ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Difficulty of Merging GAAP and IFRS

Updated on November 12, 2017

The Difficulty of Merging GAAP and IFRS

By: Kyle Hoops

In the accounting world, the two most widely accepted accounting guidelines for businesses are the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS). GAAP is used strictly in the United States, whereas IFRS is the main accounting standards for many foreign countries. With an ever more global economy, there has been effort, and some success, to bring these two standards closer together. The International Accountings Standards Board (IASB) has worked for years to create one set of accounting standards for everyone across the globe. While the IASB has gotten many countries to accept their standards, the U.S., which hosts the largest and most influential market, still does not follow IFRS. GAAP and IFRS have slowly made some progress towards convergence and unity of their accounting standards. This has been seen in the Norwalk Agreement, whose goal was to “achieve compatibility and remove differences between International Financial Reporting Standards.” Despite noticeable progress towards convergence over the last decade, there are still some significant differences between the two standards that have proven to be roadblocks from creating a single uniform standard.

One barrier the convergence effort faces is the difference in nature of the States’ business landscape from foreign ones. CPA Alex Bogopolsky described the U.S. as a “highly litigious business environment where, if something goes wrong, accountants and auditors are often blamed before anybody else.” As a result, U.S. accountants desire more clearly defined rules rather than broad principles that force accountants to rely on discretion. This is not an easily reconcilable difference, as much of the dissimilarity stems from a difference in culture between the U.S. and foreign cultures. Some countries are more comfortable and are able to handle a more lenient set of accounting rules. Instances such as the Enron Scandal demonstrate why the U.S. is not able to act this way. Even looking beyond major scandals, the U.S. market is extremely competitive, and with so much money at stake, it is important that no one is getting an unfair competitive advantage.

Another major obstruction in the way of unifying the two standards is political reasons. The U.S. will not easily give up control over domestic issues to a foreign power, even if this foreign power is supposed to be neutral in decision making. Bogopolsky states the SEC feels that “IFRS lacks consistent application, allows too much leeway with judgment, and is underdeveloped in many specific areas, for which the US GAAP has detailed and accepted guidance and established practice.” When asked to speak on behalf of investors about convergence, the SEC stated in its July 2012 Final Staff Report that, “investors do not believe that high-quality standards should be compromised for the sake of uniformity.” Essentially, the U.S. would not use IFRS until the SEC feels that those standards are up to an acceptable level. It would be counterintuitive to take a step backwards just to appease an international committee. The purpose of accounting standards is to help guide and ensure that accountants are accurately and ethically reflecting a business’s financial status. The SEC went on to say that, “investors noted that the FASB, in acting as an endorser, could serve an important role, ensuring that any standard incorporated into the US financial reporting system is of sufficient quality so as to maintain or improve on the financial reporting system.” This is an important statement to analyze. Basically, the SEC is saying that even if convergence between GAAP an IFRS did happen someday, the rules being used would still all be reviewed and altered, if seen fit, to match the interest of American Investors.

The two major roadblocks in the way of convergence of the Generally Accepted Accounting Principles and the International Financial Standards Board are the nature of the U.S. economic landscape and political reasons. Technical differences between the two that also pose issues have not been mentioned in this discussion. Globalization has resulted in many good things and will continue to; however, globalization for the sake of doing so is not wise. When discussing accounting standards, trillions of dollars are at stake; therefore, the U.S. will not be hasty to adopt what is a weaker set of accounting standards in their eyes. What remains questionable is if the U.S. will continue to be a powerful market in the future. If major international businesses were to focus their efforts elsewhere, there may be an even greater push to converge these accounting standards. Cultural differences will always be a roadblock. Only time will tell if these two giants in accounting standards will ever exist in perfect harmony.

Works Cited

Adam. “U.S. GAAP vs. International GAAP vs. Unified GAAP.” Adam Pieniazek. <>.

“Does IFRS Have a Future in the US?” IFAC. <>.

“HOME.” SEC Emblem. Web. 5 Feb. 2017. <>.

Strouhal, Jiří. “SMEs Financial Reporting Convergence: Current Developments.” EBSCOHOST. International Scientific Conference


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)