Treatment Differences and Political Realities in the GAAP-IFRS Debate

35 Pages Posted: 10 Apr 2009 Last revised: 13 Aug 2010

See all articles by William W. Bratton

William W. Bratton

University of Pennsylvania Carey Law School; University of Miami School of Law; European Corporate Governance Institute (ECGI)

Lawrence A. Cunningham

George Washington University


The Securities Exchange Commission has introduced a Roadmap that describes a process leading to mandatory use of IFRS by domestic issuers by 2014. The SEC justifies this initiative on the grounds that global standardization yields cost savings and an ultimate gain in comparability, facilitating the search for global opportunities by U.S. investors and making U.S. capital markets more attractive to foreign issuers.

This paper enters an objection, noting that the stakes include more than the choice of the framework for standard setting. The accounting treatments themselves are at issue, treatments that for the most part concern domestic reporting firms and domestic users of financial statements.

We present a treatment by treatment comparison of GAAP and IFRS and go on to discuss the differences' implications. FASB maintained its independence during its 35 year history in the teeth of opposition from corporate management, which experienced a steady diminution of its zone of financial reporting discretion.

A switch to IFRS would allow management to reclaim some of the lost territory. Meanwhile, the interest group alignment that protected FASB, comprised of auditing firms, actors in the financial markets, and the SEC, has disintegrated as U.S. capital market power has waned in the face of international competition. Management is the shift's incidental beneficiary, with possible negative effects for reporting quality in domestic markets.

Keywords: GAAP, IFRS, FASB, Securities Exchange Commission

JEL Classification: M41, M44, M47, G34, G38

Suggested Citation

Bratton, William Wilson and Cunningham, Lawrence A., Treatment Differences and Political Realities in the GAAP-IFRS Debate. Virginia Law Review, Vol. 95, p. 989, 2009, GWU Legal Studies Research Paper No. 461, GWU Law School Public Law Research Paper No. 461, Georgetown Law and Economics Research Paper No. 1375617, Available at SSRN:

William Wilson Bratton

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

University of Miami School of Law ( email )

P.O. Box 248087
Coral Gables, FL 33146
United States

European Corporate Governance Institute (ECGI) ( email )



Lawrence A. Cunningham (Contact Author)

George Washington University ( email )

DC: 2000 H Street, NW
NY: 250 Vesey Street
United States
202-994-0732 (Phone)


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