Principles-based and a rules-based framework

NotesCBEMock

Principles-based Framework

  • Principles which reflect the initial objectives of financial statements are set

  • All accounting standards then follow these principles

  • Therefore, a principles-based framework is based upon a conceptual framework

Rules-based Framework

  • Rules are laid out as events arise, designed to cover all eventualities

  • Therefore, accounting standards are a set of rules which companies must follow

NotesCBEMock