1. Should the University adopt a “rules based” approach or a “principles approach” to students who are late submitting coursework?

Outline the advantages and disadvantages of each approach.

Advantages of principles approach * The primary benefit of principles-based accounting rests in its broad guidelines that can be applied to numerous situations instead of detailed rules. * Simpler standards, easier to understand and apply. * The use of principles-based accounting standards may provide accounting statements that more accurately reflect a company’s actual performance as it reduces manipulation of the rules.

Disvantages of principles approach * The problem with principles-based guidelines is that lack of guidelines can produce unreliable and inconsistent information that makes it difficult to compare one organization to another. * Difficult to compare one entity to another.
Advantages of rules based approach * Clarity in application * Reduction in risk * Strict rules that give clear guidelines and more accuracy * Requirements are set out in detail and compliance with the rules can be more easily monitored and enforced.

Disavantanges of rules based approach * Can cause unnecessary complications * Confusion * Encourages financial engineering

2. Rules-based accounting adds unnecessary complexity, encourages financial engineering and does not necessarily lead to a ‘true and fair view’ or a ‘fair presentation’. Discuss

Rules-based accounting has not worked in practice. The present U.S. system does not produce accurate reporting. This has made standards longer and complicated and has led to arbitrary criteria for accounting treatments that allows companies to structure transactions to circumvent unfavorable reporting .

Lease accounting contains hundreds of pages of