Rules vs. Principles Based Accounting Standards in the United States
Elsie M. Powell
Liberty University Online ACCT 301-D01
December 7, 2014

Rules vs. Principles Based Accounting Standards The United States of America is under a great decisional debate, should the United States adopt a more principles-based accounting standard or stay with the more rules-based standard that is currently used. The two standards offer differing views on how a company should approach their accounting needs. The United States continues its discussion about whether to change from the U.S. Generally Accepted Accounting Principles (U.S. GAAP) to the International Financial Reporting Standards (IFRS) and with the recent accounting scandals, the debate has become a heated topic. The key issues of the argument relates to a variety of moral issues and cost of transitioning from GAAP to IFRS. The question remains, should the United States replace the current rules-based accounting standards with a more relaxed principles based accounting standard. The Financial Accounting Standards Board (FASB) is a “designated organization in the private sector for establishing standards of financial accounting that govern the preparation of financial reports by nongovernmental entities. Those standards are officially recognized as authoritative by the Securities and Exchange Commission (SEC) (Financial Reporting Release No. 1, Section 101, and reaffirmed in its April 2003 Policy Statement) and the American Institute of Certified Public Accountants (Rule 203, Rules of Professional Conduct, as amended May 1973 and May 1979). Such standards are important to the efficient functioning of the economy because decisions about the allocation of resources rely heavily on credible, concise, and understandable financial information.” (FACTS ABOUT FASB, n.d., para. 1) FASB’s main function is to develop and