The SEC described the standard characteristics of "rule-oriented" in its "Research on Adopting Principle-based Accounting System in American Financial Reporting System":
(1) It contains many "bright boundary" tests. For example, the relevant accounting standards distinguish between financial leasing and operating leasing, and set more numerical or percentage boundaries for the choice of equity combination method and purchase method. Some transactions with the same economic substance but only slightly different related data or percentages may belong to both sides of these boundaries and have completely different accounting reflections. (2) It contains many exceptions, internal inconsistencies and too many detailed descriptions.
The principle of "principle orientation" is the other extreme. It has little or no specific explanation. It requires information providers to use professional judgments, but it does not provide enough basis to standardize these judgments.
It is difficult to distinguish from the concept, so let's base it on the facts. After Enron went bankrupt, the CEO of Andersen lashed out at the traditional financial reporting model, saying that the financial reporting model, which focused on historical information and single earnings per share, was outdated and could not adapt to the new business model, complex financial structure and related business risks. At the first time when Enron filed for bankruptcy, he published his famous reflection: rethinking our accounting standards. Improve our financial reporting model, reform our regulatory environment, and improve the accounting responsibility in our capital system. Among them, the most famous one is that "form is more important than substance" put forward in "Rethinking China's Accounting Standards", which triggered a big discussion on accounting standards from "rule-oriented" to "principle-oriented".
The SEC believes that in the game competition between American fraud and system, the system is backward. Therefore, the Sarbanes-orkney Act was promulgated in 2002, and the SEC denied the "rule-oriented" of American accounting standards in the study of adopting the principle-based accounting system for American financial reporting system.
From this point of view, the "principle orientation" of accounting standards seems to be the new favorite. But look at the following facts. On the afternoon of June 29th, 2003, David, Chairman of the International Accounting Standards Board, accompanied by Feng Shuping, Assistant Minister of Finance, gave a report on "International Accounting Standards: 2005 and Its Convergence" at Shanghai National Accounting Institute. At the report meeting, Sun Zheng, vice president of Shanghai University of Finance and Economics, and Li Ruoshan, a professor at Fudan University, both questioned the universal applicability of international accounting standards. Professor Li Ruoshan compares rule-oriented accounting standards to clothes, while principle-oriented accounting standards to clothes. He believes that rule-oriented accounting standards are made for accountants to wear clothes, which have been divided into "big", "medium" and "small". The "principle-oriented" accounting standards only provide "cloth" and require accountants to be "tailors" themselves, which may lead to disharmony. Small people wear big clothes. Professor Li hinted that attacking "principle-oriented" accounting standards may lead to accounting confusion.
So can it be understood that, compared with China, "principle-oriented" accounting standards are not favored!
At present, the quality of accountants is not high, which has been recognized by the industry. Therefore, we have reason to continue to maintain our preference for accounting system, and it is not surprising that accounting standards and accounting system are parallel. Under the irreversible situation of accounting internationalization, the internationalization of accounting standards in China has become the mainstream.
But we are still worried about its "principle orientation"! Tang, the managing partner of Ernst & Young Dahua Certified Public Accountants, believes that it may be premature to put forward the principle-oriented principle immediately in China (Tang, 2004). Feng Shuping, Assistant Minister of Finance, actively suggested: "In order to better coordinate the accounting standards of developing countries and countries with economies in transition with international accounting standards. I hope that the IASB can take more account of the situation of developing countries and countries with economies in transition when formulating and revising international accounting standards "(Feng Shuping, 2003). What happened? It is the problem that our accountants' professional judgment ability is not high and accounting supervision is weakened. Imagine that under the strict accounting system, it is not surprising that accounting information is distorted. Then, isn't it just to give counterfeiters more "profit space" to establish accounting standards under "principle orientation"? The "goal orientation" proposed by the United States now provides theoretical support and examples for us to adhere to the long-term coexistence of accounting system and accounting standards!
This is because the goal-oriented standards endow the management with the responsibility of accurately reporting the economic substance of transactions and events in financial statements, and clearly define the reporting methods of the economic substance of transactions and events with the accounting objectives and principles contained in the standards, and at the same time provide appropriate guidance in quantity and detail, which provides a detailed framework for the management and auditors to implement the standards. On the one hand, goal-oriented standards are superior to rule-oriented standards, because it clearly stipulates the accounting objectives and related principles to be achieved by the standards, with no or few exceptions. It avoids or reduces the chance of obtaining the required accounting results through financial design, and provides sufficient guidance and restrictions for statement preparers and auditors to apply the standards.
Target-oriented accounting standards are to our taste. Feng Shuping believes: "The goal-oriented principle is neither a rule-oriented principle nor a principle-oriented principle, but a goal-oriented. We should study this issue with the theories of economics and game theory. At the same time through heavy penalties (sarbanes. Oxley Act), increase the cost of fraud, encourage standard implementers not to cheat, and make the interests and goals of report providers and users consistent with severe punishment {Feng Shuping, 2004). The advantages are obvious: it can produce fairer and truer accounting information, which plays a positive role in improving the authenticity of financial statement information in China. Of course we love you!
The problem is that goal-oriented standards are not tailored for China (Feng Shuping thinks: "Goal-oriented standards, also known as principle-oriented standards, should be the future development direction of American standards". As to whether it is the development direction of China accounting standards, we have to consider the influence of target standards. As pointed out in the research report of SEC, the key of goal-oriented accounting standards lies in strict implementation, because the goal-oriented system puts the responsibility on the shoulders of management authorities and accountants, and its role still depends on strict implementation. Effective implementation increases the cost and risk of dishonest management authorities, who try to transmit false information to the market through fraudulent manipulation of financial information. In this way, the side effects of object-oriented standards are obvious:
The choice space of enterprise accounting is expanded, which is convenient for accounting manipulation; The audit risk of certified public accountants has increased; Supervision is more difficult. . . . .
Goal-oriented principle, it's hard to say I love you!
Professor Li Ruoshan compared the rule-oriented accounting standards to "clothes" and the principle-oriented accounting standards to "cloth". If the metaphor is appropriate, the goal-oriented accounting standard will be a gorgeous evening dress! Clothes naturally look good. If the girl is still a little girl, or she is not well developed and lacks the graceful curve of women, how can she set off the fullness of the dress? China's accounting standards are still a Cinderella. Of course, it will become Snow White sooner or later. At that time, wearing an evening dress with "goal-oriented" accounting standards will naturally suit you!