While discussing GAAP (Generally Accepted Accounting Principles) or the rules of US accounting at a recent session with numerous international participants, a person asked if America will ever adopt IFRS (the International Financial Reporting Standard). After all, she said, many US public companies operate internationally and more than 100 countries have already adopted some form of IFRS.
In other words, is US accounting actually part of the world?
While FASB (Financial Accounting Standards Board) and the SEC (Securities and Exchange Commission) have taken strides toward merging GAAP with IFRS, they aren’t there yet and it’s unclear when/if the US will get there. Without getting into the nuances of the two standards, it’s certain the costs of convergence and change play an important role in the adoption process. And while “past performance does not guarantee future results”, if one takes history as a guide, a switch by the US to IFRS anytime soon seems unlikely.
I base that statement on my experience growing up in Ohio during the 1970s. While sitting at a small desk at Campus Elementary school, I learned America planned to adopt something called the “metric” system by the early 1980s. The glorious decade of the 1980s has long come and gone, yet we Americans still stubbornly cling to our inches, pounds, quarts, miles and other confusing, illogical measures. Sure, we’ve adopted a few metric elements, like two liter bottles, 5k races, gram crackers and 9 millimeter guns, but not the wholesale conversion envisioned by both Presidents Ford and Carter.
In fact, as I told participants, the US remains one of only three countries on Earth yet to adopt the metric system. The other two living in the non-metric world are Myanmar and Liberia. Your guess is as good as mine whether they use IFRS.