Converting from IFRS to GAAP
IFRS is a set of international accounting rules established by the IASB in attempt to have a uniform set of rules across the globe. At least 90 countries have adopted IFRS as the standard while United States has been slow to follow. The SEC has, in the past pushed towards a global set of accounting rules and standards. In 2017 Mary jo White, former chairman of the SEC, reaffirmed that it is still a priority for united states to change. Through the process of globalization, it is important to allow openness. Switching to IFRS would make it easier for companies to compare and interpret financial statements worldwide. This accessibility would make sense for today’s world and allow for companies to raise capital abroad. Furthermore, companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language company-wide.
An issue that is preventing the change is that in the United States, accountants are under the risk of getting litigated. The set of rules, GAAP, that the United States is currently under is rules-based and leaves less up to interpretation which can give protection to the accountant. With a principle-based accounting method which is what IFRS uses, there’s potential for different interpretations of the same tax-related situations which could leave US accountants vulnerable to litigation. Another reason why the US is slow to change is because the cost of conversion is so high even compared to other countries. In the US depending on the size you could be expecting to spend .05 to 1 percent of your income to switch not t time that it would take to complete the job. It would also take Workforce training, user training and system changes that are some of the unavoidable expenses involved in the process. Despite the drawbacks of switching to IFRS it is important in a world that is becoming connected for the US to adopt a more open way of doing things.