Guidence

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Advanced Financial Reporting and Theory 2010/11

Assignment Requirements:

Critically assess how the use of principles-based standards will aid effective standard-setting by the IASB, and aid decision-usefulness for stakeholders. You should develop your arguments in the context of appropriate accounting theory.

We do not require a description of the contents of any individual accounting standard, but a critical analysis in general terms of whether principles-based accounting helps or hinders the decision-making process for users.

Assignment Guidance Notes

There have been a few enquiries about the issues covered in the assignment, so I thought this might help clarify matters.

The question considers a number of issues around the rules v principles debate.
You can approach it from the point of view of the US, or the UK (which is IASB based), or compare both. You could also give me a generalised theoretical argument, with examples, about the rules v principles debate.

What I really want is an exploration of the arguments of rules and principles, rather than a conclusion either way as to whether we are moving towards or away from a rule or principle-based approach.

The US definitely has a rule-based approach at the moment, but has tasked a group to consider a possible move to principles-based standards. The current convergence project between the FASB and the IASB is the result of this.

The UK (via the IASB) is now moving back to a principles-based approach, after a spell at the beginning of the ASB's period of office where rules were definitely in (FRS1, for example).

From the point of view of the link to accounting theory, you need to consider the perspective of the standard-setters, their worldview etc – the Kolb diagrams will help with this- and consider how which model is (or should be) being applied – is it normative, positive etc?

And finally if you wish to consider the true and fair issue, there comes a point when rules... [continues]

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