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Possible US move to a principles-based approach to standards

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07 Oct 2002

The US Financial Accounting Standards Board has agreed to invite comment on a proposal for a principles-based approach to US accounting standard setting.

The proposal addresses concerns about the increase in the level of detail and complexity in accounting standards. Principles-based standards would focus on establishing general principles derived from the conceptual framework, reflecting the recognition, measurement, and reporting requirements for the transactions covered by the standards. The standards would provide few, if any, exceptions to the general principles and would limit additional guidance for applying the general principles to typical transactions, encouraging professional judgment in applying the general principles to other transactions specific to an entity or industry. The FASB will publish the proposal with a 75-day comment period. The FASB also plans to hold a public roundtable discussion with respondents to the proposal on 16 December 2002.

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