FASRI Roundtable: Rules vs. Principles-Based Standards

On February 26, FASRI will host a Roundtable discussing issues related to rules vs. principles-based standards.  Professor Rick Mergenthaler from the University of Iowa will lead a discussion based on his research into rules vs. principles-based standards and how they relate to litigation, earnings management, and other earnings attributes. For background you can read Professor [...] Read more > >

Auditor Judgment Frameworks; or Principles-Based versus Rules-Based Accounting Standards Part II

A recent paper by Backof, Bamber, and Carpenter (2011, International Financial Reporting Standards and Aggressive Reporting: An Investigation of Proposed Auditor Judgment Guidance) investigates auditors’ judgments under IFRS and US GAAP.  The authors conduct an experiment where 200 auditors from a Big 4 accounting firm were asked whether they agree with management’s preferred accounting methods [...] Read more > >

Principles-Based versus Rules-Based Accounting Standards

If you were to pose a question to any undergraduate accounting major with familiarity about IFRS as to what is the primary distinction between IFRS and U.S. GAAP, you’d probably get the response that IFRS is principles based and U.S. GAAP is rules based.  It’s a notion that was promoted by former IASB Chairman Sir [...] Read more > >

AAA Observations on Conceptual Framework

The AAA meeting in Denver had a number of interesting panel sessions.  One that I found enlightening concerned financial reporting and the financial crisis.  The panelists were Greg Waymire, Mary Barth, and Shyam Sunder.  I was not sure what to expect.  The punchline was that none of the panelists felt financial reporting was a prime [...] Read more > >

How many IFRIC interpretations are there? (Warning: This is a trick question.)

If someone had asked me this question, my quick response would have been 19. (Well, it might have been something more nuanced like, “I think around 18 or so.”)  But a recent post by Tom Selling on the Accounting Onion points out how in many of the IFRIC’s decisions not to provide an interpretation (i.e., [...] Read more > >

Does revenue recognition require a customer?

I’ve just finished reading the IASB/FASB exposure draft on revenue recognition, and I have all kinds of questions running through my head. But before I get to those questions, let me first say that I am very impressed with this document. In fewer than 90 paragraphs of guidance (ignoring application guidance), the IASB/FASB have laid [...] Read more > >

Professional judgment in financial reporting

In my technical accounting research class and in recent consulting work, I often have been reminded of the need for reasoned judgment in our profession. With the general move toward more objectives-based standards (using the SEC parlance), the need for professional judgment only will increase.  Recognizing the need to teach and understand what professional judgment [...] Read more > >

Happy New Year (in Principle)

I hope everyone is refreshed and ready for the new year — and a challenging one it will be for standard setters, with the convergence deadlines rapidly approaching.  To get you started, here are some thoughts on Principles vs. Rules, from Paul Miller and Paul Bahnson, academics who have a regular column (The Spirit of [...] Read more > >

2009 FASB-IASB Financial Reporting Issues Conference

For most of this decade, the Financial Reporting Issues Conference has been my favorite accounting event of the year.  Taking a Bayesian perspective, I also view it as the most informative:  every year, what I learn changes my beliefs more than any other conference. I will be writing some posts about the substance of the [...] Read more > >

Can IFRS produce global comparability?

I just read the abstract of a forthcoming paper (Kvaal and Nobes 2010) that compares the accounting policies of blue chip companies in the largest five stock markets that use IFRS. By comparing the policy disclosures in annual reports, the authors find “significant evidence that pre-IFRS national practice continues where this is allowed within IFRS.”  [...] Read more > >

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