How Would IFRS Benefit the United States?

International Financial Reporting Standards (IFRS) are becoming the new accepted accounting standard worldwide, slowly replacing the US GAAP in the United States. Basically the IFRS are a new way of preparing public financial records for companies; the IFRS are less regimented, specific, and strict than the US GAAP. There is a reason that so many countries, currently about 100, are switching over to IFRS – there are tremendous benefits involved in making the change.

Specifically for the United States, what are the advantages?

Considering that the IFRS exist globally they open new doors of communication and business for the US with other countries worldwide. There is some thought that the strict rules of the US GAAP inhibit the Unites States from working with other countries because it is specific to the US; there has even been some talk of merging the GAAP with IFRS for optimum productivity and benefit. In doing so the US would have the benefit of saving some money as they would not have to completely convert to IFRS; also they would be able to adhere to the plan they are accustomed to while still adapting the same guidelines as many other countries.

One major advantage of converting to IFRS for the US is that all financial statements from around the world will be written in the same format so comparison between statements from US companies with foreign companies will be much easier to make. In addition to being able to compare statements, converting to IFRS may open to the doors for mergers and acquisitions; some companies may decide to do business with one another because they are all more accessible if using one global standard for financial reporting.

Another benefit to IFRS conversion is cost. Initially there is a large cost for companies making the transition however in the long-run the savings are well worth the initial hit. After the transition to IFRS investors and corporations will experience a reduction in auditing fees compared to what they have paid in the past; this reduction could accumulate to $100 billion in savings for the US companies involved in the switch. Also, because the US would be easier able to compare their financial statements to those of other countries they can adjust their finances to be comparable.

It is obvious that the most substantial advantage of developing a global standard for financial reporting and either converging US GAAP with IFRS, or adopting IFRS completely, is that the transition provides a link between many countries. The US would be open to not only comparing their statements to those from other countries, but also increasing international commerce, international investments, and international communication between companies which can financially benefit one another.