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Accounting Horizon

In: Business and Management

Submitted By Kuttyma
Words 26892
Pages 108
Accounting Horizons
Vol. 24, No. 3
pp. 355–394

American Accounting Association
DOI: 10.2308/acch.2010.24.3.355

Global Accounting Convergence and the
Potential Adoption of IFRS by the U.S.
(Part I): Conceptual Underpinnings and
Economic Analysis
Luzi Hail, Christian Leuz, and Peter Wysocki
SYNOPSIS: This article is Part I of a two-part series analyzing the economic and policy factors related to the potential adoption of IFRS by the United States. In this part, we develop the conceptual framework for our analysis of potential costs and benefits from
IFRS adoption in the United States. Drawing on the academic literature in accounting, finance, and economics, we assess the potential impact of IFRS adoption on the quality and comparability of U.S. reporting practices, the ensuing capital market effects, and the potential costs of switching from U.S. GAAP to IFRS. We also discuss the compatibility of IFRS with the current U.S. regulatory and legal environment, as well as the possible macroeconomic effects of IFRS adoption. Our analysis shows that the decision to adopt IFRS mainly involves a cost-benefit trade-off between ͑1͒ recurring, albeit modest, comparability benefits for investors; ͑2͒ recurring future cost savings that will largely accrue to multinational companies; and ͑3͒ one-time transition costs borne by all firms and the U.S. economy as a whole, including those from adjustments to U.S. institutions. In Part II of the series ͑see Hail et al. 2010͒, we provide an analysis of the policy factors related to the decision and present several scenarios for the future evolution of U.S. accounting standards in light of the current global movement toward
Keywords: accounting regulation; standard setting; U.S. equity markets; mandatory disclosure; political economy; convergence; harmonization.
JEL Classifications: F50; G15; G38; K22; M41; M48; O51.

Luzi Hail is an...

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