Rules-based versus principles-based accounting standards : the perspectives of Maltese accountants

Abstract

With the IFRS-US GAAP convergence process being a predominant contemporary issue within the profession, and as the Companies Act 1995 imposes a mandatory requirement on accounting practitioners to fully comply with IFRSs, the main objective of this study was to ascertain the implications this convergence process could have on the local profession and professionals. Thus, it was necessary to determine the kind of accounting standard Maltese accountants' prefer to work with and also which they consider to suits best to local conditions, whether rules or else principles-based accounting standards. This study found that the Maltese accountants in general prefer principles-based accounting standards both as the standards to work with but also as the standards which best suits to local conditions. However, on an individual level, the Maltese accountants' opinion relative to each individual issue relevant to the debate is not consistent with their overall opinion. This has led to the conclusion that locally, the professionals have not yet formed a definite opinion on the subject and the primary reason accounting for this was found to be their lack of awareness and knowledge. The legislators should certainly reconsider the practicality of the Companies Act mandatory requirement, in particular when considering the small size of most of the local companies. Reassessments and enhancements to the existing CPE system are also recommended. However, it is clearly evident that there is also a lack on the part of the local accountants who should more seriously fulfil their responsibility as purported in the code of ethics to maintain their professional competence through continuing awareness of developments in the accountancy profession.