Principles-Based Standards and the Determination of Control for
Consolidation  By Leslie Kivi, Pamela Smith, and Colette Wagner
E-mail Story Print Story A growing number of stakeholders have
endorsed replacing the current rules-based approach to setting
accounting standards with principles-based standards. During his
time as SEC chief accountant, Robert K. Herdman captured
concerns with recent standard setting before a congressional
subcommittee: “[E]xtremely detailed rules that attempt to
contemplate virtually every application of the standard …
encourage a check-the-box mentality to financial reporting that
eliminates judgments.” The Sarbanes-Oxley Act [section 108(d)]
required the SEC to conduct a study and report to Congress on
the feasibility of principles-based standards. The SEC
recommended a transition to a form of principles-based
standards. The SEC, in turn, requested that FASB solicit input
from its constituencies on the merits of a principles-based
system. The comment letters to FASB were mixed b