A study by the SEC has recommended that a principles-based approach should be adopted when dealing with accounting standards. The study, prepared by the office of the chief accountant, relates to the Sarbanes-Oxley Act of 2002.
The principles based approach means the accounting standard must have a number of facets. It must state the accounting objective of the standard and must provide enough detail for the standard to be consistently applied with as little exception as possible.
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