Accounting practices have long been debated in the United States. Currently, the United States requires companies to follow the GAAP method of financial reporting. GAAP or Generally Accepted Accounting Principles, has been serving this country for years. However, with increasing cross-border financial activity, it is time to adopt new rules. IFRS, or International Financial Reporting Standards, is currently the standard for many countries in the world. At present, about 120 countries and jurisdictions require or permit the application of IFRS as usual accounting practices (IFRS FAQs). Most of the world's largest economies require the application of IFRS except the United States, Japan, India and China. However, Japan is currently allowing voluntary use of IFRS and India and China plan to fully converge IFRSs ("IFRS in the US"). The SEC has long been discussing and supporting the IFRS change and eventually taking action.
The United States should adopt the IFRS methodology to harmonize financial activities globally. Companies are no longer within the limits of their own limits. Now, as ever, there is a worldwide need for cohesion in accounting practices. In order for the United States and its companies to remain competitive, they must be involved in this global trade. However, without the standard of financial reporting it will be difficult for companies to keep up (Iwata). The two different methods can not be compared between companies. Foreign investors may be tired of the GAAP reporting companies, as they have different reporting rules that are long and complicated. Mergers and acquisitions with foreign companies are likely to require the application of IFRS. Global business companies or companies with foreign investors may require that some of their business financing be converted into IFRSs, depending on the country or location of the subsidiaries. The transition to IFRS will also benefit companies that seek to attract global capital. For many, this is currently an untapped market that can be very profitable for business (IFRS FAQ).
In the past, opposition to the adoption of IFRS has come from those who deal with reorganizing part of the accountants. While this may be true, most accountants are likely to have been exposed to IFRS. Many accountants may need to apply IFRS for certain activities and the growing population of accountants and other financiers coming from the dormitory is already working on IFRSs. National business schools teach students about both accounting principles and work done in accordance with the two standards. Likewise, US GAAP changes were often followed by IFRS and simplified the transition to the international standard ("IFRS in the United States").
The financial impact of US companies and investors in IFRS is also disputed. Several studies have been carried out that have produced many positive results for American companies and investors. Yours sincerely, Leuz and Wysocki have stated that the Single Accounting Standard can result in higher market liquidity, lower capital costs and higher capital withdrawal. They found that long-term comparability benefits continue to increase (Hail, Leuz and Wysocki). Apart from the financial benefits, Yoga, Leuz and Wysocki have also found other great benefits. First, the introduction of IFRS has political benefits as a sign of international harmonization and cooperation between the United States (Hail, Leuz and Wysocki).
Overall, there are many advantages for the US in applying IFRS. IFRS application is beneficial for companies that want to compete and operate globally without having to work between different accounting principles. Students and professionals are already taught using IFRS, which makes GAAP much simpler. Finally, there are many financial and political benefits to the international accounting standard. In addition, many leaders in the industry express the consistency of accounting principles. Sir David Tweedie, former President of the International Accounting Standards Board, strongly supported the support of a global accounting system (Iwata). In addition, companies such as the Accounting Service, Price Waterhouse Cooper, also have the need for accounting principles ("IFRS in the United States"). The time has come for the United States to permanently hear and accept the IFRS.
Welcome, Luzi, Christian Leuz, and Peter Wysocki. "Global Accounting Convergence and US IFRS Acceptance (Part II): Political Factors and Future Scenarios for US Accounting Standards." Accounting Horizons 24.4 (2010): 567-588. Business resource complete. Web. November 10, 2015
"IFRS FAQs". IFRS resources. AICPA, 2015. Web. November 10, 2015
"IFRS in the United States: the importance of financial bilingualism". PwC. PwC, February 2014. Web. November 10, 2015.
Iwata, Edward. "The United States has considered international accounting rules." USA today. USA Today, January 6, 2009 Web. November 10, 2015