Which accounting framework allows more principles-based judgement? (A) US GAAP (B) IND AS (C) IFRS (D) None
Answer (1)
In the realm of accounting frameworks, there are different systems used by various countries and organizations. Understanding each one will help clarify which allows more principles-based judgment.
US GAAP (Generally Accepted Accounting Principles) is primarily used in the United States. It is known for being more rule-based, providing detailed rules and guidelines for financial reporting.
IND AS (Indian Accounting Standards) is largely based on IFRS (International Financial Reporting Standards) but adapted for India’s context. However, it may lean towards IFRS in its principles-based approach.
IFRS (International Financial Reporting Standards) is used widely outside of the United States and is known for being principles-based. It allows for professional judgment in financial reporting and is considered more flexible in the interpretation of accounting policies.
For the given multiple-choice question, the correct answer is:
(C) IFRS
The reason is that IFRS provides a framework where the guiding principles offer more room for interpretation and require the exercise of professional judgment in the preparation of financial statements compared to the more detailed and prescriptive rules of US GAAP. This flexibility can be especially useful in the global market, as companies may have unique transactions and situations that principles under IFRS can more readily accommodate.
