International Financial Reporting Standards (IFRS) are a set of international accounting

standards stating how accounting and financial transactions should be reported in financial
statements. IFRS are issued by the International Accounting Standards Board (IASB) to
harmonise the accounting standards among countries so companys financial report can easily
be interpreted. It provides a common financial reporting language so that companys
performance can be evaluated, interpreted and measured across international borders.
IFRS is principle based and GAAP is rule based.
The topic of replacing Accepted Accounting Principles (GAAP) with that of International
Financial Reporting Standards (IFRS) has been much controversial off late. While there is a
class of people who support the introduction of IFRS, there are also others who recommend
the continuation of GAAP in the U.S. Supporters of IFRS claim that it will make way for a
common reporting language, enhance the quality of financial reporting across the borders,
and ensure consistency of financial reporting for companies operating at the global level.
However, there are strong reasons because of which the U.S is not switching to IFRS just yet.
1. The first and the foremost reason is IFRS is a costly affair. Switching from GAAP to IFRS
will prove to be very expensive for the country. Workforce training, user training and system
changes are some of the unavoidable expenses involved in the process.
2. Comparability of financial statements is another important point considered by the US.
With the IFRS, the comparability between financial statements may not be achieved. People
living in countries, applying IFRS, come from varying backgrounds. This results in
interpretative differences arising out of varying historical practices. This breaks down the
common ground of comparison of financial statement and serves as a big hurdle in the
process.
3. Another reason why the U.S is not adopting IFRS is the lack of superior standards. IFRS
financial statements are not at par with the quality of GAAP financial statements. Efforts are
being made to make IFRS equivalent to GAAP. Till this happens, the country would like to
stick to GAAP.
4. GAAP is a complex system with its own limitations but it works. Contenders of IFRS state
that when the existing system is good enough and works there is no need for a new system. If
it aint broke, dont fix it!
5. Viewing the flaws in IFRS, its contenders state that there must be a better way than IFRS
to improve the system of financial reporting in the U.S. Efforts can be made to create a
system that is better than GAAP and if free from the problems that IFRS poses. There has to
be a middle way out.
6. One reason why U.S is not adopting IFRS is that IFRS is principles based whereas GAAP
is rules based. With the implementation of IFRS, there will be more scope for interpretation
with regards to financial statements. This is not something that the U.S looks forward to.