Why Not Allow the Fasb and IASB Standards to Compete in the U.S.?

27 Pages Posted: 31 May 2001

Multiple version iconThere are 2 versions of this paper

Date Written: May 2001


This paper articulates the arguments for and against introducing competition into the accounting standard-setting process in the U.S. by allowing individual corporations to issue financial reports prepared in accordance with either FASB or IASB rules. The paper examines several arguments supporting the status quo, including (1) the FASB's experience and world leadership in making accounting rules, (2) the increased risk of a "race to the bottom" under regulatory competition, (3) the inability of most users of financial reports to understand the complex technical issues underlying accounting standards, (4) the possibility that IASB's standards will be diluted to gain international acceptance, allowing additional opportunities for earnings management, (5) the risks of the IASB being deadlocked or captured by interests hostile to business, (6) the costs of experimentation in standard-setting, and (7) economies from network externalities. Argument examined on the other side include how competition will (1) help meet the needs of globalized businesses, (2) increase the likelihood that the accounting standards will be efficient, (3) help protect standard-setters from undue pressure from interest groups, (4) allow different standards to develop for different corporate clienteles, (5) allow corporations to send more informative signals through their choice among accounting standards, (6) protect corporations against capture of regulatory body by narrow interests, and (7) not affect network externalities at national or global scales.

Keywords: Accounting Standards, Regulatory Competition, International

JEL Classification: L51, M41, M44, G18

Suggested Citation

Dye, Ronald A. and Sunder, Shyam, Why Not Allow the Fasb and IASB Standards to Compete in the U.S.? (May 2001). Available at SSRN: https://ssrn.com/abstract=271090 or http://dx.doi.org/10.2139/ssrn.271090

Ronald A. Dye

Northwestern University - Department of Accounting Information & Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-2663 (Phone)
847-467-1202 (Fax)

Shyam Sunder (Contact Author)

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 ( email )

Box 208281
New Haven, CT 06520-8281
United States

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