IFRS vs. U.S. GAAP vs. A Better Option

As I've discussed in my previous posts, anyone who's asking whether the United States should stick with current U.S. Generally Accepted Accounting Principles (GAAP) or switch to current International Financial Reporting Standards (IFRS) is asking the wrong question. That's because we have more and better options to choose from in determining the future of financial reporting in the United States. In this post, I'll describe another alternative for us to consider—a realistic, practical approach that has a better chance of maximizing the economic welfare of both the United States and the rest of the world.

Instead of us continuing to waste time playing the "irresistible force meets an immovable object" game (i.e., IFRS vs. U.S. GAAP), the United States would be better off working to establish a single, global registry of financial reporting standards.

The single, global registry of financial reporting standards would be based on a single, global conceptual framework. This is hardly a pipe dream; the U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are intensely committed to and have already made significant progress toward defining just such a framework.

In order to participate in the registry, a financial reporting standard-setter would be required to endorse the common framework. In doing so, the standard-setter would gain a say in the due process of maintaining the framework over time.

After agreeing to endorse the common conceptual framework, a standard-setter could contribute one or more sets of financial reporting standards to the global registry. Each registered set of standards would be codified according to a common codification scheme. Fantasy? No—the FASB recently codified U.S. GAAP based on the topical structure inherent in IFRS. And the FASB's codification already robustly incorporates guidance from another major standard-setter: the U.S. Securities and Exchange Commission (SEC). So not only has the FASB codification managed to organize what is indisputably the most complex set of financial reporting standards in existence, its structure is already harmonized with the two most-significant sources of financial reporting guidance other than U.S. GAAP.

Now here's where the idea of a global registry really gets interesting. Because many specific provisions of U.S. GAAP, IFRS, and other major sets of financial reporting standards are the same across the sets of standards (and increasingly so), it would be possible to identify and separate out the common provisions among registered sets of standards. Collectively, the common provisions would be viewed as the "core" standards for all sets of standards in the registry, and therefore, each registered set of standards would need to consist of only those exceptions and/or extensions deemed appropriate by the contributing standard-setter.

Is the idea of a common, core set of standards far-fetched? Not at all. In fact, the IASB's recently issued IFRS for Small and Medium-sized Entities (SMEs) is basically it.

So the idea of a global financial reporting standards registry is pretty simple. Not coincidentally, it's also grounded in today's realities, all of which stem from efforts of the FASB and IASB. But what advantages does this approach offer over simply sticking with U.S. GAAP or switching to IFRS? It's going to take me several posts to describe all of the ways in which this approach would benefit the preparer, auditor, academic, regulator, and investor communities, so stay tuned.

This blog

Bruce Pounder, MBA, CMA, CFM, DipIFR (ACCA) is an internationally recognized expert on corporate financial reporting and the global convergence of financial reporting standards. He has two decades of firsthand financial reporting experience as the CFO of a privately held corporation and has served as a financial reporting consultant to many public corporations. Currently Bruce is President of Leveraged Logic, a leading provider of educational products and services to accounting professionals. He is the author of the 2010 U.S. Master GAAP Guide (CCH), the Convergence Guidebook for Corporate Financial Reporting (Wiley), and the monthly "Financial Reporting" column of Strategic Finance magazine. Bruce also presents the live webcast series "This Week in Accounting."

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

42051

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

74147

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

47018

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

86300
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
19688

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

54103

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

78655

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

24369

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

62449

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

33712
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
100233
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
24917

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

50935
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
26687
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
31000

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

97432

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

32194

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

108294

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

59039

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

38343
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
65134

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

90817

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

51956