The Nature of Accounting Regulation (Routledge Studies in Accounting)

Accounting standards are an essential element in the regulation of current financial reporting. Standard setters promulgate such standards, and companies and professional accountants follow them in preparing financial reports. Although much has been written about the history of standard setting, the conceptual underpinnings of accounting standards, the process of setting them, and whether such standards should be ‘rules-based’ or ‘principles-based,’ there has been little written about the kind of thing they are. This book examines the nature of accounting standards and the very idea of a rule, of implementation guidance, and of the objectives that are included in them. It enables the reader to grasp the reasons for promulgating standards, the role of the conceptual framework in setting standards in an institutional context, and the kind of rules that are useful in regulating financial reporting. The insights provided by this examination are used to throw light on the distinction between ‘principles-based’ and ‘rules-based’ standards and on the nature of ‘good’ accounting standards.' Accounting standards are an essential element in the regulation of current financial reporting. Standard setters promulgate standards, and companies and professional accountants follow them, in preparing financial reports. Although much has been written about the history of standard setting, the conceptual underpinnings of accounting standards, the process of setting them, and the question of whether such standards should be 'rules-based' or 'principles-based' has been ignored until now. This book examines the very idea of a 'rule,' of implementation guidance, and of the objectives of the standards that are included in such guidance Cover 1 Title 4 Copyright 5 Contents 6 1 Introduction 8 2 The Nature of Modern Accounting Practice 13 3 The Role of Theory and of Conceptual Frameworks in Standard Setting 31 4 Kinds of Rules in Accounting Standards 64 5 The Nature and Role of Explanatory Guidance in Accounting Standards 83 6 The Nature and Role of Objectives in Accounting Standards 104 7 The Anatomy of Accounting Standards 114 8 Implications for Standard Setters 120 References 134 Index 140