US in fear of principles-based accounting
A move away from rules-based accounting in the US is being hampered by an aversion to making more judgements by companies and auditors, according to the head of the accounting standard setter.
Despite a call from the Securities and Exchange Commission for a more principles-based approach to work on accounts, Bob Herz, chairman of the Financial Accounting Standards Board, believes auditors and companies are frozen by fear of challenges from regulators, lawyers and the media.
‘There seems to be a reluctance to exercise more judgement,’ Herz told the Financial Times. ‘In fact, if anything people are requesting more rules because they want clarity and defences against being second guessed.’