Need an argumentative essay on Accounting standards: rules vs principles. Needs to be 9 pages. Please no plagiarism.Download file to see previous pages... In recent times accounting and financial scan

Need an argumentative essay on Accounting standards: rules vs principles. Needs to be 9 pages. Please no plagiarism.

In recent times accounting and financial scandals have brought to fore the issue of accounting standards.Currently rule-based accounting standards are longer and more complex filled with specific details in an attempt to address as many potential contingencies as possible. Also the role of professional judgment became unimportant and rules took over the professionalism. So, the debate started whether the current financial reporting system in the U.S. is undesirable or inappropriate because it is rule based.In order to address the issues with rule based standards the Sarbanes-Oxley Act of 2002 made recommendations to examine the feasibility of a principles-based accounting system. Many top accounting firms have also supported the switch from rule-based accounting system to principles-based accounting system. Even the Financial Accounting Standards Committee (FASC) of the American Accounting Association is more in favor of a principles-based accounting system.Hence, the promulgation of the Sarbanes-Oxley Act of 2002 has possible implications for the adoption of principles based financial reporting standards. This particular Act has come into force in order to provide detailed and prescriptive corporate governance guidance, at the federal level, in particular. Also this Act has special emphasis on matters related to financial reporting and auditing. Previously, the principle based outlook has been associated with the state level, where the fiduciary duties of care and loyalty have formed the basis of governance guidance for officers and directors of corporations. ...

Hence, principles-based accounting system is based on general objectives rather than detailed guidelines. A principles-based accounting system would explain the objectives using some examples rather than detailed procedures. "The research literature suggests several broad conclusions about the incremental effects of additional rules on a standard's ability to communicate clearly and constrain aggressive reporting. First, a key to accurate communication is striking the right balance between providing enough rules to communicate clearly and not so many rules that practitioners are overwhelmed. Increasing the extent to which the various rules in a standard are related to each other should help avoid overwhelming practitioners with complexity" (Nelson, 2003) .

Perhaps the chief advantage of principles-based accounting rests in its expansive guidelines that can be applied to numerous situations. Broad principles stay away from the drawbacks linked with specific requirements that permit contracts to be written specifically to manipulate their intent. Providing broad guidelines may improve the representational faithfulness of financial statements. In addition, principles-based accounting standards allow accountants to apply professional judgment in assessing the substance of a transaction. This approach is substantially different from the conventional approach common in rules-based accounting standards. Another advantage of a principles-based system is that it would result in simpler standards comprising less pages as compared to pages and pages of rule based standards.