The adoption of IFRS in the U.S Essay

The acceptance of IFRS in the U.S


  • By following IFRS, it allows comparison and improves transparence of fiscal information across states and industries even if there are differences degree among the state such as developed state and developing state ( Brown, 2010 ) . Each state has their ain GAAP rely on the civilization and institutional factor, but there are still exists drawback and obstructor. IFRS provides a platform to legion states that create professional, flexible and crystalline accounting values. Furthermore, it will assist investors to compare difference company public presentation and do better determination devising of investing. In add-on, following one set of planetary accounting system can cut down the degree of uncertainness that boost the investor’s assurance.
  • The comparison of houses describing is progressively in the recent twelvemonth between U.S. houses under U.S. GAAP and non-U.S. houses under IFRS ( Barth et al, 2012 ) . With the increased degree of comparison, it is good to the ‘foreign counterparts’ that improve U.S. trade and investing internationally ( Ball, 2006: Hail et al. , 2010a ) . ACCA ( nd ) outline that it will convey more ‘international portfolios’ for the investors since studies are more comparable and professional by following IFRS. As a consequence, US market will be more attractive since it allows investor to compare fiscal statements and to do the best determinations of investing.
  • IFRS use the rule footing which is more flexibleness because it provides sensible rating that means holding plenty freedom to companies by following IFRS. Furthermore, the accounting complexness will diminish and hazard of mistakes will weaken. On the other manus, US use rules-based that Cabrera ( 2008 ) states that both of authorities and Securities and Exchange Commission ( SEC ) maintain “good faith” and ‘trust auditor’s’ position ‘on populace companies during confidence projects’ . Therefore, it will take possible job and hazard like dirts and deceitful that we can see in the recent twelvemonth.
  • Furthermore, it is good to the cross-border investing because it helps to avoid the barriers with extinguishing the incompatibilities of fiscal coverage methods and diminishing the readying costs ( Tarca, neodymium ) . It can raise the efficiency of capital allotment on a planetary footing and cut down overall cost of capital by following IFRS. Indeed, it will convey more important market benefits of the houses from codification jurisprudence states than houses from common jurisprudence states if following IFRS ( Prather-Kinsey et Al, 2008 ) . It will beneficial to participants in capital market when implementing IFRS as the ‘higher quality information’ will be provided and better decision-making ( Tarca, neodymium ) . Consequently, it is more expeditiously apportioning financess in the market and houses that can diminish cost of capital as reference before. Brown ( 2011 ) besides states that following IFRS “promote the development of national capital markets and the integrating of markets internationally” . Therefore, it will hold possible influence to single investor that heightening more foreign equity investings ( Tarca, neodymium ) . Besides, the cost of capital is comparatively low when the company uses IFRS to be list in abroad stock exchange market comparing with the company acquire inflow of foreign capital in local market. Adopting the IFRS will besides beneficial to the possible acquisition schemes, since cross boundary line listing can better the efficiency of company coup d’etats.
  • Furthermore, the position will be increased as US companies and its capital markets are going more competitory by diminishing barriers. PWC ( 2007 ) states that the most of import intent of FASB is to help SEC protecting investors by run intoing their duty that IFRS can besides run into FASB’s aims in the interim. Then, if utilizing capital market theoretical account under IFRS, it will diminish ‘misalignment’ hazard between houses and outside investors.
  • The accounting ‘quality’ will be improved by following the acceptance of IFRS, for case, it will better the truth of calculating Earning Per Share ( Brown, 2010 ) . More precisely, IFRS emphasise showing accounting information in true and just positions and highlight substance over signifier. Barth, Landsman and Lang ( 2008 ) records that it will convey ‘lower degrees of net incomes management’ and ‘more timely loss recognition’ comparing the houses following IFRS voluntarily to the houses utilizing local GAAP. Additionally, as we can see from IASB ( 2010 ) , there are two major factors of qualitative features when showing fiscal statements, which need to fulfill ‘relevance’ and ‘faithful presentation’ . More exactly, the information of relevancy “has confirmatory or prognostic value” and information of faithful representation express the economic state of affairs in the existent universe ( Palea, neodymium ) .


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  • It is bing jobs by following global IFRS for little and average sized companies ( SMEs ) . Nowadays, SMEs plays a important function in the economic system particularly in the field of employment. Indeed, Bohusova ( 2011 ) states that it is besides important to most ‘developed’ and ‘developing economies’ . More precisely, it is non executable or desirable for assorted entities in the SMEs scope by following IFRS, chiefly to micro entities. Harmonizing to Schiebel’s research ( 2008 ) , IASB fail to fulfill the demands from external user of finding the information since the sorts of entities tends to revenue enhancement intents when fixing fiscal statements. In add-on, to some states, it is clip devouring and dearly-won of first using IFRS for SME as there are civilization, rules and systems difference between IFRS and local GAAPs.
  • U.S. GAAP is the regulations base which include more elaborate and specific in its application counsel and demand. More precisely, there are demands to company and its hearer under U.S. GAAP non merely think about whether or non the ‘accounting suggested is consistent’ , but besides need to see the ‘public interest’ in the pattern of ‘professional judgment’ ( FASB, 2003 ) . U.S. GAAP besides strongly requires a faithful representation when fixing fiscal statements and opposition from client’s force per unit areas when making audit, which the companies and hearers unable to make nil under the elaborate and clear rules. Alternatively, IFRS is the rules based which means more infinite for following under the rules to fiscal statement.
  • The fiscal statement under US GAAP is more comparison in the same industry because the IFRS merely have more comparison in the different industry ( IFRSUSA, 2011 ) . Due to backgrounds of people in different states by implementing IFRS, it will do different results and account since their historical patterns otherwise. Furthermore, SEC Chairman Cox ( 2008 ) stated that, “Securities ordinances can and should be converged to a far higher grade than we have already attained. But it is unrealistic to believe we could or should do them indistinguishable, because of differences in national Torahs, economic conditions, and objectives” . Therefore, the defect and defect of comparison is evidently seen and the more subjective of IFRS will cut down the utility by change overing to IFRS.
  • It will take to be consuming If US adopt the attack of IFRS since it will make big passage costs, “including employee preparation and Internet engineering systems, particularly during a period of terrible budget deficits and economic crisis” ( Tyson, 2011, p. 26 ) . It is necessary supplying professional preparation in the work force because people need to be knowing to implement IFRS, which make the convert smoothly ( Hansen, 2011 ) . In add-on, Diamond and Herrmann ( 2008 ) states that it will be several old ages to change over IFRS as following IFRS will alter ‘operational procedures’ and ‘information technology’ . Harmonizing to the SEC, it will be US companies gross in the initial twelvemonth between 0.125 % and 0.13 % if pass throughing to IFRS ( Johnson and Leone, 2008 ) . Furthermore, Albrecht ( 2008 ) highlight that the cost nest eggs from audit fees is ‘ $ 100 billion’ if pass throughing to IFRS, but it will convey approximately ‘ $ 1 trillion’ cost to companies. As we can see from that, the costs of exchanging to IFRS are gratuitous and far exceed the benefits conveying to companies.
  • If exchanging U.S. GAAP to IFRS, it will hold deficit of ‘bright line tests’ that the dependable and accurate fiscal coverage is indispensable. It can non show the accurate and dependable fiscal coverage if convert to IFRS rules “because of the deficit of ethical and economic rules in the current coevals of direction and auditors” ( Bahnson and Miller, 2008 cited in Albrecht, 2008 ) . Bright line regulations non merely can forestall the direction changing fiscal statement but besides assist investor because the company needs to do fiscal study under more rigorous criterions. U.S. GAAP can command the fraud to some extent during the accounting procedure although no footing of accounting can forbid fraud.


Harmonizing to the critical analysis above, US will non follow IFRS. SEC predicts the consequence of US in planetary criterions that will be decrease by following IFRS ( Street, 2012 ) . As we can see from the staff study, implementing IFRS is non supported by “vast bulk of participants in the US capital markets” , and “would non be consistent with the methods of incorporation followed by other major capital markets” ( PWC, 2012 ) . Additionally, it is non necessary to follow IFRS, because US is the world’s largest capital market. There is a particular phenomenon that IASB is funded by USA, hence, the IFRS may be influenced by US congressional which represent benefits of different fiscal group. Furthermore, there is strong and complex association between US GAAP and US Torahs so that it is improbable to follow IFRS in the short-run development ( Erchinger, 2012 ) .


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Brown, P. ( 2011 )International Financial Reporting Standards: How existent are the benefits?Accounting and Business Research, 41 ( 3 ) , 269-285.

Cabrera, L. ( 2008 )Widespread Acceptance of IFRS Continues:Is It Time for U.S. Companies to Fix for the Passage?, available from hypertext transfer protocol: //, accessed 9 February 2014

Christopher, C. ( 2008 )Address by SEC Chairman: ‘The Future of International Standards and Cooperation In Light of the Credit Crisis’, U.S. Securities and Exchange Commission, New York, 18 November, available from hypertext transfer protocol: //, accessed 9 February 2014

Erchinger, H. ( 2012 ) Australian Accounting Review,IFRS in the United States – Developments and Current Status, Vol 22, No 62, pp248-256



Herrmann, G. and Diamond, M. ( 2008 )GAAP? IFRS? What you need to cognize, 1 August, available from hypertext transfer protocol: //, accessed 8 February 2014

IAS PLUS ( n.d )Conceptual Framework for Financial Reporting 2010, available from hypertext transfer protocol: //, accessed 9 February 2014

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Johnson, S. and Leone, M. ( 2008 )SEC: Early IFRS Adoption will Cost Firms $ 32M, 17 November, available from hypertext transfer protocol: //, accessed 8 February 2014

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Street, D.L. ( 2012 ) Australian Accounting Review,IFRS in the United States: If, When and How, Vol 22, No 62, pp257-274

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