Research IFRS

A project with an objective to gain greater
understanding of International Accounting
rules, its processes and institutions, and
how they relate to the U.S. GAAP, the FASB
and the SEC. A study of the history of the
globalization of accounting standards, the
current status of International Accounting
rules in the U.S., differences between U.S.
GAAP and IFRS, and results of adopting
IFRS and potential future IFRS adoption.
The Role of Financial
Reporting Standards in A
Globalized World.
The complexity of uniting under a
single global financial reporting
standard, despite the demand for
international guidance in an
emerging globalized market.
May, 6, 2016
Samuel Lindquist
Utah State University

of 45
The Role of Financial Reporting Standards in a Globalized
World.
The complexity of uniting under a single global standard, despite the demand for
international guidance in an emerging globalized market.
Samuel Lindquist
Utah State University
Table of Contents
Page
1. Executive Summary……………………………………………………………….. 2
2. Introduction………………………………………………………………………... 3
3. Historical Perspective of Globalization of Accounting Standards…………....... 5
3.1 Emerging Markets brought demand of Unity in Accounting Standards….. 5
3.2 Challenges facing the IASC………………………………………………. 6
3.3 The G4+1………………………………………………………………….. 9
3.4 The IASB……………………………………………………………….... 10
4. International Accounting Rules and the U.S. …………………………………...11
4.1 IASB’s influence on jurisdictions worldwide……………………………. 11
4.2 Efforts in the U.S. towards international accounting standards………….. 12
4.3 Current status of international accounting standards in the U.S…………. 16
4.4 Benefits of adopting IFRS………………………………………………...18
5. Differences and Similarities between US GAAP and IFRS. ………………….. 18
5.1 Areas with Similar Objectives and Signs of Convergence………………. 19
5.1.1 Business Combinations.
5.1.2 Debt.
5.1.3 Earnings per Share.
5.2 Significant Differences……………………………………………………19
5.2.1 Impairment Testing.
5.2.2 Inventory.
5.2.3 Research and Development.
5.2.4 Depreciation of PP&E.
5.3 Study of Convergence and Differences of Areas in Greater Detail……… 21
5.3.1 Revenue Recognition.
5.3.2 Consolidation Accounting.
5.3.3 Long-Lived Assets to be held and to be used for sale
Impairment Testing.
6. Adoption of IFRS. ……………………………………………………………….. 27
6.1 IFRS adoption by the EU………………………………………………… 27
6.2 IFRS adoption outside of the EU………………………………………… 31
6.3 The future of IFRS adoption……………………………………………... 33
6.4 IFRS in the U.S.? ………………………………………………………... 34
7. Conclusion. ………………………………………………………………………. 37
8. Works Cited. …………………………………………………………………….. 39
9. Appendix – Tables. ……………………………………………………………… 42

of 45
1. Executive Summary
The IASB (International Accounting Standards Board) has operated since 2001,
and has without rest worked towards the fulfillment of their mission “to develop a single
set of high quality, understandable, enforceable and globally accepted financial reporting
standards based upon clearly articulated principles”. Although many countries have
accepted and required financial reporting per the International Financial Reporting
Standards (IFRS), the IASB has not yet been able to unite the world economy under a
single set of accounting standards. Some countries have adopted parts of the IFRS
standards set by the IASB with the promise to accelerate their convergence efforts
towards adapting the full use of the standards. With the support of advisory groups and
the world-wide standard setting community, the IASB has been successful in responding
to world-wide demands for global accounting approaches. Surely, to satisfy all cultures
and national jurisdictions with their objectives and philosophy of financial reporting is
not an easy task.
As the world saw more and more countries engage in cross-border transactions
and mergers and acquisitions, a movement was initiated to promote the harmonization of
international accounting standards to deal with the suffering comparability of financial
information across borders. With joint efforts from international accounting networks, the
IASB was organized in 2001 and took the lead in crafting international accounting
standards.
Early on the IASB sought for mutual convergence efforts together with leading
national accounting institutions of the world, such as the FASB. These organizations have
engaged in convergence projects to eliminate differences in accounting standards that
would lead to the eventual adoption of using a single set of high-quality international
accounting standards. Events in the world economy such as the financial crisis has
distracted the convergence efforts, but so has underlying fundamental corner stones upon
which national accounting standards were built. These historical and present economic,
cultural and constitutional differences have frustrated the objective of developing a single
set of high-quality international accounting standards. The use of International Financial
Reporting Standards (IFRS) has been accepted and adopted by the majority of the world
economies, and is becoming relevant because of its worldwide influence for countries
who still has not mandated the use of it. We are now close to a bilingual world with only
two accounting languages: IFRS and the US GAAP. Although these two standards are
becoming more similar, significant differences remain. Academic research has shown
that adopting IFRS has been beneficial for countries through evidence of higher market
liquidity, higher investor confidence, increased market transactions, and other positive
market outcomes. There is optimism about the future adoption of IFRS by countries like
the US. Research also shows that there are valid reasons as to why these standards still
are functioning separately because of historical and present differences in approaches to
financial reporting. The cost of a country abiding under a “one-size-fits-all” standard
translates into the complex and arguable argument that a single set of standards can
answer the needs of every single member of a network. This is the negative costs of a
single set of global international accounting standards. The opportunity- and switch cost
is too high for some developed countries. The ultimate question for international
accounting standard setters and for each individual country is to determine whether the
benefits and gains from international standards could exceed those costs.

of 45
2. Introduction
As I moved to the United States, I quickly discovered differences in ways of
measuring units that I had never seen before in any part of the world. Liters, meters and
kilometers per hours turned into gallons, yards and miles per hour. Being an experienced
traveler throughout Europe and other parts of the world, it seemed strange to me that I
would find this difference in a country that play such a big role in our grand world. This
fact guided my thoughts to pondering on why the world hasn’t adopted the measuring
system of one of the world’s mightiest nations, or why this mighty country hasn’t
adopted the measuring units of the rest of the world. I remember picturing in my mind
traders, brokers, negotiators in our early history of this world who met at borders, major
trade harbor cities such as Amsterdam or London. Disputes arising over amounts, units
and measurements in trade negotiations surely lead to a desire to find common ground as
trade exchanges suffered. These men must have come together to unite under a more
broad system that allowed traders to easier compare their goods to others. This system
might have generated more trade as common grounds were found, although I’m sure we
can argue whether everyone could see benefits exceed costs by using this new system
based on the nature of their goods. These unifying systems might have been established
for each harbor trade city, and then evolved into national approaches to trade. Proud over
this thought that world traders came together in trade negotiations throughout European
trade harbors, I drew the conclusion that this way of uniting would eventually cover more
areas of dispute, like the one I encountered when I first moved to the United States. Ever
since that day, I have anxiously been waiting for the glorious day when the United States
of America would adapt the common measuring units found around the world. Oh what
relief it would grant us to use a method when determining freezing temperatures to be as
simple as looking at the negative side of -0 degrees Celsius, instead of a confusing and
cold search along the thermometer for 32 degrees Fahrenheit. Surely this would simplify
multiple situations, if we would just unite under one method as habitants of this world.
As I went through Intermediate studies in Accounting with this proud European mindset
and discovered the differences in accounting standards around the world, my initial
thought was just that – for us all to just unite under one law. This research paper pays
careful attention to the universal differences of global markets to explain the complexity
of “just uniting” under one law for financial reporting methods. Surely, this would be
easier said than done.
My initial thought process that lead me to comparing the imagined historical
uniting procedures of measurement units at the historical harbor cities, to the present
differences in global accounting standards in need of merging into one came from a few
different conclusions. People are good at negotiating and finding common ground.
Everyone will be better off under one law that would cover their concerns of differences.
After learning a little more about the history of the development of global measurement
units, I came across a quote from the philosopher and mathematician Condorcet who
stated this regarding the metric system: “a system for all people, for all time”.
French Revolutionists formed a system where they used base units of length, mass
and time. This seemed to work fine, until they ran into more innovative and prosperous
times. New concepts arose from innovative efforts, such as electromagnetic forces and
sunray patterns. How would you measure these? This caused the system to expand into

of 45
many new derived units, based and derived from the base units originally crafted.
(History of the Metric, 2016)
Today there are many forms of units for measurements, but the metric system
took long to perfect and surely still has future adjustments to add to it. This complexity
relates to where differences and difficulties are found in uniting accounting standards
around the world under one law. Re-visiting in my mind the traders at the London harbor,
I realize that for a start the trade probably only concerned them, or their families.
Common ground could be found fairly quick as each trader had to consider the benefits
of each discussed trade. As time passed, these trades would start to affect bigger
communities and eventually territories and countries. This is where the complexity is
found with the thought to “just unite everyone under one law”. Bringing each industry,
country, culture under one law could result in frustrating economies and less liquidity of
markets. Just like the traders at the harbor, it’s arguable whether everyone could see
benefits outnumber costs when using a new, single global system based on the nature of
their goods, industry, country, or culture. This is where my analogy of the metric system
being so similar to accounting standards fails. This indeed deserves careful research and
consideration of factors that speaks for both benefits and costs for adapting a single set of
global accounting standards.
In learning more and more about the U.S. GAAP accounting standards and its
related processes, I’ve gained a good understanding of how accounting standards play a
crucial role in helping the business world maintain its trust and integrity. As I’ve gained a
deeper understanding of the big picture of accounting, I’ve found it interesting and
important to further consider the global market. How is trust and integrity being
maintained internationally? Who is the recognized governing authority of accounting
methods internationally? My goal with this research is to gain a greater understanding of
international accounting rules, its processes and institutions, and how they relate to the
U.S. GAAP, the FASB, and the SEC.
I will accomplish my goal through studying the history of international
accounting rules and find its original reasons of existence. I will compare the
international accounting standards, the IFRS and its institutions, to the U.S. GAAP to try
to understand similarities and differences. Has one been more successful than the other,
and why?
I will also study the efforts of convergence of the IFRS and the U.S. GAAP. This
research deserves careful consideration of reasons why these two accounting standards
still functions separately in a world where the markets are merging due to a more and
more globalized world. Why the U.S. hasn’t adopted the IFRS, or vice verse, is a
question I’ll discuss here.
To illustrate the differences of the U.S. GAAP and the IFRS, I will look at some
specific areas of financial reporting. This will perhaps help us understand the complexity
of the convergence efforts and perhaps give more answers to my previous stated question.
I will research countries and jurisdictions who already have adopted IFRS to learn
of their adoption and transition to using this standard. Have they adopted it fully or
partially? Has this adoption happened without any problems for financial reporting? I will

of 45
highlight some challenges that IFRS are facing now, and discuss the future of IFRS
adoption,
I will conclude with some personal insights from my research on my thoughts on
how to maintain trust and integrity in markets around a more globalized world.
3. Historical Perspective of Globalization of Accounting Standards
It is appropriate to provide a historical perspective on the development of the
international accounting standards to highlight the importance of the international
accounting standards organizations that we have today. I will also highlight how the US
played an important role in the early convergence efforts.
3.1 Emerging Markets brought demand of Unity in Accounting Standards
After World War II, each country operated after their own designed national
accounting rules. This resulted in differences in accounting methods. Some countries
would revalue their assets and properties, differences in the use of historical cost methods
were found, and some countries allowed the use of LIFO in accounting for inventories
while others only allowed this for certain industries etc. Leading countries, such as
Germany, developed effective accounting standards that were adapted by neighboring
countries perhaps due to consistent trade among those countries. Even though many
countries shared accounting standards, worldwide accounting reporting was extremely
diverse. Useful comparison of financial statements from one country to another was
highly difficult.
In the 1960s, international trade became a consistent move by companies who
tried to reach beyond their borders. Accounting professionals recognized these new
challenges, which led to discussions regarding this new complexity. As the world
economy saw more international mergers and as companies moved production operations
internationally, more accounting leaders encouraged a movement to deal with the issue of
comparability in accounting practices. Organizations from the U.K., Ireland, Scotland
and Canada heeded the call. This small international accounting organization
collaboratively prepared series of pamphlets and booklets1
for comparison of accounting
standards and approaches across the leading countries in the world economy. This newly
formed group, called the AISG (Accountants International Study Group), hoped that this
comparison would highlight the diversity in accounting practices and lead to an
awakening of the frustration for comparability of financial reporting across country
borders. The determined leader of the AISG, Sir Henry A. Benson, saw a rising interest
from respondents of accounting groups around the world to pursue this issue.
(Zeff, 2011)
In 1973, he led the organization of the IASC (International Accounting Standards
Committee). The group’s motivation was to promote the international harmonization of
1
The AISG issued a series of booklets that compared the accounting and auditing approaches in the US,
Canada, and the U.K. Among other things, Benson hoped that a comparison of auditing approaches in the
three countries would eventually convince the U.K. accounting profession to require the auditor to be
present at the taking of inventory, and he succeeded in that endeavor. Over a period of more than ten years,
the AISG issued 20 such booklets, which represented the first major effort to compare and contrast
accounting and auditing practices across leading countries.

of 45
accounting standards and to lessen the differences in accounting practices between
countries.
At the time, only seven countries had committees established on a national level
that influenced the accounting practices of their country. By Sir Henry Benson’s
encouragement to form committees, a total of nine countries and their national
committees joined the IASC. These countries were Australia, Canada, France, Germany,
Japan, Mexico, the Netherlands, The U.K., and the United States. Each country’s
representation was called a delegation, which was made up by two staff who had the
voting power of the delegation’s vote, and a delegation observer who gave council to the
staff. The delegation used their vote when the IASC would vote on issues affecting the
global approach to accounting methods. The delegation strived to see participation from
their own country’s various departments who could be affected by its decisions.
(About the International, n.d)
3.2 Challenges facing the IASC
The IASC carefully proposed Accounting Standards, which would become part of
a new Framework that would unite accounting approaches in the world economy. In their
efforts to unite the countries and appeal to accounting professionals, the IASC saw some
difficulties.
The IASC was a private-sector organization who had only a small established
market status. It had no authority over any preparer, regulator or auditor. It’s important
here to understand how they still could be so influential. Essentially, the influence and
existence of the IASC (today IASB) are the result of market demand. There had been a
long held view from influential auditors, preparers and regulators that global accounting
standards were essential.
The IASC was more of a volunteer group where leaders of accounting
organizations2
from around the world donated their time to attend meetings and review
papers. For this process to move forward, they needed more consistency in efforts,
meetings and greater resources.
The Board meetings were all held in English. Representatives from non-English
speaking countries had to understand and participate in the difficult decision-making in a
foreign language. The large number of Board-members, counting at least 2
representatives plus their observers from each country, perhaps created a setting where
understanding of differential views and opinions would not have been easy.
They saw significant difficulties in appealing to the broader market, other than
just accounting professionals. They did not get much attention from the European
Commission or the FASB at first, as they were viewed as just another private-sector
movement who acted upon personal interest instead of the public interest. The outside
also saw the IASC as a narrow-minded organization that only put the interests of
accountants first without considering the entire market.
2
The IASG that was established by Henry Benson, which was formed prior to the IASC, had members of
AICPA, the Canadian Institute of Chartered Accountants (CICA), the Institute of Chartered Accountants in
Ireland, and the Institute of Chartered Accountants of Scotland. Similar executives of other national
accounting bodies, audit firm partners, and financial executives joined in these meetings. They all served
on a part-time basis.

of 45
The IASC also faced challenges from other organizations. As financial reporting
of multinational companies became more consistent, national accounting regulators
demanded more guidance but questioned the authority of the IASC to set international
accounting standards. Controversy in the world over who should have the authority to set
international accounting standards remained. (Zeff, 2011)
It’s important here to note that different countries had different objectives for their
financial reporting. While the US focus was on the users of the financial information,
many other countries view social or political objectives as more important. Some
countries designed their accounting standards to easier deal with taxation laws, while
others focused on the convenience of the preparers of financial statements.
Professor Christopher Nobes established a helpful framework to better understand
the underlying nature of these different objectives (1983). By learning from the
framework of Accounting Classification of 14 countries during this time in the 1980s, we
learn of micro and macro. Micro relates to a focus on the individual reporting entity.
Micro implies a market that emphasizes equity investors. With assistance of material
information from financial statements, equity investors make economic decisions of
where to allocate their resources. In order to provide material and relevant information
from each specific reporting entity for their specific circumstance, the reporting system
and methods needs to be flexible enough to adapt to relevant circumstances. Judgment is
a big factor here as it is applied to each specific circumstance. Macro is a focus on the
broader and wider economy. The need for material financial information for decision
making in a macro classified focus is towards industry and economy-wide planning. Less
relevance of specific circumstances, but more emphasis on uniformity. Nobes is
essentially saying fitness for purpose. (Godfrey & Chalmers, eds. 2007)
Below is Table 1, which illustrates Nobes Accounting Classification of 14 countries in
the 1980s. More detail and larger figure is found in Appendix – Figures, 1.

of 45
After studying the illustration in Table 1 of Nobes Accounting Classifications, we
can now try to understand the significant differences between country’s philosophies,
practices, and ignorance. For example, reported earnings related to German operations
were significantly tax-driven and seemed to almost always be smoothened out by
intentional recognition. This was often done with the use of secret reserves. Also,
consolidated accounts and statements in Germany usually excluded all subsidiaries
outside of German borders (Godfrey & Chalmers, eds. 2007).
In Europe, the globalization of financial markets had in the 1990s led many high
profile entities to adopt US GAAP methods. It is speculated that many either feared the
eventual demands of US GAAP, or grudgingly considered the intrusion of the US
involvement into their markets. The initiative and proposed standards and cores from the
IASC represented a softer alternative. These standards leaned more towards principles-
based standards and unfortunately gave domestic accounting institutions an incentive to
try to manipulate the IASC and manage their standards for their own purposes.3
(Godfrey & Chalmers, eds. 2007).
Sir Henry Benson and his colleagues understood that they needed to take a
different approach to accomplish their goal. Despite their rejections, they would receive
some needed help. As the FASB focused on improving the U.S. GAAP standards, the
SEC followed development in accounting on an international basis and had noticed the
IASC’s efforts. Noticing the movement to a globalized world economy and the issues
involving cross-border financial reporting, the SEC gave the IASC a note of support and
encouraged them to inspire unity on an international basis. The SEC relied on the FASB
for developing the U.S. GAAP principles and saw it fit for the IASC to further their
efforts for international accounting approaches. Surely, the merging world markets had
created enough issues to be solved regarding accounting practices cross-borders.
With this new light shining over them from the SEC, the IASC Board grew in
numbers as more countries saw an interest for their own representation, and the Board
continued to propose accounting standards. By being continually encouraged and
supported by the SEC in their efforts to draft globally accepted accounting standards, the
IASC felt that this support gave them credibility and authority to influence their members
to action. While the IASC felt that they had been given sufficient authority from the SEC,
the countries were reluctant to feel the need to necessarily adopt the standards proposed
by the IASC. It seemed that some of the newly added delegations only had an interest to
listen and discuss, rather than to set and adopt standards. With the exception of a few
countries, most did not modify their accounting principles according to the standards
proposed by the IASC. They saw their national GAAP standards as superior to the IASC,
the reason being that the proposed standards did not fit well into their country’s
accounting system.
3
For some auditors and preparers, the establishment of global accounting standards gave them considerable
convenience. The establishment promised to reduce the complexity and number of methods used across
borders, increase the movement of staff, and reduce the negative comparability aspects by reporting
multiple results for the same entity. Perhaps in some domestic situations, the establishment and adoption of
global standards also ensured a slowing down of the increasingly difficult demands of control from
domestic standards setters and regulators (Godfrey & Chalmers, (Eds.). 2007).

of 45
At the same time, the FASB had started to think outside of the U.S. In the early
1990’s they formulated their first strategic plan for international activities to also strive
for the harmonization of cross-border financial reporting. Surely advised by the SEC, the
FASB had served as an observer at the IASC’s meetings. In discovering the different
objectives of representatives at the IASC Board Meetings, the FASB determined that a
more productive way would be to meet periodically with a smaller group of
representatives that shared the US accounting standards philosophy. The US, UK and
Canada standard setters found shared values and objectives for accounting philosophies,
and invited other countries to join. Australia joined shortly thereafter. This group would
be known as the G4. This group would be important to the furthering of the efforts by the
IASC to receive recognition and gain respect in the world as leading accounting
standards setter (Camfferman & Zeff, 2006).
3.3 The G4+1
The newly formed G4 group’s goal was to make sure that accounting standards
were at peace amongst their members. Their goal was not to set new standards for the
members of the group, but to find and highlight principles that they all agreed on. Each
G4 member was then encouraged to develop and perfect their own policies and standards
by taking into consideration the groups discussions and position. An invitation was
extended to the IASC to participate by observation, to make it clear that these English-
speaking countries did not create a picture of themselves as keeping secrets from the rest
of the world. The IASC accepted the invitation, and this group now became known as the
G4+1. Members were expected to actively participate, pledge a long-time commitment
toward international accounting principles, and to share the objectives of the group. A
phrase from the groups published objectives reads: “there is strength in numbers, and
each body gains support to make improvements in its own country by taking positions
consistent with those elsewhere” (Beresford, 2000).
As part of the U.S. representation at the G4+1, the FASB contributed together
with the US Board staff to many leading discussions. Several G4+1 meetings resulted in
small changes in the U.S. GAAP for the harmonization push. Reflecting on the objectives
and expectations of members of the G4+1, it seemed that the IASC’s contribution was
small. This created more frustration amongst the G4 members, especially for the FASB,
which began again to question the IASC’s potential role as a global standard setter. Many
instances hints that the IASC perhaps feared losing ground in gaining global recognition
as accounting standard setters, as the G4 group held and published useful documents
regarding arising global accounting issues. For example, documents from the G4
discussion were shared with the ISAC’s Board leaders for further distribution to the
entire ISAC’s Members. The leaders of the IASC would change the name of the author
and take credit for developing these appropriate and possible solutions to global
accounting issues. These types of mistakes did not help the IASC to gain positive and
authoritative recognition after being publicly disciplined by the G4. The G4 thought that
the IASC acted in this way because of fear that the G4 would put the IASC out of
business.

of 45
The SEC patiently continued to encourage IASC’s efforts to unite the world
economy under general accounting principles. Surely by encouragement from the SEC,
the International Organization of Securities Commissions (IOSCO) approached the IASC
to propose a potential endorsement. The IOSCO4
is a securities market regulator and had
interest in increased comparability and a united economy. They regulated thousands of
market participants. Such an endorsement would bring more attention and credibility to
the IASC. Many multi-national firms, large accounting firm wanted to see the removal of
the foreign restraint reconciliation requirements to US GAAP for cross-border activity.
The IOSCO saw potential in the IASC to unite countries in accounting approaches, and
thereby be able to make the removal of these reconciliation requirements. The IOSCO
asked the Board of IASC to make significant improvements to their proposed standards
to be of an acceptable level before publicly endorsing them. They wanted to see further
detailed improvements considering the many different countries that would potentially
adapt these standards.
After receiving these conditions for an endorsement, the Board agreed and started
to put in efforts to craft revised standards. The Board received help from the IOSCO in
the form of an observing delegation present at their board meetings. Previously the
European Commission had ignored the IASC’s proposed standards but in the mid 1990’s
they offered help in form of an observing delegation as part of the Board meetings. The
FASB also helped in the same capacity. The IASC began to attract the interest from more
countries around the world as the number of Board delegations grew. Most G4 members
and other countries with interest for a united global economy believed that the IASC was
not up for the task as an international standard setter with the structure and organization
that they had at the time. Too many people were at the meetings, some delegations lacked
interest in standard setting and would use their vote for their own interest. As a whole, the
IASC were not committed to a common philosophy of one set of international accounting
standards.
In order for them to receive full endorsement from the IOSCO and final approval
of their proposed standards, a re-organization was required. The SEC instructed them to
find ways to be more focused on technical expertise, instead of geographical
representation. The IASC needed a smaller Board instead of the 60-70 people attending at
the time, independent from political forces, full-time members instead of part-time
efforts, help from a research staff and utilizing more due process in passing standards.
This suggestion from the SEC was essentially a structure like the FASB. (Zeff, 2011).
3.4 THE IASB
The IASC survived this frustrating and challenging period of the 90’s. Finally, the
new structure went under the name of International Accounting Standards Board (IASB)
and held their first meeting in 2001. Their standards were from that time forward known
as the International Financial Reporting Standards (IFRS). The Board consisted of 12
4 The IOSCO is an association or organizations that regulate the world’s securities and futures markets.
Members are typically the Securities Commission or the main financial regulator from each country. The
IOSCO has members from over 100 different countries, who regulate more than 95 percent of the world’s
securities markets. The organization’s role is to assist its members to promote high standards of regulation
and act as forum for national regulators to cooperate with each other and other international organizations.

of 45
members, with two observers and a research staff. Diversity was found amongst the
Board members in form of five members from audit accounting firms, three from
companies, three from the user network and one academic representative. These members
were from the U.S., and dominant countries in Europe and Australia. The newly formed
IASB received their recognition and endorsement.
Many of the new members had recent background as national standard setters and
delegates on the IASC Board before the re-structure. The new chairman, David Tweedie,
brought a significant important background. He had served on the U.K. Accounting
Standards Board, as a member of the U.K. delegation on the IASC Board since 1995 and
had been the originator and first chairman of the G4+1. Mr. Tweedie’s important
collaborative work together with the heavy representation from the U.S. on the IASB
Board would intensify convergence efforts towards their goal of one set of global
accounting standards.
4. International Accounting Rules and the U.S.
The IASB still does not carry any authority to impose their international
accounting standards on a country or organization. While this is true, the demand for
global accounting methods and practices to enhance comparability across borders is what
makes the IASB and the IFRS so influential and relevant, and has led to a world-wide
interest for global standards to apply to an organization and its members for
comparability. While the development of international accounting standards has
progressed, so has the use of them as well. Today, the European Union and more than
100 countries either permit or require the use of international financial reporting
standards (IFRS) issued by the IASB, or a local version that is designed after its nature.
4.1 IASB’s influence on jurisdictions
worldwide.
The structure of the IASB today is
illustrated in this picture. The IASB
Board has help through Advisor
Councils, Committees, and a Monitoring
Board that helps hold them accountable
to their goals and objectives.
The Standards set by the IASB
are described as guides for preparation of
financial statements by business entities.
The Standards include 15 IFRS, and 41
International Accounting Standards
(IAS). Interpretations of these Standards
are also offered and included in the
package of Standards.
The IASB has done research on 140
important jurisdictions5
around the world
to evaluate the progress of adoption and full use of IFRS. Are they fully adopting pure
5 Jurisdiction – Power of right of a legal or political agency to exercise its authority over a person, subject
matter or territory.

of 45
IFRS or do they design their own version for various reasons? Do they require this for all
companies, public and private? What does the adoption process look like? Any
alternative to fully adopt the IFRS defeats the goal of the IASB of a single set of global
accounting standards. Out of the 140 jurisdictions, 93% officially has expressed their
support for a single set of high-quality global accounting standards. The relevant
authority in 94% of the jurisdictions has made a public statement supporting IFRS as the
single set of global accounting standards. Even in the few countries that have not yet
publicly supported IFRS, IFRS is frequently used in reporting of public companies in half
of those jurisdictions.6
(Pacter, September 2015)
A research amongst these countries based upon GDP returns an interesting
insight. Out of the top 20 GDP countries globally, 35% does not require, or only partially
require, the use of IFRS. On a basis of measuring the current price and dollar amount of
GDP, 63% out of the top 20 GDP countries globally does not require, or only partially
require, the use of IFRS. Out of those 63 %, 56% comes from the top 3 GDP countries
globally who all does not require, or only partially require, the use of IFRS. See Table 2
for details on discussed jurisdictions.
Seen from the IASB’s perspective, these numbers are significantly positive facts.
Ever since the establishment of the IASB as a recognized international accounting
standard setter, the interest of countries to adopt and require the use of IFRS has gone up
and down. The U.S. jurisdiction for example saw rapid increase of interest at first, but
during the last 8 years the interest has not been as intensive. Below is a timeline, put
together by the IASB, of the fluctuating interest of the IFRS from the U.S. However, seen
from a top 20 GDP perspective it shows that the major economies with the strongest GDP
are divided on the required use of IFRS.
4.2 Efforts in the U.S. towards international accounting standards.
The period around the establishment of the IASB through 2008 can be viewed as a period
of growing interest for IFRS in the U.S.:
 2000- The SEC issues a concept release on IFRS.
 2002- Five former SEC Chairs publicly support IFRS for domestic U.S. firms.
 2002- The FASB and the IASB undertake convergence projects.
 2007- The SEC publishes a convergence roadmap.
 2007- The SEC eliminates the requirement for foreign securities issuers using
IFRS to reconcile to U.S. GAAP.
 2008- The FASB and the FAF7
support IFRS in a submission to the SEC:”
Investors would be better served if all US public companies used accounting
6 Of the 24 jurisdictions that do not require IFRS for all or most domestic publicly accountable entities in
their capital markets, 14 already permit or require IFRS for at least some domestic publicly accountable
entities. Only 10 jurisdictions currently do not require or permit IFRS for any domestic publicly
accountable entities. One of those (Thailand) is in the process of adopting IFRS in full, and another
(Indonesia) is in the process of converging its national standards substantially (but not entirely) with IFRS.
(Pacter, 2015)
7 FAF (Financial Accounting Foundation) is the independent, private-sector organization with
responsibility for the oversight, administration, and finances of the Financial Accounting Standards Board
(FASB), the Governmental Accounting Standards Board (GASB), and their advisory councils, the

of 45
standards promulgated by a single global standard setter as the basis for preparing
their financial reports… We, the SEC, and other affected parties should work
together to develop transition plan or “blueprint” for moving US public
companies to IFRS. “
 2008- The SEC issued a new road map towards requiring IFRS.
The period following this can be viewed as a period of declining interest for IFRS:
 2009- The new SEC Chair expresses reservations from IFRS to Congress.
 2009- The FASB and FAF’s response to the second SEC road map is” wait and
study”.
 2011- The SEC staff reports on IFRS’s shortcomings.
 2012- The SEC publishes a final staff report without providing a recommendation
on IFRS adoption.
 2014- The former SEC Chair, Cox8
, expresses limited appetite for IFRS in the
U.S.
(AICPA, n.d.)
I will discuss a few of these developments to help us understand the status of
international accounting rules in the U.S.
Early on, the IASB sought for mutual converge efforts with the FASB in hope to
eventually see the drop of the required reconciliation policies to U.S. GAAP on foreign
issuers that would adapt IFRS. This policy was set by the SEC, who was in the process of
evaluating whether this policy could be modified or removed as part of global
convergence efforts of accounting standards. The SEC encouraged both the FASB and
the IASB to eliminate differences between their standards to allow for this change.
During their first meeting in 2002, the FASB and the IASB crafted a Memorandum of
Understanding (MoU) known as the “Norwalk Agreement”, which confirmed their joint
commitment to “ make their existing financial reporting standards fully compatible as
soon as practicable”. They would work together on short-term projects, an also
coordinate long-term projects9
. This MoU was reviewed again in 2006, and the two
organizations signed another MoU to steer their future progress on jointly converge a
number of major standards. Around the same time, the SEC had gladly observed the joint
work of the FASB and the IASB. With their goal to eliminate reconciliation requirements
spoken of above, they proposed a possible roadmap for completing this goal. The SEC
Chief Accountant, Donald Nicholaisen, had already expressed his personal opinions
about a possible roadmap plan in 2005 and received support from the overall SEC
organization. Finally in 2007, the SEC proposed to drop the reconciliation requirement to
U.S. GAAP for foreign private issuers adopting IFRS. By a unanimous approval from the
Commission, this took effect immediately in November of 2007. The SEC continued to
Financial Accounting Standards Advisory Council (FASAC) and the Governmental Accounting Standards
Advisory Council (GASAC). The FAF selects the members of the standard-setting Boards and Councils,
and protects the independence of the Boards.
8 Former SEC Chairman Christopher Cox, in office 2005-2009.
9 Among the short-term projects that were launched in the wake of the Norwalk Agreement were ones on
income taxes, a revision of IAS 37 on provisions, IFRS 5 on non-current assets held for sale and
discontinued operations, and financial statement presentation.

of 45
explore the possibilities to allow U.S. issuers to use IFRS in their filings with the SEC.
They released a concept proposal of this that re-enforced their goal, but was surprising to
many that the SEC had arrived at this point. This was something that many never thought
would be on the SEC agenda. In 2008, the SEC released their second roadmap with
support from the entire organizations and participating divisions. This new roadmap
focused on the eventual required adoption of IFRS by U.S. issuers.
This new roadmap met excitement but was quickly toned down with the impact of
the economic and financial crisis that took place in the United States at the time. A new
Chairman, Mary L. Schapiro10
, was also put in place who stated at her confirmation
hearing that she did not feel bound by the roadmap. The invasion of the economic and
financial crisis put a lot of pressure on the IASB to set relevant standards for the time
regarding re-classification of securities. IFRS did not allow companies to reclassify their
securities in a trading portfolio from a “trading” status to a “hold to maturity” status,
while this was possible under U.S. GAAP under certain rare circumstances. Many
companies and banks were reluctant to continue their support of the IFRS unless
adjustments were made to allow this reclassification as they were afraid of having to
recognize vast amounts of unrealized holding losses in the next quarterly earnings report.
By re-classifying your debt securities to a “hold to maturity” status, companies and banks
would not have to record any unrealized losses. The European Commission among others
pressured the IASB to issue a standard quickly, without enough time to utilize due
process, to establish such a reclassification. In 2009, the G20 international organization
sent a similar message when they called upon the Boards to improve standards on
valuation and to achieve a single set of high quality global accounting standards. The
IASB were afraid that by not listening to this pressure and acting quickly would cause
them to lose their position as the international accounting standard setter. Acting quickly
without sticking to their cores and principles of due process caused the U.S. to question
their credibility as a standard setter that could stand by its cores and constitution.
The Board of the FASB and the IASB enjoyed much joint efforts towards the
convergence but were forced to focus on the many aspects of the global financial crisis
that took place during 2008 and the following years. The pressure for immediate
standards and guidance forced the two Boards to take on more short-term projects and
perhaps set aside standards that deserved more time for research and analysis. With
changes on the Board as Chairman Tweedie of the IASB and two other Board Members
retired in 2011 and, Chairman of the FASB Robert Herz11
retiring in 2010 put more focus
on the re-structuring of the Board and its members. Evidently, the demand for global
accounting standards that was promised to be met by the two Boards convergence
projects had not yet been satisfied. (Zeff, 2011)
In late 2010, the FASB and IASB issued a convergence progress report on their
converge projects. In this report, the two Boards reaffirmed their priority to complete
their priority projects by June 30,,
2011 or earlier.
10
Mary L. Schapiro, in office 2009-2012.
11
IASB Chairman Sir David Tweedie (2001-2011) succeeded by Mr. Hans Hoogervorst (2011- ) on July
2011. Chairman of the FASB Robert Herz retired in 2010, succeeded by Leslie F. Seidman in July 2010.

of 45
The SEC continued to take a leading role in their efforts to develop a core set of
accounting standards that could serve as a framework for financial reporting in cross-
border offerings. To follow up on their support of the MoU’s signed between the FASB
and the IASB and their own roadmap issued in 2008, the SEC issued statements in 2010-
2011 of support of convergence and global accounting standards. Included in these issues
were a call for a work plan for consideration of IFRS, both as they currently existed and
after the completion of the ongoing convergence projects of the FASB and the IASB.
Based on the progress report issued by the FASB and the IASB, the SEC assumed that
converge projects would be completed and that they would then determine whether to
incorporate IFRS into the U.S. financial reporting system for U.S. issuers, and if so, when
and how. If they would make the determination to incorporate IFRS into the system, the
SEC said to believe that to require U.S. entities to report under IFRS would be no earlier
than 2015. (AICPA, n.d.)
To respond to the financial crisis, the IASB undertook a variety of projects. The goal with
these projects was to find areas that needed improvement that would hopefully prevent
such dramatic affects from happening again, should another financial crisis in the future
occur. Here are some examples outlined by Chairman Hoogervorst from a talk he gave in
early 2014, as he looked back on that time:
One fundamental question was how to apply mark-to-market accounting when there was
no active or well-functioning market. IFRS Standard 13 regarding Fair Value
Measurement was perfected with more guidance on how to determine fair value in
illiquid markets.
Secondly, improvement to accounting for off balance sheet items. The main
problem in this area had been created when looking at specific “Qualifying Special
Purposes Entities12
” in the U.S. GAAP, which had led to the spread of off balance sheet
financing in the United States. This concept was not to be found in IFRS. Decisions were
made that if you had a relationship with an off balance sheet structured entity then
disclosures are required about the nature and risks of the relationship.
The main response to the financial crisis was to reform financial instruments
accounting. A more logic approach for determining the way in which a financial
instrument is classified was introduced. This new approach was based on classifying
partly on an entity’s business model for managing their financial assets. Further
improvements to this approach were to consider whether the concept of the business
models assets were meant to be held for sale, or to generate cash flows. They also dealt
with the accounting for an entity’s own liabilities when they are measured at fair value.
Historically, if an entity’s credit quality became progressively worse so that the value of
its debt fell – that resulted in a gain being marked in profit or loss. That was adjusted and
fixed. (Hoogervorst 2014)
All these adjustments tackle many issues to lessen the effects of the financial
crisis and prevent future ones. The IASB didn’t just make progress, there was also
12
Accounting for transfers of financial assets from a company to an off-balance sheet structure known as a
qualifying special-purpose entity (QSPE). Special purpose entities are seen as a way for businesses to raise
debt levels but not have to record on your balance sheet. That increases risk-level. For an example, visit
http://people.stern.nyu.edu/adamodar/New_Home_Page/articles/specpurpentity.htm.

of 45
disappointment. In their perhaps rushed work to calm the financial storm, the IASB did
not manage to fully stay converged with the FASB on some points of issues. That
inability to deliver convergent outcomes with the FASB demonstrated the complex
instability of convergence efforts towards reaching the goal of a single set of global
accounting standards.
Following this sequence of events, the IASB added a concept for the overall
supervision for a single set of global accounting rules. They needed to deal with
development of countries own national accounting standards based on, or “consistent in
all material respects” with IFRS. The IASB recognized that those developments could be
a stepping stone on the path of adopting the full use of it, but not a substitute for
adoption. Recognition was made that there would be different paths towards adopting
IFRS. The adoption of IFRS is a voluntary decision by the legislative and regulatory
authority over accounting in each individual jurisdiction. The IASB or the IFRS
Foundation( the Trustees13
) does not have the authority to mandate the adoption of IFRS.
Countries need to establish their own procedures or mechanisms for adopting IFRS into
national law and for the correctly applying it nationally. However a jurisdiction chooses
to adopt it, the end result and goal should arrive at the same place where full adoption of
IFRS is taken place. The following is a quote from IFRS Vision out of their Pocket-Guide
version: “Convergence may be an appropriate short-term strategy for a particular
jurisdiction and may facilitate adoption over a transitional period. Convergence, however,
is not a substitute for adoption. Adoption mechanisms may differ among countries and
may require an appropriate period of time to implement but, whatever the mechanism, it
should enable and require relevant entities to state that their financial statements are in
full compliance with IFRS as issued by the IASB.” (Pacter, April 2015, p.11)
So the work goes on in trying to consider all aspects of national accounting
standards and bring them all under one global standard.
4.3 Current status of international accounting standards in the U.S.
Organizations like the SEC and the FASB have had much influence on the
convergence movement as discussed so far in this paper.
Mary Jo White, SEC Chairman, stated in May of 2014 that considering whether to
incorporate IFRS into the US financial reporting system continues to be a priority she
“hopes to be able to say more about it in the relatively near future.” (PwC, 2015).
Chief Accountant of the SEC, James Schnurr, has in recent speeches commented on
the potential for allowing the use of IFRS in the US capital markets by further allowing
domestic issuers to provide information prepared per IFRS in connection to US GAAP
financial statements without requiring reconciliation. Although Chief Accountant Schnurr
indicated that there is continued support for the overall objective of a one set of high-
quality, globally accepted accounting standards, he made a point to explain that there is
little support for the SEC to allow an option for domestic issuers to prepare their financial
statements under IFRS, and even less support to require the use of IFRS for all
companies. He believes that for the future, the only realistic path towards achieving the
objective of a single set of high-quality, global accounting standards is the continued
13
The Trustees of the IFRS Foundation are responsible for the governance and oversight of the
International Accounting Standards Board (IASB).

of 45
collaboration among the IASB, the FASB and its associated Trustees organizations
towards completing their planned converge projects. (PwC, 2015).
The U.S. is still the biggest national capital market in the world. Other parts of the
world are trying to learn from the U.S. to generate the success of the American capital
markets. This creates endless of opportunities for American companies and investors, but
they need reliable financial information to take advantage of them. Let’s take a look at
where the U.S. economy is finding connections related to the IFRS. Vice-Chairman Ian
Mackintosh shared the following observations and remarks at a recent AICPA
Conference.
American investors currently hold more than $7 trillion (2013) in debt and equity
securities of foreign companies from IFRS-required jurisdictions. It creates a tremendous
benefit for these investors by knowing IFRS. They can now compare financial statements
from across the world. See Table 3 for more details and a time line of acquired investor
debt.
IFRS is becoming more relevant for many American companies. Out of all the
Fortune 500 companies, over 50 percent are reporting using IFRS. This means that more
American companies will be able to compare against other users of IFRS, which will
increase the relevance of IFRS reporting here. Understanding IFRS also helps them
understand the reporting of competitors, potential acquisition of entities, or business
partners. Reporting over additional international subsidiaries brings more comparability
with the use of IFRS. See Table 4 for more details on this fact.
Mr. Mackintosh, with public sector experience of audit regulating in the U.K. and
Australia, also observed that the introduction of IFRS has been a great benefit for
enforcement organizations. For example, the European body of securities regulators
(ESMA) is now able to compare notes across national borders. Previously, the
applications and procedures to regulate could have been misleading and hidden behind
national GAAPs. These are now easier to expose and regulate by European regulators.
(Mackintosh, 2014)
Another good example of the progress and appeal of the use of IFRS was given by
Chairman Hoogervorst at another recent AICPA Conference. He recalled a recent listing
of high-profile Ferrari on the New York Stock Exchange. By listing in the U.S., Ferrari
set a platform for attracting U.S. investors. Ferrari was able to do this with their own
financial statements, prepared in their own country per IFRS. Ferrari took the lead in
continuing to increase the international appeal of the markets in the U.S. as a market for
establishing IPOs. Ferraris success shows the progress of the acceptance of IFRS around
the world. Mr. Hoogervorst jokingly made the following comment regarding jurisdictions
that does not yet require the use of IFRS: “For all others, including investors, we have
moved very close to a bilingual world, with only two languages: IFRS and US GAAP.
That is not perfect, but it is a heck of lot better than the Tower of Babel where we came
from. While we are happy with the still-growing IFRS family, I can assure you from
personal experience that it is not a simple task to keep all the members of the diverse
IFRS community happy. In fact, we know we cannot even begin to do so. If we did keep
try to make everybody happy, the world would soon revert to the accounting hodgepodge
that we came from ten years ago” (Hoogervorst, 2015).

of 45
4.4 Benefits of adopting IFRS.
As mentioned earlier, many of the world’s capital markets now require or allow
the use of IFRS for financial statements of entities with public-interest. The remaining
major capital markets without this requirement are:
- Japan, where voluntary adoption is allowed but no mandatory transition has
been established.
- India, which announced in January of 2015 their final roadmap to work towards
the Indian accounting standards to be significantly converged with IFRS. This roadmap is
hoping to bear fruit over the next few years.
- China, which intends to fully converge to IFRS at some undefined future date.
- The US, who have no current plans to change.
From a preparer’s perspective, being financially bilingual in the US has become
increasingly important. The consistent global adoption affects US businesses, as
additional jurisdictions allow or even require the use IFRS for reporting purposes and for
public filings. As IFRS becomes more frequently required internationally, it also affects
US companies at cross-border, merger and acquisition activities where IFRS reporting is
demanded of non-US shareholders. To attract more investors in cross-border dealings,
accommodating this demand of IFRS is important.
From an investor perspective, the importance of understanding IFRS might be
even greater. US investors continue to look overseas for opportunities to invest. As Vice-
Chair Mackintosh mentioned, large amounts of US capital is already invested in foreign
securities.
To aid prepares and investors in obtaining financial bilingual skills, understanding the
similarities and differences of IFRS and U.S GAAP is important, as well as an optimistic
mind for the future convergent changes that lies ahead. What follows is a study of
similarities and differences of the accounting standards from the Board of the IASB and
the Board of the FASB, referred to as the two Boards.
5. US GAAP and IFRS.
The primary difference between the United States Generally Accepted
Accounting Principles (US GAAP) and the IFRS is that the US GAAP is more rules-
based while IFRS is more principles-based. Rules are less flexible while principles give
preparers more options when reporting to investors. Rules are deemed useful to uphold
precision in financial reporting, but can lead to major complexity and purposeful
structuring by governing institutions of company’s operations.
The two Boards have made progress on some of the joint projects that has been
given more priority. The work of many projects continues, and the two Boards have at
times struggled to reach conclusions in some areas that follow their goal of convergent
results to bring standards together. This has resulted in delays in projected completion
dates of projects, and for some projects it has meant the full suspension of efforts.
Possible reasons of delay could be the mentioned financial crisis and also shifting
priorities of investors and regulators. To minimize the divided conclusions, the two

of 45
Boards have increased in-person meetings to see improved collaboration from working
even closer together on issues. As these meetings are happening, one could be concerned
over the effectiveness of these meetings when projects are continually delayed and
behind schedule in a world that desperately needs global guidance.
The SEC issued a Staff Paper in which they discussed the convergence of U.S.
GAAP and IFRS. I will try to expand on their findings.
5.1 Areas with Similar Objectives and Signs of Convergence.
Although the focus in this paper is on the differences between the two accounting
standards to try to understand the delay of convergence of international accounting
standards, the similarities might seem irrelevant. I will mention just a few. Out of the
large tree of convergence projects, some good fruit and positive results has been
harvested. IFRS and U.S. GAAP standards have developed similar objectives, or have
become substantially converged. The following are some of the areas where proof of
convergence is found:
5.1.1 Business Combinations: The two standards (U.S.GAAP and IFRS) now contain
similar requirements and principles for accounting for business combinations. Both
standards require the acquisition method of accounting for business combinations in
which assets, liabilities, and non-controlling interests of the acquired entity are
recognized and measured at fair value.14
This principle still has significant differences
that will be discussed later in this section.
5.1.2 Debt: Both standards require most financial liabilities to be measured at amortized
cost on the financial statements, although a fair value option is available for qualifying
instruments (which may differ slightly between the two standards). Interest expense
accrues similarly under both standards. In 2014, The IASB completed a reform on
financial instruments accounting as its comprehensive response to the financial crisis by
issuing IFRS 9 Financial Instruments. This has been one of the major long-term projects
of the two Boards.15
5.1.3 Earnings per Share: Both standards contain similar requirements for calculating
earnings per share. Both standards asks for calculations of both basic and diluted EPS for
entities with publicly-traded shares. Differences still exists in the detailed requirements
and calculation methodologies.16
(SEC, 2012).
5.2 Significant Differences.
Differences still remain between the two standards. This is due to a variety of
possible reasons. The two Boards originally had different objectives in developing their
standards. Perhaps the two Boards had different views on how to communicate the
14 For more details on Business Combinations, see Section III.X of SEC’s “A Comparison of U.S. GAAP
and IFRS. A Securities and Exchange Commission Staff Paper”.
15 For more details on Business Combinations, see Section III.R of SEC’s “A Comparison of U.S. GAAP
16 For more details on Business Combinations, see Section III.B of SEC’s “A Comparison of U.S. GAAP

of 45
economics meaning and signals to investors, or that the standards were developed at
times where the objectives were generally different. The two standards were also
developed in different regulatory environments. The standards setters had to respond to
these regulations. These are among other fundamental differences between the two
different standards that are difficult to merge because of their origin. Some significant
areas are:
5.2.1 Impairment Testing: The impairment recognition and measuring models of PP&E,
intangible assets such as goodwill, and inventory are different between the two standards.
The IFRS model allows for reversals of impairments up to a certain amount if there is an
indication that an impairment loss has decreased, whereas the U.S. GAAP disallows any
reversals. Because of this difference, significant differences are found in the timing and
extent of impairment losses. The flexibility of this approach, would allow U.S. issuers to
have more volatility in their income statements should this model be required in the
U.S.17
5.2.2 Inventory: IFRS does not allow for the use of the LIFO costing methodology for
inventory while it is allowed under U.S. GAAP. The SEC observed that this difference is
more of an issue in tax policy rather than financial reporting, but this difference could
also have significant impact on operating results, in financial reporting18
.
5.2.3 Research and Development: Under U.S. GAAP, costs for R&D activities are
normally expensed as incurred. IFRS also expenses costs incurred, but also allows for
costs that meet certain criteria to be capitalized. This creates a significant difference in
timing of recognition of costs and affecting amortization of assets over its useful life.19
5.2.4 Depreciation of PP&E: Under IFRS, an item is separated into each part that makes
up that certain item. If the cost of a part of an item is significant in relation to the total
cost of the item, that part needs to be depreciated separately. Each part meaning a
separate asset. This method is referred to as “asset componentization”, or the component
approach. Under U.S. GAAP one item is usually depreciated over the useful life of the
item as a whole. Asset componentization is not disallowed in the U.S.
Differences are found in specific areas of financial reporting. Important aspects of
these differences are also found in how they are more and less specific to certain
industries. The U.S. GAAP is a more developed standard with additional and specific
guidance to companies in certain industries. This is tailored to the needs and work of
businesses, reporting, and regulatory environment in the United States. The IFRS does
17 For more details on Business Combinations, see Section III.K (PP&E), III.H (inventory), and III.J
(intangible assets) of SEC’s “A Comparison of U.S. GAAP and IFRS. A Securities and Exchange
Commission Staff Paper”.
18 For more details on Business Combinations, see Section III.H of SEC’s “A Comparison of U.S. GAAP
19 For more details on Business Combinations, see Section III.V of SEC’s “A Comparison of U.S. GAAP

of 45
not have this feature as it instead applies broader principles for all industries. This has to
do with the history of how these two standards were historically developed.
Historically in the US, there were different types of standards issued. The
accounting guidance proposed by different standard setters20
was intended to address
industry-specific matter, particularly in situations in which the broader guidance seemed
unclear and would result in less relevant information for companies operating in a certain
industry. Later, the FASB assembled accounting standards to what we have as the
Codification. The Codification was compiled from the historical standards that included
special guidance for industry issuers.
5.3 Study of Convergence and Differences of Areas in Greater Detail.
To better understand the differences and similarities of the standards, I’ve chosen to
research a few topics in greater detail. There are many areas that would be appropriate to
carefully study. My introduction of US GAAP being more tailored to industries helps us
understand where differences are found, since IFRS is minimal industry-specific.
Perhaps someone would suggest studying other areas, but these are the areas I’ve chosen:
5.3.1 Revenue Recognition.
One of the long-term convergence projects the two Boards have worked on for a long
time has been the standard on Revenue Recognition. In May 2014, the Boards completed
the project and issued “Revenue from Contracts with Customers”, and were originally
expected to take in effect for companies with year end of 2017. This effective date
however, has been pushed back by a year. This new standards is expected to eliminate
many of the existing differences in accounting for revenue between the two current
standards. Due to the industry-specific guidelines of US GAAP, many companies who
are covered by this standard will be affected. Until that effective date, differences still
exists. 2 examples helps illustrate industry-specific US GAAP directives, and how it
creates differences from IFRS.
Telecommunication providers provide activation services. Cable television
companies provide connection services. Even though they are often economically similar,
the US GAAP guidance differs on the treatment of these transactions. As a result, the
timing differs of revenue recognized for these economically similar transactions.
Dealing with software, US GAAP requires revenue recognition to be done with
the use of vendor-specific objective evidence (VSOE) of fair value in determining an
estimate of the selling price. VSOE in revenue recognition is commonly used by
companies with services in multiple-element bundles. It enables companies to recognize
revenue on specific item as part of a multi-item sale. It puts focus on the fair market value
of the individual item sold, as opposed to the assigned sales value of the items included in
the bundle. IFRS does not have a similar specific guidance.
In revenue recognition, we can easily see the truthfulness of the claims that IFRS being
more principles-based, and that US GAAP is being more rules-based.
20 Different types of standards came from multiple standards setters that served different purposes. These
were for example, FASB Statements, the AICPA’s industry Audit and Accounting Guides, the SEC, the
EITF (Emerging Issues Task Force) etc. Even though these organizations had different types of authority,
their proposals were very good and thoughtful which lead to consideration by higher authority.

of 45
General Revenue Recognition Standards
Another aspect of revenue is regarding how service revenue should be recognized.
IFRS requires that service transactions be reported for by use of the stage of completion
of the transaction (the percentage-of-completion method)21
. The stage of completion
could be identified by using a variety of different methods, including the cost-to-cost
method22
. Companies frequently recognize revenue on a straight-line basis if services are
carried out by a number of acts over a specified period of time. If the outcomes of a
service cannot be measured reliably, revenue may be recognized to the amount of
recoverable expenses incurred. A zero-profit model would be used, as opposed to a
completed-performance model. Basically, if the outcome of a service is so uncertain that
the recovery of costs is not probable – revenue would need to be deferred until a more
accurate estimate could be made.
21 The percentage-of-completion method is generally the required method of financial accounting of larger
construction companies for long-term contracts. The percentage-of-completion method attempts to
recognize revenues and gross profit in the applicable periods of construction, and not only in the period
when the construction has been completed, as in the completed contract method. The degree of completion
of the construction, i.e., the percentage-of-completion, is typically estimated by dividing the total
construction costs incurred to date by the total estimated costs of the contract, or job.
22
The cost-to-cost method is an underlying component of the percentage of completion method. The
formula for the cost to cost method is to divide all costs recorded to date on a project or job by the total
estimated amount of costs that will be incurred for that project or job. The result is an overall percentage of
completion that is then used for billing and revenue recognition purposes. The cost to cost method is a
favored approach by those who want to recognize the largest possible proportion of project revenues in the
early stages of a project, since most of the direct material costs are incurred at the beginning of a project.
US GAAP:
Guidance focuses on
revenue being either realized
or realizable, and then
earned. It is considered to
involve an exchange
transaction, where revenue
should not be recognized
until an exchange transaction
has occurred.
Industry-specific guidance,
as illustrated in the example
of using VSOE above, goes
further than the general
requirements of US GAAP.
IFRS:
Two primary revenue
standards capture all revenue
transactions within one of
four groups: Sale of goods,
Rendering of Services,
Other’s use of an entity’s
assets (royalties etc.), and
construction contracts.
Criteria for each of these
groups include the probability
that the economic benefits
linked to the transaction will
go to the entity, and that the
revenue and costs can be
measured reliably.
The concept of using VSOE
of fair value does not exist
under IFRS.

of 45
US GAAP generally prohibits the use of the cost-to-cost revenue recognition
method. The exception is if the contract of the arrangement is covered by the specific-
industry guidance for construction. Companies would apply the completed-performance
model. When output measures are not reliable or does not exist, input measures may be
used. Revenue is deferred if a service transaction cannot be measured reliably.
The earlier mentioned recent standards on revenue recognition “Revenue from Contracts
with Customers” will now be found in both IFRS and US GAAP standards. This standard
includes guidance that a company will use to report useful information about the amount,
nature, timing, and uncertainty of revenue and cash flows generated from its contracts to
provide services and goods to customers. The standard outlines five steps23
for
recognizing revenue from contracts:
- Identify the contract with a customer
- Identify the performance obligations in the contract.
- Determine the transaction price.
- Allocate the transaction price to the performance obligations.
- Recognize revenue when, or as, each performance obligation is satisfied.
(PwC, 2015).
It will be interesting to see whether these standards, when effective, will have an impact
on companies who are currently using industry-specific guidance on recognizing revenue.
My understanding is that this new standard will replace all currently existing IFRS and
US GAAP revenue recognition guidance, including industry-specific guidance. The IFRS
is allowing early adoption of this standard, but effective one year past the original issued
effective date which was January 1, 2017. The US GAAP standard was originally going
into effect after December 15, 2017 but has together with IFRS pushed back the date by a
year. However, US GAAP will permit companies to adopt this standard as of the original
effective date. In reading companies recently filed 10-K’s with the SEC, they are
following the invitations to evaluate how this new standard might affect their business
activities and plan accordingly to be ready to adopt this standards when it goes into
effect.
5.3.2 Consolidation Accounting.
The principles-based framework of IFRS is shining through when we consider the
approach IFRS takes to consolidation. IFRS offers some guidance on when it is clear that
an entity has control over another, which then requires consolidation. IFRS gives certain
indicators to look if control isn’t certain by looking at voting rights, such as considering
the benefits and risks between the parties. The consolidation model used by IFRS focuses
on determining whether control is found in the existence of a parent-subsidiary
relationship. A parent is deemed to have control over a subsidiary when it has power
through rights that gives it ability to direct the activities that significantly affects the
returns of the subsidiary. As a result of its involvement, it must also be deemed to have
exposure to the variable returns, either positive or negative.
23
For more details on the five steps, see ASC 606 of the Codification, and IFRS 15.

of 45
US GAAP uses a two-level system for consolidation. Previously, consolidation
was a rather mechanical process. Determining whether to consolidate or not was solely
based upon ownership (voting rights) percentage. Due to the events surrounding the
Enron Scandal, the FASB recognized the need to deal with the problem companies
removing assets and liabilities from their balance sheet. FIN 46 was issued as an
interpretation of the US GAAP, and introduced a new concept of determining control by
exercising economic power over an entity. The power to influence financial results and
decision making through rights and obligations by contract and by the exposure of risk is
considered major factors that should lead to consolidation. The concept of declaring an
entity a “variable interest entity” is applied when you have clear economic influence over
that entity. The reason why this concept was introduced as an interpretation of the US
GAAP and not as an accounting standard was because of the need to issue the
interpretation standard relatively quick to respond to the events surrounding the Enron
Scandal.
This model meant more work for companies as it requires the evaluation of every
relationship that a company has with related parties and even third-parties. The voting
interest model wasn’t fully abandoned by the introduction of the variable interest model,
but the direction is to use the variable interest model first, and if the entity is not deemed
a VIE (variable interest entity), then a company would move to utilizing the voting rights
model. In certain circumstances, the variable interest model could result in a
deconsolidation of an entity that otherwise would have been deemed to be consolidated
under the voting interest model. (GAAPLogic, n.d)
Differences arise when studying how these economic benefits and variables are
evaluated when consolidation assessments consider more than just voting rights.
Additionally, consolidation differs under the two standards when a subsidiary’s set of
accounting policies differs from the parents. Because of industry-specific guidance under
US GAAP, it is acceptable to apply different accounting policies within a consolidation
group of entities to deal with relevant issues to certain specialized industries. This
exception to the requirements of comparability does not exist under IFRS.
Differences are also found in matters of determining when control is attained.
Aside from the US GAAP, both standards utilize the voting rights concept, or the voting
interest model. Control is then said to exist when a parent owns more than 50 percent of
an entity’s voting power. Under both standards, control may also exist when a company
has less than 50 percent ownership, but has legal or contractual rights to control either the
majority of the entity’s voting power or the board of directors. IFRS now goes further in
discussing control, by using two concepts named “De Facto control”, and “De Jure
control”. De jure control of a company exists when a person, or group by virtue of
shareholdings, has the power to elect the majority of the board of directors. De facto
control is less clear-cut, as it arises from questions of direct and indirect influence. To
understand these concepts better of who controls a company, I’ve found a court case that
took place in Canada between companies involved in a consolidation dispute that would
affect their taxation. The following is a sequence from a summary of the case, which has
the language of a family illustrated, we can understand how de facto control is present
based on factors found in this case: “In this case, two corporations were controlled by
elderly parents, while a third was controlled by their children. The parents' corporations

of 45
had no employees or separate premises, and the corporation controlled by the children
was the sole client of the parents' corporations. The father suffered from Alzheimer's
disease and the mother's involvement was very limited. All operational decisions for the
parents' corporations were made by the children and the controller of their corporation.
The children's corporation was found to have de facto control of the parents' corporations
based on the following factors:
• the operational control exercised by the children's corporation;
• the economic dependence of the parents' corporations on the children's corporation; and
• the family connection between the shareholders.
The FCA concluded that the parents had relegated to the children's corporation
the decision-making powers they had held as shareholders of their corporations. The
judgment rendered by the court shows that before recognizing de facto control, it sought
to determine whether the influence went beyond the day-to-day operations of the
business. “(ST-ONGE, F, 2005).
The concept of consolidation accounting is becoming more and more common, as
companies invest in merger and acquisition agreements. Although IFRS is usually viewed
as more principles-based than US GAAP, IFRS does have some specific guidance on this
concept, especially on determining whether control is found in company-relationships. It
makes sense to me that consolidation should not be as simple as just looking at
percentage of ownership to determine control. This would make it too simple to move
and “sell” your assets to a different entity who could hold those assets and liabilities for
you while you enjoy recording the earnings they generate, even though they are not found
on your records. Increased guidance to consider economic factors are important, as
illustrated by the VIE model used by GAAP and the specific guidance given by IFRS.
REQUIREMENTS TO PREPARE CONSOLIDATED FINANCIAL STATEMENTS
US GAAP:
Industry-specific guidance
allows consolidation of
controlled entities by
certain types of
organizations, such as
investment companies.
For example, investment
companies measure their
own investments at fair
value, and any other
investments in which they
have a controlling financial
interest.
IFRS:
Parent entities must
consolidate all subsidiaries in
financial statements, except
when the subsidiary is a
wholly owned subsidiary,
when the parents’ debt or
equity are not publicly traded.
When parent only-financial
statements are prepared,
investments in subsidiaries
are accounted for at cost.

of 45
5.3.3 Long-Lived Assets to be held and to be used for sale: Impairment Testing.
The primary differences dealing with non-financial assets that are to be held or to be
used, relates to impairment indicators, measurements and recoveries of already impaired
assets.
It is important to break out the different parts of impairment testing to easier understand
the significant differences and similarities.
When looking at volumes and unit of accounts to evaluate for impairment, US
GAAP looks at asset groups. An asset group almost always includes several assets. IFRS
on the other hand, carries out their impairment testing on an individual level whenever
possible.
US GAAP, ASC 350, requires a two-step impairment test and for measuring
impairment. First, the carrying amount, or the book value, is compared with the
undiscounted cash flow. If the carrying amount is higher than the undiscounted cash
flows, an impairment loss is found and need to be recognized. Second step is to record
that impairment loss, which is measured as the difference between the carrying amount
and the fair value24
of the asset.
IFRS, IAS 36, only uses a single step in their impairment testing of what they
refer to as a CGU (Cash Generating Unit). The carrying amount here is compared to the
recoverable amount. The recoverable amount is the higher of the assets fair value less
costs to sell25
, or the assets value in use26
. When the carrying amount is greater than its
recoverable amount, an impairment loss is recognized.
Many companies under US GAAP perform their impairment testing during the fourth and
final quarter of their fiscal year. As changes in market interest rates fluctuate, US GAAP
does not consider that to be an indicator for impairment testing. IFRS views changes in
interest rates in the market as potential triggers for impairment, and is therefore
considered to be an indicator for that purpose.
Under US GAAP, reversal of impairments is not allowed under any
circumstances. IFRS usually does not allow reversals, unless certain criteria are met. For
an asset for which an impairment loss has been recognized previously, the entity must
perform annual reviews for any indicators of reversal. If an indicator is found, the entity
should estimate the recoverable amount, and past recognized impairment losses are
reversed up to the new recoverable amount. The ceiling for impairment reversals is the
initial carrying amount of the asset that was originally adjusted for depreciation. (PwC,
2015)
The overall differences in impairment testing under IFRS, might lead to recognition of
impairments of long-lived assets held for us or sale earlier than recognized under US
GAAP.
24 Fair value is defined as the price for which the asset would sell for on the market on the
impairment measurement date. Fair value price should be based on the assumption of market
participants.
25 Fair value less costs of sell represents the price that would be received to sell an asset or be paid to
transfer a liability, in a transaction between people on the market less costs of disposal.
26 Value in use represents the present value of future cash flows expected out of asset.

of 45
6. Adoption of IFRS.
This part of my research focuses on parts of the world who have adopted IFRS
and have allowed, or even required, it to be a standard that should guide jurisdictions in
their own approach to financial reporting. As mentioned earlier, the ultimate goal of the
IASB is to achieve a single set of high-quality globally accepted accounting standards.
Jurisdictions creating their own national standards per the IFRS standards should not take
its place, but is an enormous step towards that objective. Learning about country’s
motives and adoption process of IFRS can return understanding of the benefits and costs
thereof. I will take a look at jurisdictions and communities who have adopted the use
IFRS to learn how it has affected them. I have identified two groups for this part of the
research. With the help of recent reports and research, I will look at the European
Commission’s experience with adopting IFRS. Although countries in the EU jointly
decided to adopt IFRS, it was closely related to the establishment of the IASB itself. As
the EU imposed the use of IFRS on its member nations, it doesn’t fairly give an
understanding to each country’s individual motives to adopt IFRS. Therefore, I will also
look at a few countries outside of the EU that have adopted the use of IFRS.
6.1 IFRS adoption in the EU.
Like in many parts of the world, the globalization of the financial markets in
Europe led to the need to find a common set of standards for public companies with
frequent cross-border trade. Many of these companies had to prepare additional sets of
financial information per other national GAAPs to engage in international trade. More
work and more costs highlighted the need for common ground. After rejecting the IASC
for some time, the EU saw interest in adopting IFRS for its members soon after the re-
structuring of the IASC into the IASB. In 2002, the European Parliament decided to
apply IFRS for publicly listed companies in the EU markets by issuing Regulation
1606/2002(“IAS Regulation”) to eliminate additional reconciliation work between
national standards of its member nations. This regulation is referred to here as “the
regulation”. This regulation meant that consolidated financial statements of listed
companies with securities traded on a regulated EU market were to be prepared in
accordance with IFRS. The regulation took effect in 2005, which gave jurisdictions time
to prepare for this adoption.
After 10 years of requiring and applying IFRS, the European Commission put
together a report that looked back at the regulations objectives and evaluated whether
these have been achieved. This report, published in 2015, discusses the methodology for
the regulation, and the outcomes of adopting IFRS for its members. The report is based
upon views and feedback from stakeholders, informal expert groups and the Accounting
Regulatory Committee which includes regulatory representatives of all member nations
of the EU.
The main objective of this regulation was to “harmonize the financial reporting of
listed companies by ensuring a high degree of transparency and comparability of their
financial statements in order to enhance the efficient functioning of EU capital markets
and of the internal market”. Attached to this objective was the hope and importance of
global convergence efforts to help IFRS become globally accepted so that EU companies
would be able to compare and compete equally for financial resources in the markets
outside the EU. Feedback from stakeholders said that the EU’s decision to adopt IFRS

of 45
would be a great step for credibility and acceptance of IFRS globally. Today, over one
hundred countries allow the use of IFRS. International organizations such as the G20,
Financial Stability Board (FSB), World Bank, International Monetary Fund and Basel
Committee on Banking Supervision all support the acceptance of IFRS globally. The
limitations on the global application of IFRS are still held up by countries like China and
the U.S. As mentioned earlier in this paper, the SEC lifted the reconciliation requirement
to US GAAP for foreign companies with US listing. Their IFRS prepared financial
statements are now accepted, which is an important benefit and step towards
convergence.
The Commission sought to find evidence of effectiveness through improved
transparency and comparability, which then would give them assurance of that the IFRS
standards were of good quality. The findings from collected views and feedback showed
that the regulation has increased the transparency of financial statements because of
improved accounting quality and disclosure, and higher value-relevance27
of reporting.
This has led to more accurate market expectations, including correctness of analysts
forecast and statements of the future. Financial statements prepared under IFRS have
therefore been good, indicating that the standards are of good quality. Still, there is critic
of the standards limitations to apply to industry specific matters. The Commission argued
that complexity in standards is just a mirror of the complexity of the fundamental
complexities in the overall market. Although the standards are not industry specific, they
were rather flexible enough to accommodate most businesses models.
The EU recognized another necessary element for successful adoption of IFRS to
its member nations. To ensure high quality financial reporting, it would be crucial to have
proper and full enforcement. Although the required application of preparing consolidated
financial statements per IFRS would be EU-wide, the enforcement of accounting
standards is the responsibility of the individual member nation. The European Securities
and Markets Authority (ESMA) are carrying out coordinating activities to enhance the
joint supervisory convergence to ensure correct use of IFRS in the EU. I would highlight
this as a limitation to the adoption of IFRS for a community of members where
governmental environments and enforcement differences exists between the members. As
national GAAPs are eliminated and accounting standards converge, how could
enforcement procedures converge as well? Who would do it better? Organizations such
as ESMA play a crucial role in calling upon the member nations to enforce consistency
and proper use of IFRS.
This regulation also sought to improve capital market outcomes. Evidence was
found of higher liquidity, lower costs of capital, increased cross-border transactions,
easier access to capital at the EU and at the global level, improved investor protection,
and increased investor confidence. Although these improvements should not be linked to
the regulation to use IFRS alone, the EU recognizes these as fruits of this decision. The
bottom line is that the regulation has had positive economic outcomes.
There are many arguments that speak about whether the regulation intensified the
effects of the financial crisis on the global market. As discussed earlier in this paper,
many multi-national companies found themselves in a frustrating situation with valuation
27
Value relevance is defined as the ability of financial statement information to capture and summarize a
firm’s value. Value relevance is measured as the statistical association between financial statement
information and stock market values or returns.

of 45
and classification of financial instruments- specifically with the use of fair value prices to
value financial instruments. In times of depressed and desperate markets, values can be
exaggerated. On the other hand, financial instruments such as bank loans are reported at
cost with a constant need to evaluate whether customers will pay loans back. The
standard to apply of loan impairments at the time of the financial crisis was criticized for
having led to” too little, too late” guidance. Short term guidance was given at the time,
and after a longer due process, the IASB issued a new standard in 2014 for financial
instruments known as IFRS 9.
The Commission sought to find evidence of efficiency by evaluating whether the
yielded benefits of IFRS had outweighed the costs. The report explains that a traditional
cost-benefit analysis in monetary terms is difficult to use as there is an unequal
distribution of costs and benefits in this case. Costs are primarily incurred by companies
that are preparing financial statements per IFRS whereas the benefits are shared by those
companies, but also by users of financial statements like investors, and the broader
economy. The distribution also depends on the traits and model of company such as its
size and amount of international operations. The unevenly distributed benefits could be
dependent upon factors such as effectiveness of enforcement in each country, variations
in incentives to adopt IFRS, and whether firms and countries rely upon domestic or
foreign sources of financing. The regulation required all listed firms to prepare their
financial statements per IFRS, but it also left the member nations with the option to
extend and impose this regulation on non-public firms as well. Views and feedback from
stakeholders included suggestions of future lighter versions of IFRS with reduced
disclosures for listed subsidiaries. This seems to translate into difficulties for smaller
companies to go public under IFRS. It was noted that the cost of adopting IFRS perhaps
presented an obstacle for initial public offerings for smaller and mid-size companies.
In reviewing the original objectives of the regulation, the Commission wanted to
look at whether the objectives had remained relevant. At the time of the regulation, there
were limited level-playing fields for companies with listed securities across the EU
capital market. Then and now, the increasing globalization of capital markets has made
the need for one financial reporting language even more relevant. The adoption of IFRS
by the EU has helped level that playing field. The regulation specifies that as condition to
be brought into the EU, IFRS must contribute to the European public good. How does the
regulation define “public good”? It didn’t, but the Commission said it may mean the
broader financial and economic stability. It is necessary to evaluate whether accounting
standards could be harmful to the economy or particular stakeholders, especially when
reflecting upon the financial crisis.
The EU recognized areas of improvement for countries in following and
practicing IFRS standards. They’ve identified a need to perfect translations of IFRS into
certain languages that could eliminate practical differences in applying the standards, and
conflicting text guidance coming from the IASB and the EU. This gap of differences
needs to be closed for full and proper coherence to IFRS. The report states the following
regarding the complexity of enforcing IFRS: “ The evidence suggested that although
IFRS, regulatory requirements, tax and capital maintenance rules may impose different
reporting requirements on companies, such differences are largely considered to be

of 45
proportionate and legitimate given the array of objectives pursued” (European
Commission, 2015).
Even though differences still remain, there has been no other recognized
alternative to IFRS in the EU and the overall outcomes of the regulation have been
positive. The regulations objectives of achieving effectiveness and efficiency have been
reached, but the objectives are still relevant to continue to pursue. Thus the report notes
that the regulation to adopt IFRS for EU and its members have added value to Europe by
reducing cross-border barriers of trade through a common accounting language. The
Commission is also pleased with the decision to give the member nation the option of
making the use of IFRS mandatory on all companies or only some. This allows for the
proper adoption of IFRS with respect to each member nations specific economy and legal
environment.
The EU is now looking to move forward and take on criticism and suggestions
that they have received from the public, stakeholders and experts during the time this
report was put together. The Commission is now discussing what more can be done to
accommodate the needs of smaller business and the complexity they are finding in the
use of IFRS. The IASB has recently come out with “IFRS for SMEs” (Small & Medium
Size Entities). This standard is worth reviewing to see if it pursues the objectives of the
regulation, and gives small & medium size entities a fair chance to grow.
The Commission is determined to support IFRS as a global standard and will
continue to encourage the SEC and other global jurisdictions to adopt IFRS for use by its
domestic companies. The objectives of effectiveness and efficiency as they continue to be
relevant will be reached as the standards created by the member nations are developed
per IFRS and receive proper support and endorsement28
by the Commission. As
enforcement of coherence to IFRS and national accounting standards will continue to be
done by each individual nation, the Commission will continue to encourage member
nations to align with the ESMA enforcement guidelines (European Commission, 2015).
Additional academic research found positive reactions to the adoption of IFRS in
Europe. Positive reactions regarding expected changes in information environment,
where research found a positive reaction for European firms with lower pre-adoption
information quality and higher pre-adoption information asymmetry, which is consistent
with investors perceiving that the benefits associated with IFRS adoption will outweigh
the costs. Research also found that investors react less positively for firms domiciled in
code law countries, which are likely to have weaker enforcement of accounting standards.
This connects to earlier discussion on importance of adoption of new accounting
standards being accompanied with proper enforcement. Overall, findings from academic
research are consistent with investors expecting the benefits associated with IFRS
adoption in Europe to exceed the expected costs. Our findings indicate that investors
expected net benefits associated with increases in information quality, decreases in
information asymmetry, more rigorous enforcement of the standards, and convergence
(Armstrong, et al, 2010).
28
IFRS issued by the IASB are endorsed by the Commission under a comitology process. An endorsement
process remains necessary to ensure that the standards developed by a private body meet certain criteria
and are fit for the European economy before becoming part of EU law.

Research IFRS

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (17)

Similar to Research IFRS

Similar to Research IFRS (20)

Research IFRS