Technological Impact of IFRS Adoption
Transition of United States Accounting Standards
Since 1938, the United States government has looked to the private sector to provide American companies with principles to govern financial reporting. In its infancy, the American Institute of Public Accountants (AICPA) helped form the regulations to which businesses still adhere. Through the late 1950s, the AICPA’s Committee on Accounting Procedure issued fifty-one authoritative pronouncements (“History”). These pronouncements became the basis of the accounting standards used today, the United States Generally Accepted Accounting Principles, or U.S. GAAP. The International Financial Reporting Standards (IFRS), the financial reporting regulations used by the majority of the world, stands in contrast to U.S. GAAP. U.S. GAAP, a very thorough and complex set of regulations, provides many advantages to American accountants and investors. It facilitates better communication between investors and companies, allows for verifiable audits, and minimizes the use of managerial judgment that could be seen as deceiving to an investor (Austin). IFRS, on the other hand, virtually eliminates the issuance of obsolete rules, and allows businesses to adjust to the perpetually evolving business landscape by interpreting rules that apply to modern technology more rapidly than U.S. GAAP. It also provides a common international standard, which allows financial statements from companies in separate countries to be more easily comparable (Austin). For American companies, this international comparability is not easily achieved with U.S. GAAP in place. Thus, it seems inevitable, that United States reporting standards will need to adapt in large part to the accounting standards set forth by IFRS. In 2009, James G. Kaiser, U.S. Convergence and IFRS leader for PricewaterhouseCoopers stated “U.S. financial reporting will undergo an unprecedented level of change...