Principles-based or rules-based accounting standards?: benefits, costs, opportunities and risks
DOI:
https://doi.org/10.11606/rco.v4i9.34765Keywords:
FASB, US-GAAP and convergence of accounting standarsAbstract
The convergence process of accounting standards and the evidence that the financial fraud cases in the beginning of the century in the USA were encouraged by the "rules-based" orientation (US-GAAP model) produced a great debate over the appropriateness to adopt, alternatively, the principles-based accounting standards. Brazilian law and the statements published by the Accounting Pronouncements Committee (CPC) required the progressive convergence of Brazilian GAAP with IFRS which are considered to be principles-based accounting. However, we have no enough evidence of academic studies over the advantages and disadvantages of accounting standards based on rules or principles. The main purpose of this paper is to provide an insight on the benefits, costs, opportunities and risks arising from the adoption of accounting standards based on either principles or rules. According to the research, each model has strengths and weaknesses, which must be adequately evaluated before a decision by regulatory bodies, accountants, professionals and users. As far as this research has pursued, a principles-model has been prevail in this debate, although some studies also identify the need of an intermediate reference, defined as "based on goals".Downloads
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