In a rules-based approach (such as U.S. GAAP), compared to a principles-based approach (such as Canadian GAAP),
A) the body of knowledge is smaller.
B) the importance of communicating the best information to users is emphasized.
C) since it is more prescriptive, it may be easier to defend how to account for a particular item.
D) companies frequently do not interpret the rules literally.

Question

Quizplus · Accepted Answer

In a rules-based approach, there are specific guidelines and rules that must be followed, making it easier to defend how to account for a particular item. Canadian GAAP follows a principles-based approach, which focuses on the underlying principles and concepts rather than specific rules, making it more subjective and open to interpretation. Therefore, the importance of communicating the best information to users is emphasized in both approaches, and companies frequently do not interpret the rules literally in either approach. However, the body of knowledge in a rules-based approach may not necessarily be smaller than in a principles-based approach.

In a Rules-Based Approach (Such as U