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Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem
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Briefly discuss the difference between (A) a “rules-based” approach to accounting standard setting and (B) a “principles-based” approach to accounting standard setting.

To determine

Examine the differences between (A) rules-based approach, and (B) principles-based approach, in setting the accounting standards.

Explanation

International Financial Reporting Standards (IFRS): IFRS are a set of international accounting standards which are framed, approved, and published by International Accounting Standards Board (IASB) for the preparation and disclosure of international financial reports.

Generally Accepted Accounting Principles (GAAP): These are the guidelines necessary to create accounting principles for the implementation of financial information reporting in the Country U.

The following are the differences between (A) and (B):

(A)

Rules-based approach to standard setting: GAAP are usually observed as rules-based approach to standard setting because the accounting standards are based on perfect and consistent rules for business transactions, which reflect the legal, social, and economic values of Country U...

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