Why the U.S Should Not Adopt Ifrs

Globalization has been changing the world. It has interconnected people, nations, and even businesses. Today´s business can share information to investors around the world thanks to the intelligent software of the actual society. Being more specific, the way in which investors and users evaluate businesses performance is through the information contemplated in their financial statements. These financial statements illustrate the current assets, liabilities, and stockholder equity a company has in order to help users take economic decisions. However, not all the companies are regulated to provide the same structuralized information around the world. Each country possesses its own accounting standard that regulates the preparation of financial statements of a company. In that way, companies’ information might differ between countries making the comparability between financial statements difficult to be implemented by users in order to assess the performance of foreign businesses. In view of the need of a globally accepted accounting standard that promotes uniform standards for worldwide financial reporting, the International Accounting Standards Committee (IASC), which then becomes replaced by the International Accounting Standard Board in 2001, was created (Cathey and Schroeder 130). The IASB issues International Financial Reporting Standards (IFRS) that stands as the set of accounting standards that prepare and present the financial

The issue of adoption of international financial reporting standards (IFRSS) in Australia has been controversial issue since the first time Australian Financial Reporting council (FRC) announced the policy in 2002. Many believe that IFRSS adoption will lead to great advantages such as enhance financial report comparability, improve quality of financial reporting, attract more foreign investor, and other significant advantages. However, some also believe that the adoption merely result in disadvantages and cost for Australian business, accounting profession and even Australian government.

SFAC No. 8 addresses the cost constraint on useful financial reporting, “Cost is a pervasive constraint that standard setters, as well as providers and users of financial information, should keep in mind when considering the benefits of a financial reporting requirement.” (SFAC No. 8 BC 3.47) However, the ability to place a dollar value and fully enumerate a cost or benefit is almost an impossible task for standard-setters. Additionally, there is no way to successfully identify and measure all of the economic consequences associated with a new standard. The FASB should be applauded though for advancing uniformity in accounting standards, however; uniform financial reporting suggests a one size fits all approach. “Smaller, non-publicly listed firms (and their auditors) argue that accounting standards are formulated mainly for larger, publicly traded firms” and that “compliance costs are disproportionately higher and the

The five research articles I have chosen to further my research on the convergence between U.S. GAAP and IFRS are The Implication of US GAAP and IFRS Convergence on American Business by Austin Willmore (2015), IFRS adoption by country by PWC (2015), International Financial Reporting Standards and American Generally Accepted Accounting Principles: the Convergence Lessons by Kuzina (2015), The economic impact of IFRS - a financial analysis perspective by Seay (2014), and Accounting for Leases The New Standard by CPA Journal (2016). These articles are related to my topic, where these researchers researched and analyzed the financial statement reporting on convergence of the U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), and certain accounts when adopting IFRS present a different result in the financial reporting for U.S. reporting companies when U.S. GAAP standards combined with IFRS. Also, these research articles discuss the existence of two systems of standards, U.S. GAAP and IFRS; and the issue and difficulty of the process to fully converge.

Implementing GAAP and IFRS will reduce huge transition cost that may occur in the future. Due to this difference between GAAP and IFRS, the transition cost from GAAP to IFRS is very high. If a company wants to change accounting reporting method, it must report the current year, pervious year or years depend on the situation and the first year started to report financial statements using the new-implemented method (Kieso Et al., Chap. 5, ETB). It cost a lot for the company to do so.

Fosbre, A. B., Kraft, E. M., & Fosbre, P. B. (2009). THE GLOBALIZATION OF ACCOUNTING STANDARDS: IFRS VERSUS US GAAP. Global Journal Of Business Research (GJBR

This research project will inform the reader of the difference between the United States accounting standards and International accounting standards. The United States uses the Financial Accounting Standards Board (FASB) to issue financial reporting procedures. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB). There are proposals for the United States to adopt the International standards. Financial reporting procedures are debated about the United States using the Generally Accepted Accounting Procedures (GAAP) or following the global procedures. This

States. Companies should report income, liability, equity, and assets. Many people (stockholders, investors, etc.) who have a stake in the company want to know this information before providing a service. In this paper, International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) will be compared for

Our aim in this paper is to analyse and justify the facts that support and object the main issue of whether the mandatory adoption of International Financial Reporting Standards have in fact increased Financial Reporting Quality.

The country selected for this study is the United Kingdom (UK). UK Generally Accepted Accounting Practice (GAAP) has been in place for a long period of time and was harmonized in 2005 so as to comply with the international accounting standards. The UK embraced the principles of the International Financial Reporting Standards (IFRS) in 2005 after the European Union (EU) mandated that all members that were publicly listed companies be subject to reporting under the International Accounting Standards (IAS). This was to help facilitate that those listed companies could easily be compared to onr other on their performance and transparency was improved since they were now subject to the same principles of reporting. Companies in the United

Another important and major disadvantage of adopting or converting to IFRS makes the IASB the monopolist in the sense of setting the standards. And this will be more solid if the US companies adopt IFRS. And if there is competition, such IFRS vs. GAAP that are up on national level, there is more chance of having relevant, reliable and useful information that would be produced while the companies are in the course of competition.

prospective and consensus of fair value, lending ammunition both to those in favour and to the

With complete notion and awareness of how each country has their set of rules, “the goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements” (Rouse, 2011). This view is meant to provide general guidelines, as well as international comparisons through conventional and edifying means. To bring broader and vivid objectives, IFRS replaced IAS, the older standards, in order to bring a more comprehensive and simplified accounting procedures.

The International Accounting Standards Board (IASB) and U.S. Financial Accounting Standards Board (FASB) have been working on convergence of U.S. GAAP and IFRS since 2002, but it has been a challenging process on combining the standards between U.S. GAAP and IFRS, especially when there are two set of approaches on standards, where U.S. GAAP is rules-based and IFRS is principles-based. The U.S. GAAP is rules-based by following a set of guidelines opposed to IFRS, is principles-based by having an objectives of good reporting and provides the best judgement on the guidance to a specific circumstance. It takes a lot of effort to converge accounting standards between U.S. GAAP and IFRS, such as training personnel on the new policies and procedures, updating the accounting policies, improving a new information system, and updating internal control procedures, which you can see the reason American companies is reluctant on this transition. Just like any new updates in standards, it has its issue and difficulty as in the cost of transition, the resources to make the changes, and a period where financial reporting will be unable to have the comparability for financial statement users. Bottom line, transition is a messy process and have its complexity.

Companies are beginning to converge from GAAP with the end result of adopting the IFRS. When a company in the U.S. is converging to IFRS, they are typically looking for a more rule-based set of standards. On the contrary, foreign countries prefer to follow a set of principles. Taub said that even though countries are switching over, the “IFRS users request the same kind of detail and rules that GAAP user often request” (Taub, “Busting some myths about IFRS.).