In a principles-based standard-setting system (such as Canadian GAAP), compared to a rules-based approach (such as U.S. GAAP),
A) which is more prescriptive, it may be easier to defend how to account for a particular item.
B) there is a rule for every situation.
C) accountants either apply specific standards based on the conceptual framework, or, professional judgement consistent with the framework.
D) it is expected that professional accountants might encounter situations where they are unable to apply the principles appropriately.

Question

Quizplus · Accepted Answer

In a principles-based standard-setting system, accountants either apply specific standards based on the conceptual framework, or use professional judgement consistent with the framework. It is not a rule for every situation, and there may be situations when professional judgement must be applied. While the principles-based system may be less prescriptive than a rules-based approach, it encourages accountants to apply principles and use their judgement, which can lead to more accurate and relevant financial reporting.

In a Principles-Based Standard-Setting System (Such as Canadian GAAP), Compared