'principles-based' standards

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Explain how 'rules-based' accounting standards differ from 'principles-based' standards. How might fundamentally changing accounting standards from 'bright-line' rules to principle-based standards help prevent another Enron-like fiasco in the future? Are there dangers in removing bright-line rules? What difficulties might be associated with such a change?

Rules based accounting standards differ from principles-based standards. Rules-based standards means the firms must follow the detailed ruled when they prepare accounts and financial statements. Having a fixed set of rules means the accounts can be very accurate and can be compared across companies. On the other ...