Speech Outline: Why the United States should continue using US GAAP and not adopt IFRS I. The adoption of IFRS is unlikely to have any major impact on reporting quality. a) U.S. firms currently optimize their reporting strategies, therefore they are expected to resist changes that are not in their interest by using the flexibility inherent in the standards. b) It is also unlikely to lower the reporting quality, as firms can always go beyond the required disclosures by putting more information in the notes. 1 II. The comparability benefits of switching to IFRS, while possibly positive, would be negligible. c) IFRS already closely resembles U.S. GAAP, therefore the comparability is already very close. d) Because of this (a), many comparability improvements should have already been realized when the bulk of countries with large accounting differences between local GAAP and IFRS/U.S. GAAP switched to IFRS.2 III. In actual practice, the transparency and comparability of financial statements in compliance with IFRS is questionable. e) The SEC performed a study on 183 companies that reported under IFRS. It was noted that the disclosures could be more transparent and clear. f) It was also found that the diversity in the application of IFRS diminished the comparability of the financial statements across countries and industries. IV. Adopting IFRS would delegate standard-setting power to the IASB, which is an entity that is independent of the U.S. government that is influenced by other foreign governments and interest groups. g) It is not certain that other foreign governments have the same goals as the U.S. concerning the role of accounting. h) Several countries and regional entities have put in place an endorsement mechanism for future amendments to IFRS that grants them veto rights and leverages their influence in negotiating changes to IFRS. This could slow down the development and...
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