“The Financial Accounting Standards Board, which is the primary body that issues accounting rules in the United States, is moving to simplify its rules and to rein in other rule makers,” writes Floyd Norris in today’s New York Times.

“Such a move, if completed, would probably leave auditors with more discretion than ever in determining if financial statements conform to generally accepted accounting principles. And, as the board acknowledged yesterday, there is a risk that different auditors faced with the same question might come up with different answers.”

“The board, reacting in part to anger generated by the collapse of Enron, asked for public comment yesterday on adopting a principles-based approach that presumably would avoid the detailed rules, sometimes with exceptions and exceptions to the exceptions, that have been present in some American rules.”

“Much of the debate on that question so far has been based on generalities and assertions, with those who favor principles over rules having the better of the rhetorical debate. Congress has ordered the Securities and Exchange Commission to study the issue, and Harvey L. Pitt, the S.E.C. chairman, has been a vocal advocate of change.”

“In a speech last spring cited by the board yesterday, Mr. Pitt complained that detailed rules have slowed the board’s action. ‘Additionally, because the standards are developed based on rules, and not broad principles, they are insufficiently flexible to accommodate future developments in the marketplace,’ Mr. Pitt said. ‘This has resulted in accounting for unanticipated transactions that is less transparent and less consistent with basic underlying principles than should apply.’ “

“The International Accounting Standards Board, which is developing rules that many countries will accept, has also said it is more inclined to issue broad standards. But the distinction is not always clear: American rules do enunciate standards and international rules do set forth some details.”

” ‘The international people are moving to more rules underneath principles,’ said Robert H. Herz, the chairman of the American board, in an interview yesterday, ‘and we’ll move to more clearly indicating principles and maybe not trying to provide a rule for every possible situation.’ “

“Currently, while the F.A.S.B. is the main American rule setter, there are two other groups that do so. The Emerging Issues Task Force, which was created by the board, is supposed to rule quickly on new issues. And the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issues rules that are normally aimed at one industry.”