CPAs' and CFOs' Perceptions Regarding Principles-Based Versus Rules-Based Accounting Standards

John E. McEnroe, DBA, CPA, and Mark Sullivan, PhD, CPA

As of today, non-U.S. companies using International Financial Reporting Standards (IFRS) are permitted to list their securities on u. S. stock exchanges without reconciling those statements to U.S. GAAP. The fact that this rule has not been extended to u.S. issuers is somewhat controversial, especially given that iFRS are considered by many to be more “principles based” in contrast to the more “rules-based” U.S. GAAP. The discussion below begins with a review of the more significant actions of the SEC over the past several years regarding the adoption, convergence, and the more recent “condorsement” of iFRS. The perceptions of auditors and chief financial officers (CFO) regarding certain attributes of principles- versus rules-based accounting standards are then considered. The authors' results should be of interest to many parties involved in the U.S. financial reporting process and especially relevant to the SEc as it deliberates on the potential use of iFRS by U.S. firms.