In this essay, I apply a well known accounting framework to the issue of whether or not to adopt IFRS as a basis for U.S. corporations to use when preparing financial statements. The conclusion I draw is that adopting IFRS costs trillions of U.S. dollars to the American investment community.
In the course Managerial Accounting the primary topic is the inclusion of accounting information for making decisions. The framework we use is called incremental analysis. Essentially, the benefits from taking the proposed course of action should exceed the costs of taking the proposed course of action. Not profound in any way, it is plain common sense. The incremental analysis is shown in the following chart:
Incremental analysis framework to be applied to IFRS issue.
When performing an incremental analysis, it is absolutely essential to tie down the party that is receiving the benefits and incurring the cost. Here, it is easy. The SEC states:
The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. As more and more first-time investors turn to the markets to help secure their futures, pay for homes, and send children to college, our investor protection mission is more compelling than ever.
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