Sample Essay

Some disadvantages of rule based approach to setting standards are described below

  • The setting of standards under the rule based approach is too cumbersome.
  • It is quite exhaustive to implement standards set under this approach as they tend to reflect every minute detail in a transaction.
  • Accountants consider rules presented in these standards as complex and hard to apply as various aspects of a standard may be incomprehensible.

  • It is quite difficult and time consuming to implement standards presented dealing with contemporary accounting issues as extensive and detailed interpretation and guidance is required for various sections and aspects of these standards.
  • The inflexibility of these standards may sometimes cause financial statements to be distorted as an accountant would not be able to apply personal judgment based on a specific situation in a company or industry (HSBC Holdings plc 2003).

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