Principles not rules

The Institute of Chartered Accountants of Scotland is pleased to announce the publication of its report Principles Not Rules: A Question of Judgement - PDF [377 KB].

The report is the culmination of an ICAS working group project which was established to help find a resolution to the Principles versus Rules debate within international accounting standard setting. The report is available to download. 

The report concludes that a principles-based approach to standard setting is not only desirable but essential, to serve the needs of business and the public interest and that the global convergence of accounting standards cannot be achieved by a detailed rules-driven approach.

The working group believes that principles-based standard setting will require: a change in the global profession, with preparers and auditors assuming more responsibility for their judgements; the documentation of key judgements in the financial statements; and regulators accepting a range of judgement-based outcomes. The working group believes that rules-based accounting adds unnecessary complexity, encourages financial engineering and does not necessarily lead to a true and fair view or fair presentation.

As part of the Principles versus Rules project two financial instrument workshops were held with two different groups of financial experts:

  • To explore whether, or to what extent, the current version of IAS 39 could be distilled into higher-level principles; and
  • To explore what an alternative model for financial instruments might look like if started from scratch.

A copy of the report Principle Not Rules: Report on Proceedings of Financial Instrument Workshops - PDF [351 KB] is available to download.

The project also included a review of the professional, academic and regulatory literature on the Principles versus Rules debate in international accounting standard setting.  This review: Principles-Based or Rules-Based Accounting Standards? A Question of Judgement - PDF [1,270 KB] (edited by Professor Pauline Weetman) is available to download.


  • Corporate and financial reporting

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