International Financial Reporting Standards (IFRS) are the accounting rules all public companies in the European Union must follow, with another 100 countries either implementing or considering them. So why should this concern a U.S. company? There are at least seven good reasons.
1) Convergence May Eventually Change U.S. Rules
The Financial Accounting Standards Board in the U.S. (FASB) and its international counterpart, the IASB, have been trying to minimize the differences between U.S. GAAP and IFRS for some time. In a number of cases this has meant changing U.S. GAAP to the IFRS position. One could interpret this as meaning that, in some respects, the United States has lost sovereignty over U.S. GAAP. The bottom line for a U.S. company is that developments at the IASB are relevant and may portend future changes to U.S. GAAP.
For example, IFRS was the first standard to require the expensing of stock options at fair value, and the FASB cited convergence with IFRS as one of the reasons for adopting this position, despite the concerns of some U.S. stakeholders. Although the FASB had its usual comment period prior to making this rule final, in this case, U.S. companies might have been better served by raising their issues in London, as well as with the FASB.
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