Public companies in the United
States file all of their financial statements in congruence with Generally Accepted
Accounting Principles (GAAP). Many other
countries worldwide use a different set of accounting standards known as International
Financial Reporting Standards (IFRS), and the U.S. government has considered
adopting these international standards. However, the U.S. should not adopt
these standards because doing so would reduce government power and cause
difficulty in creating new accounting standards.
The
U.S. government would lose power if it adopted IFRS. Currently the Securities
Exchange Commission (SEC) has government power to regulate public companies and
enforce standards that prevent fraud. If the U.S. adopts the international
standards, the SEC would no longer have the power to enforce these standards.
Managers could take advantage of these non-enforced standards which would
result in accounting fraud (Challenges of
IFRS, 2011).
Creating
new accounting standards would become much more difficult if the U.S. adopted
IFRS because several countries would be attempting to agree. Cultures and
standards vary across the world, so getting all countries to agree on one type
of accounting would be very difficult. The U.S. has previously attempted to
work on joint projects with the International Accounting Standards Board, which
creates IFRS, and these projects have taken large amounts of time and often do
not end in agreement (J. Doyle, personal communication, September 2, 2014).
The
U.S. should not adopt IFRS. Doing so would cause the government to lose the
power it has over accounting regulation as well as make the process of creating
new accounting standards very difficult. The U.S. should continue using its own
accounting standards.
References
Challenges in adopting and applying IFRS [PDF document]. (2011). Retrieved from Lecture Notes Online
Web site:http://www.ey.com/Publication/vwLUAsset/Applying_IFRS_11/
$FILE/Applying_IFRS_11.pdf
