It may be helpful to start with a brief explanation of objectives-oriented standards, as was laid out in the 2003 Staff Report*:

[T]he optimal principles-based accounting standard involves a concise statement of substantive accounting principle where the accounting objective has been incorporated as an integral part of the standard and where few, if any, exceptions or internal inconsistencies are included in the standard. Further, such a standard should provide an appropriate amount of implementation guidance given the nature of the class of transactions or events and should be devoid of bright-line tests. Finally, such a standard should be consistent with, and derive from, a coherent conceptual framework of financial reporting.

 In fact, this explanation may help shed some light on why many might assert that U.S. standards are not as principles-based as those of the IASB. Personally I do not necessarily agree that accounting standards in the U.S. lack underlying objectives or principles. Rather, in some instances, exceptions, bright-lines and a volume of application guidance may appear to obscure the objective or principle underpinning the standard (or to state it another way the reporting of the economic substance of the business transaction). Take Statement 133 dealing with derivatives and hedging transactions (used as an example by many to criticize that U.S. standards are not based upon principles) as an example. I believe that Statement 133 at its core is based upon sound principles. The objectives of the standard are laid out in a few paragraphs and seem fairly straight forward (derivatives represent assets or liabilities, such assets and liabilities should be recorded at fair value, changes in fair value should be recorded in income and special accounting for hedging should be provided only for qualifying items). However, the standard is accompanied by 800 plus pages of implementation type guidance providing a host of well meaning scope exceptions, bright-lines, and rules. It is the volume of guidance, that in many cases makes it more difficult, rather than easier, to apply the standard. Accordingly, it is not hard to understand why someone could lose sight of the bigger picture. As I will mention again later, the idea is for there to be an appropriate amount of implementation guidance to help in applying the objective, but not so much additional guidance that the objective gets lost.

*Study Pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002 on the Adoption by the United States Financial Reporting System of a Principles-Based Accounting System, released July 25, 2003.

In February 2006, the Ministry of Finance released the Basic Accounting Standards for Business Enterprises (ASBE), consisting of 38 standards to be applied to all listed Chinese companies. The aim of this initiative is to facilitate further development of a market-like economy in China, raise the quality of financial information, and boost investor confidence. The new ASBE standards are intended to bring Chinese accounting practices largely in line with the IFRS. Although there are concerns that these new Chinese standards do not completely replicate the IFRS as intended by the international accounting standard setters, they have incorporated many of its key principles....

A significant concern of both foreign and domestic investors in Chinese companies relates to the adequacy and transparency of disclosures. In view of this, the government has moved recently to strengthen disclosure rules. Moving forward, investors will have more information available in quarterly and annual reports.

The Commission welcomes the various steps already taken by CESR (Committee of European Securities Regulators) to ensure an EU wide approach [to consistent implementation of IFRSs]. The Commission has also set up an informal 'Roundtable' to assist. This Roundtable is a forum where all interested parties can discuss practical application problems relating to IFRS. Issues of widespread concern can, if necessary, be referred to IFRIC for interpretation. However, it is clear that we do not want an EU body providing interpretations and guidance. This runs counter to the whole philosophy of worldwide principles-based standards....

My firm view is that the principles-based nature of IFRS must be maintained. The convergence agenda must not be used to introduce US rules-based GAAP by the back door. In order to try and ensure a balanced evolution, we are insisting on proper consultation on the convergence programme and projects between the IASB and the FASB. We have made it clear that joint convergence projects must be subject to full due process with all stakeholders.