What is the argument for use of brightline tests

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The SEC submitted to Congress its Study Pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002 on the Adoption by the United States Financial Reporting System of a Principles-Based Accounting System in July 2003. A year later, FASB issued its reply, FASB Response to the SEC Study on the Adoption of a Principles-Based Accounting System (July 2004). The SEC recommended that FASB when setting standards "avoid the use of percentage tests (‘bright-lines') that allow financial engineers to achieve technical compliance with the standard while evading the intent of the standard."

Identify where bright-lines currently exist in the statement of financial position, areas in which we might expect revisions in the future. What is the argument for use of brightline tests?

Reference no: EM13519274

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