The Convergence of IAS with GAAP: An Annotated Bibliography

International Accounting Standards: Are They the Future GAAP?

For years, the practice in the United States has been to do everything according to the GAAP (Generally Accepted Accounting Principles). Which method of inventory accounting? Consult the GAAP. Which type of revenue recognition? Consult the GAAP. It has been the standard from which all U.S. accountants and businesses are required to report their operations, record their numbers, and do just about anything else in the field. Not so for accounting methods in other countries. Around the world, in just about every country except the U.S., the rules to follow are quite different. There they must conform to the International Accounting Standards (IAS) - also known as the International Financial Reporting Standards (IFRS), which many times are at odds with the way things are done here in the United States.

Recently, the world’s view has started to change. The Securities Exchange Commission (SEC) and International Accounting Standards Board (IASB) have begun to push for reconciliation between the two standards, and quite possibly the drop of GAAP and the adoption of IAS, a huge change for the U.S. This would lead to a reworking in the accounting in many businesses and the reissue of many financial statements. Although it seems very complicated, many people feel that in the end it would be the most beneficial. With IAS practiced here, it would be much easier to compare companies abroad to companies at home. Also, although the GAAP is very thorough, often times it can be too detailed and too hard to interpret.

The idea of converging or changing all of these standards has raised many issues. Many people feel that to merge them would only complicate things further and make problems worse, especially since certain rules are at odds between the two. This also leads to the problem of which types of businesses should be considered and who should be allowed to handle the merger. Other people feel that one or the other should just be dropped entirely; this view is considered to be too drastic and too altering. Regardless of what decision is made, it appears that there is a lot of change on the horizon for U.S. and world accounting.

The majority of the resources included in this annotated bibliography provide information about convergence of the International Accounting Standards with the Generally Accepted Accounting Principles (of the United States). The rest cover general information related to either the IAS or GAAP. One of the resources pertains to the broad topic of Finance; it is included to give background information on the effects of IAS and GAAP in the history Finance. Many of the articles accurately present the air of controversy surrounding this topic and the necessity of the approaching change. Only one the articles is from before the year 2000; recent resources are needed because this topic is always changing and being affected by what is transpiring in the world today. The annotated bibliography reviews each of these resources and presents them in a simple format, giving a brief description and analyzing their usefulness, points of bias, etc. The following resources explain the differences between IAS and GAAP, and why a unified standard is needed.

Bibliography

"Closing the GAAP." Wall Street Journal - Eastern Edition 250, no. 138 (12/12, 2007): A18.

This article discusses the GAAP and some of its problems. The author also highlights how the SEC is pulling for a change in standards. It showed a different perspective because it considered mostly the SEC side of things. It shows a definite bias against the GAAP and the SEC. Also, since it is a newspaper article and not a scholarly journal, it may not contain entirely factual information; it expresses mainly the opinions of the author. It is very pertinent to the topic of the GAAP and what is occurring now to repair these issues. It is also recent, which makes it very useful in showing exactly what is going on right now. It could be improved upon if the author included more information on the international side of things, as well as his information on the SEC side.

Botzem, Sebastian and Sigrid Quack. "Contested Rules and Shifting Boundaries: International Standard Setting in Accounting." In Transnational Governance: Institutional Dynamics of Regulation, edited by Marie-Laure Djelic and Kerstin Sahlin-AnderssonCambridge University Press, 2005.

This discussion paper offers thorough background information on the history and development of accounting standards all over the world. It also discusses these standards and the process of merging them to one set internationally. It is extremely relevant because it not only shows the present information, but presents background information to aid in the further understanding of the topic. It cites many other books related to the topic. It could be bias because it is written by non-U.S. citizens, however it is to be a chapter in a textbook, so it should not be biased and its information should be correct. It makes a great addition to the articles and papers on this topic.

Cangemi, Michael P. "Warning: U.S. GAAP Likely Headed for Extinction." Financial Executive 24, no. 2 (03, 2008): 6-6.

Cangemi writes about the fact that the GAAP will sometime be replaced by IFRS (International Financial Reports Standards) in the U.S. It also discusses the SEC’s stance on this replacement and the adjustments that will need to be made. This article includes many hard facts, although some bias may be evident in the fact that the author strongly supports the international side of things. The information presented is significant to the issue of a convergence of standards and articulates in depth what is happening between the IAS and GAAP. More information from the FASB side of things would have been helpful.

Edwards, James Don and John B. Barrack. "Reaching International Accounting Standards." Economic Reform Today 1, (1999): 20-21.

Edwards and Barrack give brief background information on what international accounting standards are, why we need them, and approaches to achieving them. The information covered is slightly difference because it considers small countries as well as big ones; this shows a point of view not found in many other resources, and therefore beneficial. The authors do cite other articles and are both expert professors on the topic. It may be biased, however, because they agree solely with the adoption of the IAS. Their definitions are accurate and easy to understand, which is very helpful. Although a little old, this article is still topical and represents the side of IASB well; this representation provides a nice contrast by to many of the other resources which generally present only the side of FASB.

FASB. "Convergence with the International Accounting Standards Board." FASB. http://www.fasb.org/intl/convergence_iasb.shtml.

This article discusses the six steps that FASB has taken toward converging U.S. and International Accounting Standards. The overall goal is to introduce the reader onto the topic and present a brief outline of efforts until the date published (2007). The article is on the FASB website and is about FASB, so it may be biased, however, since most of the information is factual, it should not be. This article is extremely applicable to the topic of merging standards and is very informative; however, it would be useful if the author included more information detailing steps IASB had made in the same way.

Fenton-Jones, Mark. "IASB / FASB Paper shows all is Not A - OK." The Australian Financial Review, August 4, 2006, sec. ABIX NEWS SUMMARIES.

Fenton-Jones goes in depth to discuss a specific problem caused by the convergence of IAS and the GAAP and why this problem occurred. It highlights on a specific attempt to merge these standards. It was very helpful to have an article that highlighted on one specific issue. It may be biased because it is from a foreign review and shows support for the international side of things. It is very relevant to the issue of GAAP versus IAS, but might have been more useful if it was more current and if it had given more background information.

GUJARATHI, MAHENDRA. “International Accounting Standards.” Encyclopedia of Business and Finance, Edited by Burton S. Kaliski. Vol. 2.
New York: Macmillan Reference USA, 2001.

This Encyclopedia entry gives a complete dissection of the International Accounting Standards, their history and creation, etc. It goes very in-depth, highlighting on the many different aspects of the international standards. It shows no bias because it is just a factual encyclopedia entry. It serves to offer great background information and provide a complete understanding of the International Standards. The information is up to date and thorough. It was very helpful, although it only discussed the international side of accounting.

Hodgdon, Christopher, Rasoul H. Tondkar, David W. Harless, and Ajay Adhikari. "Compliance with IFRS Disclosure Requirements and Individual Analysts’ Forecast Errors." Journal of International Accounting, Auditing & Taxation (06, 2008): 1-13.

This article went more in-depth with discussion of the IFRS. The Journal did a meticulous investigation using a disclosure index. This study supports the use of IFRS and states that it can deliver more accurate financial forecasts. It presented another aspect of the IFRS financially that had not been explored by others topics previously. There should not be much bias since it is written by authorities on the subject from a non-objective viewpoint. It would have been helpful if the language was less complicated and more appealing, however the information was material to the subject.

OLIVERIO, MARY ELLEN. Encyclopedia of Business and Finance; Finance: Historical Perspectives, Edited by Burton S. Kaliski. Vol. 1. New York: Macmillan Reference USA, 2001.

This Encyclopedia entry gives a complete discussion of Finance and includes references to the International Accounting Standards, GAAP, the SEC, their history and creation, etc. It includes a lot of information pertaining to these topics and points out the many different levels of their effects on finance. It shows no bias because it is just a factual encyclopedia entry. It presents detailed background information and provides a complete understanding of Finance and how it is affected by the issue of convergence. The information is recent and relevant. It was very helpful, although it was not entirely pertinent to the topic.

Payne, Wendy M. and Julia E. Ranagan. "To Converge Or Not to Converge?" Journal of Government Financial Management 57, no. 1 (Spring, 2008): 14-20.

This article mainly discusses whether the U.S. should switch to IAS or merge the two together. It includes fact from both points of view and is impartial. It is engaging and the language is not too hard. There is not much bias and the facts are topical. The authors present the information in a very face forward manner that is easy to understand. All of the information pertained entirely to the topic above. Another benefit of this article is the fact that it is current.

Perry, James and Andreas Nölke. "The Political Economy of International Accounting Standards." Review of International Political Economy 13, no. 4 (2006): 559.

This article gives in-depth information into the background of the IASB and problems that they have faced while issuing some of their policies. It centers on a specific incident in 2005 that led to problems in many business sectors. It was fascinating because it mainly centered on the political side of things and gave pertinent information on the workings of IASB. It does show some bias against the IASB methods, but it still contains much factual information. It would have been more helpful if it presented opposing view points instead of just stating that it was in contrast to certain opinions.

Rieger, John R. "Disagreement on Accounting Standards Compliance." AFP Exchange 27, no. 10 (12, 2007): 18-19.

Rieger discusses the aim to create an Accounting Standards Compliance between the European Commission (EC) and the U.S. and all controversy surrounding this Compliance. The article mostly focuses on the disagreement between the two organizations; this was appealing because it provides valid information not previously discovered about this topic. It may be biased because the author is a U.S. citizen and therefore may feel that he needs to support his country. The article was very applicable to the subject matter; however it would have been helpful if it presented the viewpoints more thoroughly.

Shaw, Helen. Convergence in Five Years: IASB Chairman. CFO.Com, June 14, 2006.

This short article from CFO.com discusses the point of view of Sir David Tweedie, the IASB chairman, on the differences between U.S. and international standards. He also proposes a timeline for when these differences will disappear. This article was remarkable because it illustrated the view point of someone who has first hand experience with these issues and is an expert on the topic. It may show bias in favor of the IASB because Tweedie is the president; however it mostly focuses on facts only. The article is semi-recent and very appropriate. It would have been even more helpful if the author had gone more in-depth with Tweedie on other aspects of the convergence.

Tarca, Ann. "The International Accounting Standards Committee: A Political History." Accounting Review 83, no. 2 (04, 2008): 554-556.

This article offers a complete background review of the International Accounting Standards Committee, their history and creation, and their politics. It is informative, and shows the many different aspects of the organization. It shows no bias because it entirely factual. It serves to provide great background information and a complete understanding of the IASC. The information is modern and comprehensive. It was very helpful, although it only discussed the international side of things. It would have been useful if it included a contrast with the SEC or FASB.

Temkin, Sanchia. "Accounting Standards Mandatory in 2009 a." Business Day (South Africa), August 07, 2006. ECONOMY, BUSINESS & FINANCE.

This article discusses the fact that certain standards will be mandatory in South Africa in 2009. The implication of these standards brings Africa one step closer to merging the GAAP with the IAS. It presented a different viewpoint removed from Europe and the U.S. It was interesting, but very short. It was not entirely pertinent because it was only about one country, but it was still included some relevant information.

See also:

http://fasb.org

www.iasb.org

http://en. .org/wiki/FASB

http://en. .org/wiki/International_Accounting_Standards

Databases Used:

Google Scholar

LexisNexis

Academic Search Premier

Gale Virtual Reference Library - Business Collection

Business Source Premier

About the Author: Caitlin Foster is a Sophomore Accounting major in the Fisher School of Accounting at the University of Florida. Along with her younger brother, she was born in Tampa, FL and still lives there. She enjoys volleyball, reading, painting, boating, and watching movies with her friends. She plans to attend law school and study to become a corporate tax attorney. This topic is of great interest to her because it is very topical in her area of study. She can be contacted at: katnip23@ufl.edu

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