Question

Accounting principles are rigid in nature

Answer 1

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⎇ The argument over whether accounting standards should follow rules or principles is often seen as a divide between the US and the UK. American business culture is characterised as lawyer-dominated, with accountants seeking the comfort zone of rules to stave off possible action from investors. The UK culture, meanwhile, is seen as judgment-based, with intellect winning the battle against a bean-counting mentality. Neither is wholly true. But a view is increasingly expressed that now is the time to sort out the “principles versus rules” debate. The Institute of Chartered Accountants of Scotland (Icas) has just published a report that examines the issues and points to future action. The chairman of the group that produced it is Hugh Shields, head of financial reporting at Barclays Capital. “We are at a critical point in the development of accounting,” he says. “It is a tipping point.”