Convergence of Ifrs and Us Gaap


Department of Law, Economics, Accountancy & Risk

BA (Hons) Accountancy

Honours Dissertation – Year 2012/2013

Author: David Mcconnell

Title:‘A critical analysis into the convergence of IFRS and US GAAP in the United States’

“I declare that this dissertation is my own original work and has not been submitted elsewhere, wholly or partly, in the fulfilment of the requirements of this or any other award. Academic citation standards have been maintained and I have made due acknowledgement to the work of others where used in direct quotation and general reference.” Signed ____________________________________________________________________


First of all I would like to take this opportunity to thank my dissertation tutor for instilling in me the necessary confidence to carry out this research. The assistance I received was instrumental in me completing the piece of work. I would also like to acknowledge the role the accounting staff has played in my progression through 4 years of hard study. Their hard work has given me the motivation and ability to complete my course and seek a career as an accountant.

Front Coveri

Chapter 1: Introduction
1.1 Background1
1.2 Aims and Objectives3
1.3 Data Gathering and Analysis4
1.4 Difficulties and Limitations5

Chapter 2: Accounting Standards
2.1 Accounting Standards History6
2.2 Domestic Standards7
2.3 International Standards9
2.4 History of US GAAP11

Chapter 3: International Convergence of Accounting Standards 3.1 Convergence14
3.3 Arguments for and Against Convergence18

Chapter 4 IFRS in the United States
4.1 Conceptual Framework25
4.2 Rule v Principle Based Standards28
4.3 Latest Update on Convergence Project32

Chapter 5: Methodology
5.1 Methodology33
5.2 Secondary Data34
5.3 Primary Data35

Chapter 6: Conclusion
6.1 Conclusion37


The increase in international trade, brought about by globalisation and advancements in technology, has ignited a demand for the implementation of a single set of accounting standards. If implemented by all countries, these standards would radically improve the transparency and comparability of financial statements from countries throughout the world. In 2001, the International Accounting Standards Board (IASB) was formed and left with responsibility for creating accounting standards. These accounting standards; known as International Financial Reporting Standards, were developed with the intention of starting the process of creating a set of accounting standards for use across the globe. It was envisaged that every country would apply these standards and hence would speak the same “business language”. By 2005 the European Union required all countries within the EU to adopt IFRS as their reporting standard, and by 2012 almost every other country in the world had followed suit, with the exception of the United States of America. The financial reporting system used in the United States; United States Generally Accepted Accounting Practices (US GAAP), was used exclusively in the US, however, with the emergence of IFRS, the Financial Accounting Standards Board (FASB) and the US Securities and Exchange Commission (SEC) decided to begin the process of converging the two sets of standards. When, in 2007, the SEC eradicated the necessity for non-US companies registered in the United States to reconcile their financial reports with US GAAP, if their accounts complied with IFRS, the potential of having a global set of accounting standards became a realistic possibility.

The implementation of IFRS in the United States has not fully occurred as of...

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