Posted: August 28th, 2015

Accounting principle

Rules or principles? US GAAP (Generally Accepted Accounting Principles) is rule-based, while IFRS (International Financial Reporting Standards) are principle-based. Being rule-based means that in deciding how to account for a transaction you follow the prescribed rules governing those types of transactions. Being principle-based means that you follow broad principles and apply judgment when deciding how to account for a transaction.

Do you believe that the needs of stakeholders relying on financial statement information will be better met by rule-based or principle-based accounting standards? Would different stakeholders have different preferences for rule-based or principle-based accounting standards? Which approach is adopted in your country? Might it be easier to commit fraudulent financial reporting following one approach versus the other?

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