THE INTERNATIONAL FINANCIAL REPORTING STANDARDS AND THEIR ADOPTION IN THE UNITED STATES: PROBLEMS, TENDENCIES, PERSPECTIVES

Abstract

The standards issued by the International Accounting Standards Board (IASB) based in London are generally considered a comprehensive, overarching set of principles, approaches, models, and general rules developed to be applied by certain undertakings for accounting and financial reporting purposes. Currently, 144 jurisdictions require all or most publicly listed companies to use the International Financial Reporting Standards, and another 12 jurisdictions allow their use. Although the International Financial Reporting Standards have been almost globally accepted in recent decades, it is symptomatic that the country with the largest capital markets in the world remains cautious, insufficiently enthusiastic about radical change, and still seems reluctant to take action to fully incorporate the International Financial Reporting Standards (IFRS) in its financial reporting system.
The issues hypothesized to exist and trends that have emerged in recent decades, as well as political, institutional, and professional approaches and attitudes towards the eventual adoption of International Financial Reporting Standards as issued by the IASB and instituting the IASB’s standards (IFRS) as a domestic financial reporting regime in the United States, are the subject of this article. The objective that is the focus of the author’s research is to identify and explore the main reasons for not (yet) adopting IFRS in the United States, for the time being, and to find out a reasonable explanation. The issue is significant and has for long been and continues to be the focus of in-depth scholarly debates and discussions among the academic and professional community.
Compliant with the main goal of the author, the article explores the essence of the reasons for existing dissimilarities, differences even contradictions in scientific, regulatory, and professional standpoints, opinions and judgments, expectations, and attitudes regarding the possible adoption of IFRS in the United States, the uncertainty surrounding the issue, and the likelihood of this uncertainty to continue to exist. Based on research and analysis, a conclusion is reached regarding the primary factors under the predominant influence of which the process is most probably slowed down and the adoption of the IFRS as a financial reporting basis for American public companies, local issuers, is delayed.
The results of the investigation of relevant literature and the comparative analytical investigations of the author reveal that in the foreseeable future the competent authoritative institutions of the United States do not intend to completely incorporate the International Financial Reporting Standards (IFRS) as issued by the Council (IASB), in the financial reporting system of the USA. There are no indications or solid evidence whether the convergence between the International Financial Reporting Standards (IFRS) issued by the IASB and the Generally Accepted Accounting Principles (U.S. GAAP), issued by the Financial Accounting Standards Board of the USA, will be finalized. It seems that the regulators of the United States empowered to set the accounting rules are trying to continue to support requirements that are relevant to the specifics and peculiarities of the business environment in the United States. Academicians, analysts, international experts observing the process suggest that the U.S. Securities and Exchange Commission (SEC) would never risk causing a “political storm” by ceding the control of accounting to a non-US body, even if it is an influential international organization that has been granted the status of authoritative and competent.
However, there are also public statements on behalf of the U.S. Securities and Exchange Commission and its staff expressing the well-intentioned position that a single set of international accounting standards should be developed and adopted by all. Thought-provoking is the fact that in the Commission’s Strategic Plan for Fiscal Years 2014-2018 it is stated that: “The Commission will continue to promote the creation of high-quality accounting standards to meet the needs of investors.” More interesting is the continuation of the specific statement that: “Due to the increasingly globalized nature of capital markets, the agency will work to promote higher quality financial reporting worldwide and consider, among other things, whether a single set of high-quality global accounting standards is achievable.”
What is the reality today? Although almost all joint IASB and FASB projects have been completed or are approaching completion, the convergence of IFRS and U.S. GAAP is still not achieved. The question that logically arises is whether it is time to recognize that the idea or the goal of a “single set” is not universally practical and applicable or is not achievable in the foreseeable future. The most likely answer seems to be in the affirmative.