Principles- versus rules-based accounting standards: the FASB's standard setting strategy

• Autores: George Benson, Michael Bromwich, Alfred Wagenhofer
• Localización: Abacus: A journal of accounting, finance and business studies, ISSN 0001-3072, Vol. 42, Nº 2, 2006, págs. 165-188
• Idioma: inglés
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• Dialnet Métricas: 6 Citas
• Resumen

  • In response to criticism of rules-based accounting standards and Section 108(d) of the Sarbanes-Oxley Act of 2002, the SEC proposed principles-based (or ‘objectives-oriented’) standards. We identify several shortcomings with this approach and focus on two of them. First, the format (type) of a standard is dependent on the contents of what the standard regulates. Given the asset/liability approach combined with fair values, we argue that the combination of this measurement concept with principles-based standards is inconsistent because it requires significant guidance for management judgment. Second, we propose the inclusion of a true-and-fair override as a necessary requirement for any format that is more than ‘principles-only’ to deal with inconsistencies between principles and guidance. We discuss the benefits of this override and present evidence from the United Kingdom's experience.