Question

Consider the question of whether the United States should converge accounting standards with IFRS. 

 

Required: 

1. Make a list of arguments that favor convergence. 

2. Make a list of arguments that favor nonconvergence. 

3. Indicate your own conclusion regarding whether the United States should converge with IFRS, and indicate the primary considerations that determined your conclusion.

Answer 1

IFRS and US GAAP

US GAAP (Generally Accepted Accounting Principles) is the standards for accounting and financial reporting in US, whereas IFRS (International Financial Reporting Standards) is the international standards for accounting and financial reporting.

 

1.

Of late opinion is gathering momentum that US GAAP should adopt IFRS and therefore there should be convergence of US GAAP with IFRS.

Following are the arguments in favor of the convergence:

 

• Renewed clarity: As a result of the convergence, there will less doubts and differences about the application of accounting standards.

 

• Possible simplification: By removing complex regulatory framework from the US GAAP, the accounting standards could be made simple.

 

• Transparency: As a result of the convergence, ambiguity and complications can be removed to make the standards transparent.

 

• Comparability: As a result of convergence, the single set of global standards will help comparability of financial reporting and facilitate capital flows and economic growth.

 

2.

The arguments against the convergence of US GAAP with IFRS are as follows:

 

• Unwillingness: Many argue that US standards should better remain customized to cater to the stringent legal and regulatory framework. Moreover it may be difficult to collaborate different cultures, ethics, beliefs, religious and political environment.

 

• Time aspect: Due to diversity in standards, cultures, ethics and more, sufficient time is required to adopt the IFRS standards.

 

3.

In my opinion there should be convergence of US GAAP with IFRS. This is because of the following reasons:

 

• Globalization of business: On account of globalization of business, IFRS being the international standards is most suitable for the business environment.

 

• SEC (Security and Exchange Commisions): SEC always endeavor to pursue achievement of fair and efficient capital market and have to provide investors with accurate, timely, comparable and reliable information. Hence, SEC pursue to uphold the domestic quality of financial reporting as well as encouraging the convergence of US and IFRS standards.

IFRS and US GAAP

US GAAP (Generally Accepted Accounting Principles) is the standards for accounting and financial reporting in US, whereas IFRS (International Financial Reporting Standards) is the international standards for accounting and financial reporting.