Convergence Between US GAAP And IFRS

In accounting terms, the process to harmonize the prevailing accounting standards that are issued by different regulatory bodies is called convergence. Although it is a known fact that the variety of accounting rules and practices around the world is due to the differences in culture, language, religion, education, and ideology and politics. However, the need of a single set of standards for the reporting of financial statements is becoming inevitable. With the significant growth of the cross-border business and trade, it is essential for the companies to be equipped with a set of high-quality accounting standards that will not only improve financial reporting across the globe but also enhance the consistency, comparability and efficiency of …show more content…
At present almost 100 countries across the globe have adopted IFRS fully or partially; for all or most listed companies to create their financial statements (Pacter, 2013). The United States is the only major world power that has not adopted or set a date to adopt IFRS yet. The purpose of this paper is to discuss the dilemma faced by the U.S standard setting bodies regarding the convergence of U.S. GAAP and IFRS. This paper will discuss history of convergence highlighting the Norwalk agreement and the Condorsement model, the timeline of the major events and the role of SEC, followed by current status of the convergence underlining the parallels, variances, threats, challenges and pros and cons and the joint projects, continued with the discussion of future of convergence highlighting the possibilities of mandatory or voluntary adoption of IFRS and its impact on politics, economy and …show more content…
This proposal states that rather following the “convergence or endorsement approach” the U.S should follow a modified approach towards IFRS which would allow continuing the existence of U.S. GAAP and the IASB and FASB to continue working on their convergence project. Moreover, FASB would also work towards convergence of those U.S. accounting standards that are not included in the current convergence project. In this manner it will ensure the appropriateness of the existing guidance and the U.S. issuers would not be under pressure to absorb the entire body of international standards all at once. (McEnroe &Sullivan, 2014) .The SEC staff paper issued in May 2011 “Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. issuers: Exploring a Possible Method of Incorporation” explains the three suggested phases for this process as, (1) pursue the completion of Memorandum of Understanding (MOU) projects in 2011, (2) assessment of the IASB’s ongoing and anticipated standards-setting projects by FASB while retaining U.S. GAAP until their completion, and (3) assessment of the “static” IFRS that are not considered for convergence and execute a transition plan for their incorporation into U.S. GAAP (SEC ,