“Our mission is to develop IFRS that brings transparency, accountability and efficiency to financial markets around the world. As stated in its Mission Statement, the IASB is committed to developing a single set of high-quality, global accounting Standards that provide high-quality, transparent and comparable information in general-purpose financial statements (IASB, 2015). PBS derive from and are consistent with a framework, formally referred to as the Conceptual Framework for Financial Reporting (subsequently, Conceptual Framework, 2018 ) issued by the International Accounting Standards Board (IASB), the standard-setting body of the IFRS Foundation that was established in 2001 as an independent, public interest organisation (IFRS, 2018 ). The principles-based standards, unlike the RBS, can be adopted and implemented worldwide, in a variety of legal and cultural contexts, by companies that vary considerably in size, ownership structure, capital structure, political jurisdictions, and financial reporting sophistication (Schipper, 2005). The rule-based standards require strict compliance with specific accounting rules and detailed implementation guidance (Nelson, 2003) hence they (the RBS) may not be readily suitable for worldwide application. Principles-based standards (PBS) are epitomised by the International Financial Reporting Standards (IFRS) and the generally accepted accounting principles (GAAP) by the USA represent the rules-based standards (RBS). Relevant literature identifies two main types of accounting standards: principles- and rule-based standards (Agoglia et al., 2011 Cohen et al., 2011 Peytcheva & Wright, 2011 Jamal & Tan, 2010 Segovia et al., 2009). With the globalisation and internationalisation of financial and capital markets, there has been a need and call for the adoption of a single financial reporting language, i.e., a set of accounting standards, for use worldwide. The flexibilities inherently pervasive in PBS can constitute the slippery slope through which fraudulent actions and reporting could be perpetuated. This chapter concluded that while flexibility embedded in PBS is inevitable and necessary in financial reporting, its unintended consequence is to facilitate aggressive optimistic or pessimistic (as opposed to neutral) reporting practices. By invoking these flexibilities, entities can manipulate financial numbers and perpetuate improper acts that significantly impact the fairness of published general-purpose financial statements particularly the financial position and financial performance. The use of PBS necessarily leaves much room for extensive use of the ‘ingredients or elements of accounting flexibility' including, estimates, multiple measurement types, and professional judgments to select accounting policies and make decisions around ‘materiality'. If you have a question contact us at (866) 354-1800.AbstractPrinciples-based accounting standards (PBS) are imbued with high levels of flexibility that enable any company to apply accounting policies that suit its unique circumstances. Please check with a University Enrollment Representative. While widely available, not all programs are available to residents of all states. It is the student’s responsibility to confirm whether or not credits earned at University of Phoenix will be accepted by another institution of the student’s choice. Transferability of credit is at the discretion of the receiving institution. These courses are not eligible for federal financial aid. Continuing teacher education courses are not eligible to apply to degree programs at University of Phoenix. If you plan to use courses for certification or endorsement, please check with your own state agency and your school district for applicability. Although our continuing teacher education courses are accepted by some state agencies in the United States toward teacher certifications and endorsements, this may not be the case in all states or foreign jurisdictions. The University of Phoenix reserves the right to modify courses. If you have a question contact us at (866) 354-1800.
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