U.s. wields enough military, political and economic might that can exert influence on nations in all parts of the world to do things they otherwise wouldn’t.
Reflect on the following students work on how they answered the question :In your opinion, should the United States adopt the IFRS? Why or why not?
If the United States adopted IFRS, it would reduce a significant number of challenges that slow or inhibit business growth in a global economy. The United States adopting IFRS would help harmonize global financial activities. (eBiz Group, 2018). As of the beginning of January 2022, 144 jurisdictions have fully adopted IFRS standards, meaning that US GAAP creates an obstacle for the United States to do business within those 144 jurisdictions. (Kavame Eroglu, Z.G., 2022)
Adopting one accounting standard would help with transparency and comparability. Investors, lenders, and creditors need the ability to compare financial statements to conduct business. One accounting standard would increase the quality of financial reporting. One accounting standard will help attract investment and make emerging economies more attractive and accessible. Using one standard will boost trade and capital flow and abolish companies’ need to report using two or more standards. (Karbhari, R. 2018) It is more feasible for the United States to adopt IFRS (especially since there has been progress toward convergence) than to have the 144 jurisdictions adopt US GAAP or even become educated enough in GAAP to trust and understand the financial reports.
A common argument against the US adopting IFRS is that the cost is too great of a barrier. In 2008 the SEC predicted it would cost approximately $32 million per company to switch to IFRS and prepare their first report in the new standards. (Karbhari, R. 2018) Another way to look at the issue of the cost of converting GAAP to IFRS is to evaluate the long-term saving opportunities. Companies could ultimately save significant amounts without the need to prepare multiple sets of financial reports and increase revenue without the obstacles created by using a different standard than the majority of the world. (Ionascu, M., et al., 2018)
I found an interesting quote from Riddhi Karbhari about the influence the United States could brandish by adopting IFRS. “You might say there are other nations too who have still not adopted IFRS, then why such special emphasis only to U.S. for not adopting IFRS. There is a reason. U.S. wields enough military, political and economic might that can exert influence on nations in all parts of the world to do things they otherwise wouldn’t. So, when a superpower like U.S. comes on board the IFRS band wagon, that would finally mean the holy grail of accounting standard is achievable.” (Karbhari, R. 2018)
References:
Karbhari, R. (2018, November 26). What if the whole world including the US adopted/converged to IFRS? Medium. Retrieved September 15, 2022, from https://medium.com/the-accouting-glutton/what-if-the-whole-world-including-the-us-adopted-converged-to-ifrs-a6263dcc5a55
Why the United States should adopt IFRS. eBiz Group. (2018, September 3). Retrieved September 15, 2022, from https://www.ebizproject.com/why-the-united-states-should-adopt-ifrs/
Kavame Eroglu, Z. G. (2022, January 6). Global adoption of IFRS as an example of international financial law making. Oxford Law Faculty. Retrieved September 15, 2022, from https://www.law.ox.ac.uk/business-law-blog/blog/2022/01/global-adoption-ifrs-example-international-financial-law-making
Ionascu, M., Ionascu, I., Sacarin, M., & Minu, M. (2018, November 21). Benefits of global financial reporting models for developing markets: The case of Romania. PloS one. Retrieved September 15, 2022, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6248969/