IFRS STANDARDS AND THEIR POLITICAL ACCEPTANCE IN EUROPE AND UNITED STATES
IFRS STANDARDS AND THEIR POLITICAL ACCEPTANCE IN EUROPE AND UNITED STATES

Summary/Abstract: The year 2005 marked the start of a new era in global conduct of business, and the fulfillment of a thirty-year effort to create the financial reporting rules for a worldwide capital market. For during that year’s financial reporting cycle, as many as 7,000 listed companies in the 25 European Union member states, plus many others in countries such as Australia, New Zealand, Russia, and South Africa were expected (in the EU, required) to produce annual financial statements in compliance with a single set of international rules—International Financial Reporting Standards (IFRS). Many other business entities, while not publicly held and not currently required to comply with IFRS, will also do so, either immediately or over time, in order to conform to what is clearly becoming the new worldwide standard. Since there are about 15,000 SEC-registered companies in the USA that prepare financial statements in accordance with US GAAP (plus countless nonpublicly held companies also reporting under GAAP), the vast majority of the world’s large businesses will now be reporting under one or the other of these two comprehensive systems of accounting and financial reporting rules. Most other national GAAP standards have been reduced in importance or are being phased out as nations all over the worlds are now embracing IFRS. For example, Canada has announced that Canadian GAAP (which was very similar to US GAAP) will be eliminated and replaced by IFRS by 2011. More immediately, China will require listed companies to employ IFRS. It is quite predictable that only US GAAP will (for the foreseeable future) remain as a competitive force in the accounting standards arena, and even that situation will be more a formality than a substantive reality, given the formal commitment (and substantial progress made to date) to “converge” US GAAP and IFRS.

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