International Convergence of Accounting Practices: Choosing between IAS and Us Gaap

32 Pages Posted: 31 Mar 2004

See all articles by Ann Tarca

Ann Tarca

University of Western Australia

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This study examines reporting practices of a sample of foreign listed and domestic-only listed companies from the United Kingdom, France, Germany, Japan and Australia to determine the extent to which companies voluntarily use "international" standards. Two types of use of non-national standards in the consolidated accounts presented to the public are considered: adoption of "international" standards instead of national standards, and supplementary use where "international" standards are used in conjunction with national standards. "International" standards are defined as US GAAP or IAS (now IFRS). The study tests for a preference for either set of standards and considers the relationship of choice of regime with firm attributes.

The results show significant voluntary use of "international" standards in all five countries and among foreign listed and domestic-only listed companies. Companies using "international" standards are likely to be larger, have more foreign revenue and to be listed on one or more foreign stock exchanges. US GAAP is the predominant choice, but IAS are used by many firms in Germany and some in Japan. Firms listed in the United States' regulated markets (NYSE and NASDAQ) are more likely to choose US GAAP, but companies traded in the OTC market often select IAS.

The study demonstrates for managers and regulators that there is considerable support for "international" standards, and that choice of IAS or US GAAP relates to specific firm characteristics, which differ according to a firm's country of origin. Most use of "international" standards reflects individual countries' institutional frameworks, confirming the key role of national regulators and standard setters in assisting companies to achieve more comparable international reporting.

JEL Classification: M41, M44, M47, G38

Suggested Citation

Tarca, Ann, International Convergence of Accounting Practices: Choosing between IAS and Us Gaap. Available at SSRN:

Ann Tarca (Contact Author)

University of Western Australia ( email )

Business School
35 Stirling Highway
Crawley WA 6009
+61 8 6488 3868 (Phone)
+61 8 6488 1047 (Fax)

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