The content of accounting standards: Principles versus rules

Michael E. Bradbury and Laura B. Schröder

The British Accounting Review, 2012, vol. 44, issue 1, 1-10

Abstract: The Global Accounting Alliance has raised a call for different perspectives on principles-based accounting standards. Based on prior studies this paper identifies a number of characteristics of principles-based accounting standards. It uses content analysis to empirically test whether the asserted characteristics are consistent with the IASB and FASB standards on interest costs. We find that rules-based standards, relative to principles-based standards, have more rules, more justification, acknowledge less judgement is required, have more bright-line thresholds, have more scope exceptions, and are more verbose and complex. The main drafting difference between a rules-based or principles-based approach is whether extensional definitions or intensional definitions are used. Several policy implications are noted.

Keywords: Content analysis; Accounting standards; Rules; Principles; Interest costs (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:44:y:2012:i:1:p:1-10

DOI: 10.1016/j.bar.2011.12.003

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