At a Crossroads: The Impact of International Financial Reporting Standards in the U.S.

Public companies in the United States face a new challenge. As set forth in its roadmap for implementation, the Securities and Exchange Commission (“SEC”) is considering the potential use of financial statements prepared in accordance with international financial reporting standards (“IFRS”.) The chief goal of these global standards is to establish a uniform system to improve comparability of companies’ financial positions. For decades, Generally Accepted Accounting Principles (“GAAP”) have been the framework of financial statement preparation for public companies in the U.S. The movement to IFRS represents an unprecedented change in the basis of financial reporting, since IFRS would supersede GAAP. This paper examines the current status of the SEC plan and a variety of issues raised by the U.S. transition to IFRS. Some fundamental accounting differences between IFRS and GAAP, the impact of IFRS on financial statements, the benefits and costs of adoption and the obstacles to implementation of IFRS in the U.S. are among the issues discussed.