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A Perspective on the SEC's Proposal to Accept Financial Statements Prepared in Accordance with International Financial Reporting Standards (IFRS) Without Reconciliation to U.S. GAAP

17 Pages Posted: 11 Oct 2007 Last revised: 10 Jun 2013

Karim Jamal

University of Alberta - Department of Accounting, Operations & Information Systems

George J. Benston

Emory University - Department of Accounting

Douglas R. Carmichael

City University of New York (CUNY) - Stan Ross Department of Accountancy

Theodore E. Christensen

University of Georgia - J.M. Tull School of Accounting; University of Georgia

Robert H. Colson

Grant Thornton LLP

Stephen R. Moehrle

University of Missouri at Saint Louis - Accounting Area

Shivaram Rajgopal

Columbia Business School

Thomas L. Stober

University of Notre Dame - Department of Accountancy

Shyam Sunder

Yale University - School of Management; Yale University - Cowles Foundation

Ross L. Watts

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: September 7, 2007

Abstract

The Securities and Exchange Commission (SEC) recently issued a call for comment on a proposal to accept financial statements prepared in accordance with international financial reporting standards (IFRS) without reconciliation to U.S. GAAP. Accounting researchers have attempted to assess the quality of IFRS using different methods and criteria. While we are skeptical of drawing direct conclusions about the SEC's proposal based on this research, there is adequate evidence that both IFRS and U.S. GAAP provide useful information to investors and other users of financial statements. Moreover, we see no conclusive research evidence that financial reports prepared using U.S. GAAP are better than reports prepared using IFRS. The prudent approach when faced with alternatives with no clear difference in quality is to promote competition among them, which supports adopting the SEC's proposal to permit foreign private issuers a choice between IFRS and U.S. GAAP. Therefore, to help improve U.S. and international GAAP through standards-setting competition, we recommend that the Commission also consider extending the choice of IFRS to U.S. companies, and require all companies to indicate clearly whether they are filing under U.S. GAAP or IFRS. Finally, we recommend that the Commission and its staff investigate and seek feedback on the educational consequences of its proposed actions. This attention will help educators better prepare future professionals to implement these proposed regulatory changes.

Keywords: Financial Reporting, U.S. GAAP, IFRS, SEC, Reconciliation

JEL Classification: M41, M44, M47, G38

Suggested Citation

Jamal, Karim and Benston, George J. and Carmichael, Douglas R. and Christensen, Theodore E. and Colson, Robert H. and Moehrle, Stephen R. and Rajgopal, Shivaram and Stober, Thomas L. and Sunder, Shyam and Watts, Ross L., A Perspective on the SEC's Proposal to Accept Financial Statements Prepared in Accordance with International Financial Reporting Standards (IFRS) Without Reconciliation to U.S. GAAP (September 7, 2007). Accounting Horizons, Vol. 22, No. 2, 2008; University of Alberta School of Business Research Paper No. 2013-679. Available at SSRN: https://ssrn.com/abstract=1020408 or http://dx.doi.org/10.2139/ssrn.1020408

Karim Jamal (Contact Author)

University of Alberta - Department of Accounting, Operations & Information Systems ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-5829 (Phone)
780-492-3325 (Fax)

George J. Benston

Emory University - Department of Accounting ( email )

Goizueta Business School
1300 Clifton Road
Atlanta, GA 30322
United States
404-727-7831 (Phone)
404-727-5238 (Fax)

Douglas R. Carmichael

City University of New York (CUNY) - Stan Ross Department of Accountancy ( email )

One Bernard Baruch Way, Box B12-225
New York, NY 10010
United States

Theodore E. Christensen

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

University of Georgia ( email )

Athens, GA
United States

Robert H. Colson

Grant Thornton LLP ( email )

Chicago, IL
United States

Stephen R. Moehrle

University of Missouri at Saint Louis - Accounting Area ( email )

8001 Natural Bridge Road
St. Louis, MO 63121
United States
314-516-6142 (Phone)
314-516-6420 (Fax)

Shivaram Rajgopal

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Thomas L. Stober

University of Notre Dame - Department of Accountancy ( email )

Notre Dame, IN 46556-0399
United States
219-631-7614 (Phone)

Shyam Sunder

Yale University - School of Management ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6160 (Phone)

HOME PAGE: http://www.som.yale.edu/faculty/sunder/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Ross L. Watts

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E52-325
Cambridge, MA 02142
United States

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