In a 12/12/07 editorial ("Closing the GAAP"), the WSJ addressed the possible move from GAAP to IFRS, pointing out that GAAP is more rules-based and IFRS is more principles-based. There is much to say, and much has been said, about rules vs. principles in accounting. I want to underscore just one thing: with principles comes more discretion and with more discretion comes a greater chance that issuers, their officers, their accountants/auditors, etc. will be found to have "gotten it wrong," particularly in hindsight. Accordingly, doesn't any discussion of rules vs. principles (whether in the context of a shift from GAAP to IFRS or otherwise) have to include a broader discussion of securities enforcement and litigation?
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