Essentially when you’re doing your accounting, you have had to opt for an accounting framework. An accounting framework is a set of guidelines based upon which you’re recognizing your transactions within your “books” or set of financial statements. 

Accounting framework sets out the principle guidelines, it gives you the structure; it gives examples and shows you how to treat certain areas and specific transactions. Generally speaking an accounting framework is something that’s set locally and when setting up your business in this specific country, you may be required to follow the accounting policies applicable in this country (called the “GAAP” or generally accepted accounting principles of this country). Obviously there are universally accepted accounting guidelines as well, set out in “IFRS” or international financial reporting standards. Some countries allow the IFRS to be used and I would even say that some of the local policies are sometimes simplified versions of IFRS.

Regardless however, it’s important to understand that if you’ve opted for an accounting framework for your set of financial statements and accounting, you must ensure compliance with the set out rules laid out there. Accounting does not mean that you can choose whichever accounting principle from any framework as suits you. Unless, and this may happen, the guidelines are “silent” or say nothing about your transaction or specifically say that the guideline is not meant for such type of transactions and gives you the reference to another source maybe you can use. If there is no other source to look help from, the general rule is that you should either consult with guidance on similar situation (if there is any) or use the same guidance as has been applied in similar practice or that’s called “best practice”.