Why Does the IASB Believe That a Principles-Based Approach to Standard

question 53

Multiple Choice

Why does the IASB believe that a principles-based approach to standard setting is superior to a rules-based approach?

• A) Detailed guidance or rules encourage accountants to look for ways around the rules rather than trying to provide useful information.
• B) Principles-based standard setting is less costly to undertake than rules-based standard formulation.
• C) It is desirable to have all corporations in all countries using the same accounting practice.
• D) A conceptual framework for standard setting has demonstrated to encourage the greatest economic development.

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Definitions:

Capital Expenditure

Capital expenditure refers to the funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.

Company Car

A vehicle provided by an employer for the business and sometimes personal use of an employee.

Engine

A machine designed to convert energy into useful mechanical motion.

Factory

A building or complex where goods are manufactured or assembled primarily by machines and workers.