Gaap for listing on us exchanges were interested in

GAAP for listing on U.S. exchanges were interested in working towards authoritative
international standards that would phase out the use of U.S. GAAP. With this incentive, in early
2000, the IASC terminated its link with the IFAC as the first step in restructuring itself. In 2001,
the IASC reorganized as the International Accounting Standards Board (IASB) and began
developing International Financial Reporting Standards (IFRS) in addition to the existing IAS.
(IASB 2007) The IASB defined itself a s “ an independent standard-setting board, appointed and
overseen by a geographically and professionally diverse group of Trustees of the IASC
Foundation who are accountable to the public interest .” To that end the IASB has fourteen
board members from 9 different countries and different academic or professional backgrounds.
Its main goal is to “ co-operate with national accounting standard-setters to achieve convergence
in accounting standards around the world.” It is important to note, that its mission is
purposefully stated to work toward convergence not absolute replacement of national standards.
This means that the IASB wanted agreement between its standards and the national standards of
a country. To that end the IASB began its convergence efforts within Europe. This made sense
because the EU presents a strong capital market and EU ministers had expressed an interest in
IFRS. Indeed by 2005, all European multinational companies were using IFRS for their financial
reporting needs. This was a great achievement for the IASB and provided the necessary drive
for U.S. GAAP convergence with IFRS. Due to pressure from EU officials and corporations in
2008 the SEC eliminated the rule requiring European companies to restate their financial
statements to U.S. GAAP for listing on US exchanges. This provided IFRS a foothold in the US
financial reporting. With these rapid changes, the SEC began to seriously look at IFRS and the
benefits it provides. (SEC Release 2008)
Benefits of International Standards
Most of the various national financial regulatory and standards setting bodies agree that
there are numerous concrete benefits to implementing international standards. The SEC
explicitly stated this as far back as 1988, in a policy statement that reads “all securities regulators
should work together diligently to create sound international regulatory frameworks that will
enhance the vitality of capital markets”(p2). Capital markets are one area that can benefit greatly
from uniform standards. Currently companies desiring to issue stock via capital markets in
different countries must follow the different rules of each country. This creates significant
barriers to entry because meeting the varied financial reporting requirements leads to
considerable increased costs. For example, in 1993 Daimler-Benz spent $ 60 million to prepare
financial statements adhering to U.S. GAAP, and expected to pay between $15 and $20 million

Journal of Finance and Accountancy
The Changing Accounting Environment, Page 6
each subsequent year to meet U.S. GAAP (Doupnik 2007). Moreover divergent standards also
create inefficiencies in cross-border capital flows.