance, such as pronouncements from the Governmental Accounting Standards Board (GASB), authoritative literature from the Financial Accounting Standards Board (FASB), and other applicable standards, GASB Statement No. 76 provides a clear hierarchy that accountants and financial statement preparers can refer to when determining the appropriate accounting principles to apply.

This hierarchy is particularly important because it supports transparency and comparability in financial reporting across different governmental entities, fostering greater trust among stakeholders including the public, legislators, and investors. In doing so, it enhances the overall integrity of the public sector's financial reporting.

The other options, while they refer to relevant concepts in governmental accounting, do not accurately reflect the focus of GASB Statement No. 76. This clarity in the definition of GAAP hierarchy helps guide practitioners in making informed decisions while preparing and presenting financial information for state and local governments.