Abstract
Debacle of Enron and the other large accounting scandals in the world placed the accounting professionals in a verge of dilemma with a debate of Rule Based Accounting Standards vs. Principles Based Accounting Standards. The challenge was constituted by the Sarbanes–Oxley Act of 2002 designating the Security Exchange Commission (SEC) to submit a study report to the US congress on the feasibility of steering towards the Principle Based Accounting Standards from Rule Based Accounting Standards. The purpose of the study was to become aware of whether the Sri Lanka Accounting Standards (SLAS) contained the characteristics of Rule Based Accounting Standards and to assess the appropriateness of the provisions of SLAS which include such characteristics in terms of the definition of Principle Based Accounting Standards. Based on the articulated definitions of Rule Based Accounting Standards and Principle Based Accounting Standards, selected SLAS were examined critically with a holistic perspective.The study revealed that all the examined SLAS contained a substantial amount of Specific Criteria, Examples, Exceptions, Subsequent Precedents, Implementation Guidelines and Determinate Rules. In Addition, the study ascertained that they also contained a considerable number of Bright-line Thresholds and a few Scope Restrictions.The study concluded that all the characteristics of Rule Based Accounting Standards included in the SLAS should be eliminated to the extent possible, leaving an ample scope for the exercise of professional judgment. And the study recommended embodying the provisions to the SLAS which represent the reality with true and fair reflection of the economic substance of Objective Based Accounting Standard. Keywords : Principle Based Accounting Standards, Rule Based Accounting Standards, Sri Lanka Accounting Standards For full paper: fmscresearch@sjp.ac.lk
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