The authors present the fact that subjectivity in the process of financial reporting itself leads to inconsistency as same transactions can be reported in different ways by the management depending on their judgment. The authors use legal resources too to explain the differences between rules and principles. The authors cite Cunningham (2007) who holds that rules minimize the scope for professional judgment. On the other hand, scholars like Dworkin (1967) highlight that principles do not direct a course of action, but they steer the decision maker in one direction. Thus while rules are specific (Kivi et al, 2004), principles are general prescriptions and are comparatively considered vague.