RULES-BASED ACCOUNTING Definition

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RULES-BASED ACCOUNTING is where specific accounting rules are set forth and must be followed in order to comply with GAAP. For example, if an airline company leases a jet, the company must follow specific GAAP rules to determine if the transaction is an operating lease or a capital lease. The main difference being that a capital lease would have to appear on the balance sheet of the airline. Therefore, two virtually identical lease transactions could be classified entirely differently based upon how they follow the GAAP leasing rules. See also PRINCIPLES-BASED ACCOUNTING.

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TRANSACTION DATE is the date on which an activity occurs.

ORDERLY LIQUIDATION VALUE is the liquidation value at which the asset or assets are sold over a reasonable period of time to maximize proceeds received.

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