Accounting standards may take the form of general principles, relying on interpretation and judgment by financial statement preparer before they can be implemented.

1)  Advantage：

    Very flexible with regard to new and changing products and environments

    broad guidelines can be practical for a variety of circumstances.

2)  Disadvantage:

To the extent that they rely on individual judgment to interpret and implement the standards, there’s danger that they can be used to manipulate financial results.

Rule-based

Accounting standards may take the form of a series of rules, limiting the flexibility and use of judgment allowed in their implementation.

1)  Advantages:

    Increase accuracy and reduce ambiguity that can trigger aggressive reporting decision by management.

2)  Disadvantage:

    Lack of flexibility with regard to changing conditions and new products, hence requiring almost continual maintenance at times.