With respect to accounting standards, there is a debate concerning the extent to which there should be “bright lines”, restricting judgement, and the extent to which professional judgement should largely dominate, within the boundaries of broader principles. “Bright lines” is a term used with the highway analogy: driving at night, one needs the bright lines in order to know how close one is to driving off the road and into the ditch. In accounting, the term refers to accounting standards involving a particular explicitness as to what can and cannot be done.
One problem with the exercise of professional judgement in accounting is the context in which it may be exercised. Such context includes situations where a professional accountant is being pressured by management as to a certain desired accounting representation. The professional accountant is not entirely comfortable with management’s position and, in terms of professional ethics, is typically required to approach the matter with a degree of objectivity. Any sense of objectivity may become compromised through the employment relationship. The accountant may be uncomfortable with management’s desired accounting representations–such as in relation to income recognition issues–but is reluctant to directly confront management or to decline to address management’s wishes, based on concerns that the accountant’s employment relationship may be jeopardized. So, with reluctance, the accountant accedes to management’s implicit demand, justifying such position on the basis that what management wishes to do is within the range of acceptable professional judgement. Then, when everything falls apart, the accountant finds his or her judgement second-guessed, becomes the fall person, and is definitely not falling in any forest.
Bright lines very much help an accountant in such circumstances, as well as more general social interests. The accountant is simply able to say “this practice is prohibited” and management can do little–other than trying to get the accountant to bend the rules somewhat, even though a slightly different bright line direction could put one closer to the ditch.