IFRS & GAAP: Reconciling Differences Between Accounting Systems and Assessing the Proposed Changes to the IFRS Constitution
Reconciling Differences Between IFRS & GAAP
Changes to the IFRS Constitution IFRS & GA AP: Reconciling Dife rences Between Accounting Systems and Assessing the Proposed
0 Thi s Comment is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Northwestern Journal of International Law & Business by an authorized editor of Northwestern University School of Law Scholarly Commons
1 Karim Popatia, IFRS & GAAP: Reconciling Dif erences Between Accounting Systems and Assessing the Proposed Changes to the IFRS Constitution, 38 Nw. J. Int'l L. & Bus. (2017). https://scholarlycommons.law.northwestern.edu/njilb/vol38/iss1/3
IFRS & GAAP: Reconciling Differences
Between Accounting Systems and
Assessing the Proposed Changes to
the IFRS Constitution
Abstract: The article begins by looking at the differences and similarities
between different accounting systems, namely IFRS and GAAP. After this, the
article moves on to talk about why it may be beneficial to the international
investment community to have a singular account system as opposed to multiple
different systems that have small, but weighty and significant differences. From
here, the article discusses why convergence between the accounting systems may
not be likely due to IFRS’s goal of independence from influence by the United
States. The article also walks through each amendment proposed to the IFRS
Constitution and discusses how each of these changes will impact the
* J.D., Northwestern University Pritzker School of Law, 2018; B.A., University of Illinois at
Urbana-Champaign, 2015. Many thanks to my family and friends for their undying support
and helping me make sure this Note made sense on paper and not just in my head. Special
thanks to Professor David Ruder for encouraging me to explore this topic. Special thanks
also to Mr. Jay Gavigan and Mr. Guru Singh for inspiring me to pursue publication. Finally,
thanks to all the JILB editors who worked on revising this Note. This Note would not have
been possible without their help.
When evaluating a company’s performance, evaluators look at many
aspects of the business, including free cash flow, net assets, outstanding
debt, revenue, and equity. One way to holistically evaluate a company’s
performance is to look at a company’s financial statements and accounting
books. Though this may be one of the best ways to learn about a company’s
financial health, it can be misleading due to differences in the accounting
standards a company follows. Companies within one nation may conform to
one set of accounting standards, but other companies in other nations may
use other standards. Two of the most widely accepted accounting standards
used in the international business community are Generally Accepted
Accounting Principles (GAAP) and International Financial Reporting
It is important to note that both GAAP and IFRS represent two of the
most basic templates for accounting standards that countries adapt, with
many countries promulgating their own versions of either accounting
standard, albeit with small variations from country to country. Different
variations of GAAP are used in different countries.1 However, while each
country’s version of GAAP may be different, every country that uses
GAAP has accounting standards which are substantially similar to one
another. In spite of the nuanced differences in each of the accounting
standards of each particular country, we will refer to the basic template as
GAAP. Similarly, while each version of IFRS may be different, every
1 For example, the United States uses US GAAP, India uses India GAAP, the United
Kingdom UK GAAP.
Reconciling Differences Between IFRS & GAAP
country that uses IFRS has accounting standards substantially similar to one
another. Because of the similarities in the accounting standards of the
countries that use IFRS, we will refer to the basic template as IFRS.
The differences between IFRS and GAAP may be subtle, but
distinctions between the two accounting methods can have weighty
implications in evaluating the financial health of a company. This can
impact internal matters such as a company’s tax base as well as external
substantive issues, including cross-border investment activity, investor
misinformation, and cross-border transactions. Because of the potential
impact of the differences between GAAP and IFRS, it could behoove the
international business community to converge on a single set of accounting
standards. Failing convergence, it would benefit the international business
community to have companies “keep their financial records in accordance
with accounting standards that are so similar that regulators and stock
exchanges worldwide would accept financial statements prepared in
accordance with differing accounting standards because the differences
between standards would be very small.”2 While some argue that the
differences between IFRS and GAAP are small and no convergence is
needed, others still argue for a continued effort towards convergence
because the existing differences are problematic.
The IFRS accounting standards are propagated by the IFRS
Foundation, which acts in accordance with its own constitution. The IFRS
Constitution undergoes changes every few years. Accordingly, the only way
IFRS could be altered to further the convergence effort is through changes
to its constitution. The IFRS Foundation is currently considering the
implementation of changes to the IFRS Constitution that would impact the
differences between IFRS and GAAP.3 These changes to the IFRS
Constitution would also effectively end any hope of efforts towards
convergence between IFRS and GAAP.
While both accounting systems have similarities and differences, and
while it is important for the international business community to reconcile
the differences between the two systems, this paper will look at the
proposed changes to the IFRS Constitution in 2016 and how those proposed
changes will serve to increase the gap between these two vital accounting
2 David S. Ruder, Charles T. Canfield & Hudson T. Hollister, Creation of World Wide
Accounting Standards: Convergence and Independence, 25 NW. J. INT’L LAW & BUS. 513,
3 IFRS: Global Standards for the World Economy 2015 Review—Proposed Amendments
to the Constitution, IFRS FOUND. (Jun. 10, 2016),
Northwestern Journal of
International Law & Business
IFRS & GAAP: THE DIFFERENCES
In order to understand why the changes to the IFRS Constitution will
have any effect on the differences between IFRS and GAAP and why this
matters, the reader must first understand the similarities and differences
between IFRS and GAAP. While IFRS and GAAP are similar in many
ways, the differences between the two systems can have weighty
implications for the international business community. But in order to
understand the differences between the two systems, we must first
understand the similarities between them.
Both accounting systems are used by multinational corporations and
other major financial entities that conduct cross-border transactions on a
regular basis and often hold cross-border securities.4 Looking at the
generalities of both accounting standards, both IFRS and GAAP do not
allow an entity to rectify inappropriate accounting policies by disclosing the
accounting policies used by way of notes or explanatory material, which
requires user organizations to properly and prominently display information
pertinent to the identification of the reporting entity and other information
that makes a financial statement easier to understand for the reader.5 With
regards to disclosures within a business’s balance sheet, both accounting
standards allow for an entity to disclose further sub-classifications of line
items presented as classified in a manner appropriate to the entity’s
operations, either in the statement of financial position or in the notes.6 Both
accounting standards are also similar in how they allow entities to present
information,7 what they define as cash or a cash-equivalent asset,8 how they
allow companies to measure noncurrent assets classified as held for sale,9
how they allow companies to address changes to a plan of selling an asset,10
how they allow entities to deal with noncurrent assets to be abandoned,11
how they allow companies to deal with a change in estimates in dealing
with a change in accounting policies and correction of errors,12 and how
they allow entities to report initial recognition of PPE (property, plant, and
4 A cross-border security is defined for the purposes of this paper as a security originating
in one country and owned by a party in another country.
5 International Accounting Standard (“IAS”) 1.18; IAS 1.51.
6 IAS 1.77.
7 IAS 1.10A; Accounting Standards Codification (“ASC”) 220-10-45-1.
8 IAS 7.6, IAS 7.7; ASC Master Glossary, “Cash” and “Cash Equivalents”.
9 IFRS 5.15 and 5.15A; ASC 360-10-35-38 to 360-10-35-43.
10 IFRS 5.26-.29 and 5.42; ASC 360-10-35-44 to 35-45, ASC 360-10-45-7.
11 IFRS 5.32(a)-(c), 5.33-5.34, 5.13; ASC 205-20-45-15, ASC 205-20-35-47 to ASC
12 IAS 8.34-.38; ASC 250-10-45-17.
equipment) assets and their depreciation.13 The two accounting systems are
also similar in the way they allow capitalization of borrowing costs during
extended delays in construction and once the asset is ready for use.14 They
are also similar in the way they allow recognition of an intangible asset
acquired in a business combination at fair value separate from goodwill if
separable or if it arises from contractual or other legal rights.15 Other
similarities also exist between the two accounting systems in the areas of
impairment,16 inventories,17 lease liabilities,18 accounting for income tax,19
general recognition of revenue from a contractual transaction,20 hedge
accounting,21 and other partially-converged issues such as dealing with
Earnings Per Share (EPS).22 The differences between these two accounting
standards are simple to put into words, but much harder to thoroughly and
fairly articulate and comprehend.
Many accountants consider the main difference between the two
accounting systems to be straightforward: GAAP is a rules-based system
whereas IFRS is a principles-based system.23 IFRS consistently strives to
incorporate the concept of reasonableness,24 while GAAP provides
accountants and preparers with a much more particularized set of
requirements.25 In one of their published documents, accountants at KPMG
have noted that the goal of GAAP is accordance with GAAP regulations,
while the goal of IFRS is to give a fair presentation of a company’s
financial position.26 The lack of guidance and emphasis on substance under
13 IAS 16.6; ASC 360-10-05-3. See also IFRS Section 2.6; ASC 360-10-35-43.
14 IAS 23.20, IAS 23.22; ASC 835-20-25-5.
15 IAS 38.33-.37; ASC 805-20-25-10.
16 GRANT THORNTON, COMPARISON BETWEEN U.S. GAAP AND IFRS STANDARDS, 46
17 Id. at 50.
18 Id. at 54–67.
19 Id. at 71. See also id. at 73-74, 84.
20 Id. at 85–91.
21 IAS 39.71-.102; ASC 815-20.
22 GRANT THORNTON, supra note 16, at 195–212.
23 GEORGE J. BENSTON ET AL., WORLDWIDE FINANCIAL REPORTING 214 (2006); Remi
Forgeas, Is IFRS That Different From U.S. GAAP?, AICPA (June 16, 2008),
24 Lance J. Phillips, The Implications of IFRS on the Functioning of the Securities and
Antifraud Regime in the United States, 108 MICH. L. REV. 603, 617-18 (2010).
25 See, e.g., Bert J. Zarb, The Quest for Transparency in Financial Reporting: Should
International Financial Reporting Standards Replace U.S. GAAP?, 76 CPA J. 30, 32 (2006)
(“U.S. GAAP consists of a set of complex and detailed accounting rules that leave little
room for individual judgment”).
26 KPMG, IFRS compared to U.S. GAAP: An Overview, 8-9 (2008),
Northwestern Journal of
International Law & Business
IFRS commonly requires management to employ estimates, assumptions,
and judgment calls in financial reporting.27
Company revenue is one of the most important financial measures
used by global investors when considering a business entity’s financial
health. How much money a business brings in is often indicative of a
company’s strength in a particular market sector and a company’s strength
in a given geographic location. It also allows a careful observer to learn at
least a little about the financial health of the particular market sector and
geographic location. This not only allows an investor to be more
knowledgeable about the investment target itself, but also allows an
investor to contextualize information about the investment target with
respect to the market sector and geographic location in which the
investment target operates. The significance of this information is often
reflected in a financial statement.28 Given this crucial importance of revenue
in financial statements, it is important that companies globally have a
singular standard of recognizing revenue across accounting standards. In a
speech in March 2016, James Schnurr, Chief Accountant for the U.S.
Securities and Exchange Commission (SEC), noted one of the major
differences between GAAP and IFRS which is relevant to their different
treatments of revenue:
[GAAP] comprises broad revenue recognition concepts and
numerous requirements for particular industries or transactions that
can result in different accounting for economically similar
transactions. While for IFRS, the current revenue recognition
standards require significant judgment to apply [forcing] companies
often to look to US GAAP for guidance when IFRS does not have
specific guidance on point.29
The subjectivity and flexibility inherent in an individual’s judgment
being applied when a company prepares its financial statements according
to IFRS30 can have significant implications in representing a company’s
27 See Navin Agrawal, The Impact of IFRS on Corporate Governance, MINT (Oct. 2,
financial information to investors, government officials, and other
companies, and cause the company’s financial information to vary widely.
In situations that deal with a service contract that is to be performed over
multiple reporting periods, IFRS allows a company to recognize all the
revenue up front upon partial performance. GAAP, on the other hand,
“tak[es] the idea that revenues should be matched to expenses more
seriously [and] amortizes these contracts over the period of service without
Another difference between the accounting standards is also succinctly
articulated by Schnurr:
In addition, I am particularly troubled by the extent and nature of the
adjustments to arrive at alternative financial measures of
profitability, as compared to net income, and alternative measures of
cash generation, as compared to the measures of liquidity or cash
generation. In my view, preparers should carefully consider whether
significant adjustments to profitability outside of customary
measures such as EBITDA or non-recurring items or other charges to
the business, such as the sale of portions of the business in order to
provide the user with an understanding of how these events impact
trends and future performance, are appropriate. As it relates to cash
measures, I believe those measures should be reconciled to cash flow
Clearly, what the different accounting standards allow preparers to
factor into a company’s performance varies greatly. While one accounting
standard allows for preparers to account for nonrecurring transactions such
as the sale of part of a business in order to impact the depiction of a
business’s profitability, Schnurr argues that accounting standards should
focus on recurring activities, such as sales, while distinguishing these from
non-recurring activities so as to be able to better contextualize the
company’s performance for potential investors and help with understanding
the impact of nonrecurring events on a business and its future.
GAAP “evolved as a system responsive to the demands of equity
holders in U.S. financial markets,” so it is oriented towards the income
statement.33 Accordingly, when GAAP requires an event to make an impact
on the income statement, it flags the event for those wishing to valuate a
company’s financial health. On the other hand, IFRS favors the balance
sheet due to its ties to block-holder regimes.34 This reflects a great
a company’s financials (see KPMG, supra note 26), a thoroughly subjective responsibility.
31 William W. Bratton & Lawrence A. Cunningham, Treatment Differences and Political
Realities in the GAAP-IFRS Debate, 95 VA. L. REV. 989, 996 (2009).
32 Schnurr, supra note 29.
33 Bratton & Cunningham, supra note 31, at 996.
Northwestern Journal of
International Law & Business
influence on IFRS by its constituents, in particular bank creditors and
With respect to inventory accounting, GAAP is more flexible of the
two accounting standards. In accounting, one must make an assumption
about the order in which goods are sold. Goods are either sold in order of
being produced or acquired,36 or they are sold in reverse order of being
produced or acquired.37 In a situation where a seller is facing rising prices
for his or her goods, FIFO “reflects economic reality on the balance sheet,
listing inventories close to current values, while LIFO better reflects
prevailing economics on the income statement with a figure for cost of
goods sold reflecting current prices. GAAP permits companies to choose;
IFRS, with its regime of balance sheet primacy, requires FIFO.”38
A final difference between GAAP and IFRS is the different treatments
given to the consolidation of special purpose entities by each accounting
standard. A special purpose entity (“SPE”) is an entity created by a
company to carry out a specific purpose or transaction and is most
commonly used as a method of keeping debt off a parent company’s
balance sheet.39 After the Enron scandal, GAAP regulators decided to
tighten the rules governing when a company must consolidate the financial
statements of SPEs with its own.40
Statement of Financial Accounting Standards No. 140 (“FAS 140”)
governs the consolidation of SPEs under GAAP.41 According to FAS 140, a
business entity is required to consolidate the financials of a SPE unless all
of the following conditions are met:
35 See generally Ruder, Canfield & Hollister, supra note 2 (positing the notion that
accounting standards should be developed by a body that is independent and not beholden to
any special interests since being beholden to special interests may lead to an increased risk
of having many negative ramifications including falsification of financial information,
misrepresentation, and investor fraud).
36 The first in, first out (FIFO) method of inventory valuation is a cost flow assumption
that the first goods purchased are also the first goods sold. In most companies, this
assumption closely matches the actual flow of goods, and so is considered the most
theoretically correct inventory valuation method.
37 The last in, first out (LIFO) method of inventory valuation is a cost flow assumption
that is used by many U.S. companies in moving the costs of products from inventory to the
cost of goods sold. Under LIFO, the latest or more recent costs of products purchased or
produced are the first costs expensed as the cost of goods sold.
38 Bratton & Cunningham, supra note 31, at 997.
39 Jalal Soroosh & Jack T. Ciesielski, Accounting for Special Purpose Entities Revised:
FASB Interpretation 46(R), 74 CPA J. 30, 30 (2004).
40 Id. at 33 (“As the Enron crisis brought attention to the use of SPEs, FASB responded
by issuing a proposed interpretation of existing accounting principles aimed at putting many
off-balance-sheet entities back onto the balance sheet of the companies that created them.”).
41 FIN. ACCOUNTING STANDARDS BD., STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 140: ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS
AND EXTINGUISHMENTS OF LIABILITIES (2000).
(a) the assets transferred to the SPE have been isolated from the
sponsor company, meaning they have been put beyond the reach of
the transferor and its creditors, even in bankruptcy or other
(b) the SPE has the right to pledge or exchange the assets, and no
condition constrains the SPE from taking advantage of its right to
pledge or exchange and provides more than a trivial benefit to the
(c) the transferor does not maintain effective control over the
transferred assets through either (1) an agreement that both entitles
and obligates the sponsor company to repurchase or redeem them
before their maturity or (2) the ability to unilaterally cause the holder
to return specific assets.42
It is important to note, however, that if the SPE is classified as a
variable-interest entity (“VIE”), a parent company is always required to
consolidate the financials of the SPE with its own.43 According to FASB
Interpretation No. 46(R) (“FIN 46(R)”),44 a VIE is a SPE that meets at least
one of the following additional criteria:
(1) The equity investors lack the direct or indirect ability through
voting rights or similar rights to make decisions about the entity’s
activities that have a significant effect on the success of the business;
(2) The equity investors lack the obligation to absorb the expected
losses of the entity;
(3) The equity investors lack the right to receive the expected
residual returns of the entity; and
(4) The total equity investment at risk is not sufficient to permit the
entity to finance its activities without additional subordinated
financial support provided by any parties, including equity holders.45
With respect to the fourth criteria, an equity investment of less than ten
percent is presumed insufficient to allow the SPE to finance its own
activities; this presumption can be rebutted by proving one of three
42 Phillips, supra note 24, at 623.
43 Soroosh & Ciesielski, supra note 39, at 34.
44 FIN. ACCOUNTING STANDARDS BD., FASB INTERPRETATION NO. 46: CONSOLIDATION OF
VARIABLE INTEREST ENTITIES (2003).
45 Id. at ¶5.
46 The three conditions are the following: 1) “[t]he entity has demonstrated that it can
finance its activities without additional subordinated financial support”; 2) “[t]he entity has
Northwestern Journal of
International Law & Business
IFRS rules regarding consolidating SPEs are much less detailed than
GAAP. This reflects the principles-based approach of IFRS. According to
International Accounting Standard No. 27 (“IAS 27”),47 a company must
consolidate a SPE’s financial information into its own financial statements
if the SPE is subject to the company’s “control.”48 Control is presumed if
the company owns more than half of the voting power of an SPE, but can
also be established if the parent company appears to obtain the benefits of
the SPE’s operations, the parent company retains the decision-making
powers sufficient to obtain the benefits of the SPE’s operations, or the
parent company otherwise has the right to obtain the benefits of the SPE’s
operations, which in turn also exposes the parent company to the risks
incident to the SPE’s activities.49 Though the one-half voting power rule is
relatively straightforward, other indicators of control may be a bit more
vague, which can allow a parent company’s management body considerable
discretion in how it classifies SPEs.
Revenue recognition from nonrecurring activities, inventory measures,
and treatment of SPEs are just some of the ways that the two lead
accounting standards in the world differ from one another. Because of their
respective approaches, a careful reader can infer that there is room for
confusion and different outcomes when taking a given company’s financial
information and preparing separate financial statements according to IFRS
Given the differences in the accounting systems, the question of
convergence turns from a positive one, a question of “what is?”, to a
normative one, a question of “what should be?” What should the
international business community do to reconcile the differences between
GAAP and IFRS so as to be able to give global investors the best and most
holistic information that they need in order to make the best business
Over the past few years, the SEC has pushed hard for a convergence
between the two accounting systems while others have also considered the
effects of a converged accounting system or even a single accounting
at least as much equity invested as [comparable] entities that hold only similar assets of
similar quality in similar amounts and operate with no additional subordinated financial
support”; and 3) “[t]he amount of equity invested in the entity exceeds the . . . entity’s
expected losses based on reasonable quantitative evidence.” Id. at ¶9.
47 INT’L FIN. REPORTING STANDARDS FOUND., INT’L ACCOUNTING STANDARD NO. 27:
CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS (rev. 2008).
49 Phillips, supra note 24, at 624.
system on multinational corporations and global investment.50 51 The
Council of the European Union has also stated how important it thinks the
goal of convergence is for the sake of competitiveness of the capital
markets.52 In 1997, the SEC noted that companies wishing to raise capital in
multiple countries were required to prepare multiple sets of financial
statements to comply with different jurisdictional accounting requirements,
increasing compliance costs and creating inefficiencies.53 Discussions
between FASB and IASB in 2002 resulted in a plan towards convergence,
known as the “Norwalk Agreement.”54 The Norwalk Agreement recorded
the understanding between FASB and IASB to use their best efforts to
make their existing financial reporting standards fully compatible with each
other as soon as practicable and to coordinate their future action to ensure
compatibility would be maintained once achieved.55 The Norwalk
Agreement outlined a number of action steps that both IASB and FASB
would implement as soon as practicable on matters such as revenue
recognition, consolidations, and fair value measurement in order to achieve
convergence.56 As of 2009, some expected that the U.S. would begin a
transition toward IFRS through small, thoroughly reviewed steps with an
end-goal of complete adoption.57 With a number of important projects
expected along with a limited trial period overseen by the SEC to have been
completed by 2011, FASB was expected to decide whether to adopt a
mandatory switch to IFRS from GAAP accounting in 2011.58 No such
Northwestern Journal of
International Law & Business
Still, FASB was committed to achieving convergence, recognizing that
“securities regulators around the world have an interest in ensuring that
high quality, comprehensive information is available to investors in all
markets.”59 In order to provide such comprehensive information to
American investors while also allowing foreign investors to better
understand the financial information underlying American businesses, some
urged that IFRS must be adopted in the United States even after the
expected convergence date of 2011 elapsed.60 The SEC acknowledged that
“capital markets have become increasingly global, [and] U.S. investors have
a corresponding increase in international investment opportunities.”61 Such
a statement by SEC could be perceived as one that acknowledged a market
demand for IFRS, given the fact that two-thirds of American investors
owned securities of foreign companies in 2008.62 As a more globalized
world economy emerges, the demand for a truly globalized accounting
standard will only increase. As former SEC Chairman Christopher Cox
remarked, “[h]aving a set of globally accepted accounting standards is
critical to the rapidly accelerating global integration of the world’s capital
The SEC currently (as of 2017) recognizes the importance of a
converged accounting standard, if not a singular accounting standard. In his
2016 speech, SEC Chief Accountant Schnurr discussed the new guidance
that FASB issued in May 2014 and how the new guidance was intended to
“improve existing revenue requirements by eliminating industry-specific
guidance, provide a more robust framework for addressing revenue issues,
and require additional disclosures to users of financial statements.”64
Schnurr clarified his comment regarding the robust framework for
addressing revenue issues. Under the new revenue guidance, “variable
pricing terms, such as performance bonuses, milestone payments, and
guarantees, will need to be re-evaluated as the timing of revenue
recognition and content of disclosures could differ as compared to current
U.S. GAAP” and that the core principle of the new revenue recognition
standard was to be that “companies will recognize revenue to depict the
transfer of promised goods to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for
goods.” Private businesses tend to use the cash basis method for
simplicity’s sake because the SEC does not require such businesses to
strictly adhere to GAAP accounting standards.65 Accordingly, this
movement towards a blanket approach to an accrual basis of accounting
depicts an effort towards convergence by FASB.
Independence is a key concern when considering either convergence or
adopting IFRS. An effective accounting standard ought to be independent
of outside commercial and government influence, allowing it to maintain
integrity and high quality.66 This does not mean however, that the entity
creating the accounting standards does not consult any other entity to help
form the creating entity’s opinion. In fact, the creating entity “must engage
in [such consultation] seeking the views of the affected parties, including
businesses, so that the standards they create will not have unintended
In adopting IFRS for the United States, or even moving towards the
IFRS standard by way of convergence, regulators such as the SEC and
FASB must make sure that the accounting standard the regulators are
adopting or converging towards maintains its independence. While
independence is the goal to strive for, an accounting standard should also
reflect the ideals and goals inherent to the accounting standard of the
constituents it serves. In understanding the issue of IASB’s independence, it
is important to recall what was said earlier—that IFRS is a principles-based
accounting standard with a focus on a company’s balance sheet whereas
GAAP is a rules-based accounting standard with a focus on a company’s
65 Sean Ross, Why Does GAAP Require Accrual Basis Rather Than Cash Accounting?,
INVESTOPEDIA (Jan. 13, 2015),
66 United States v. Arthur Young & Co., 465 U.S. 805, 817-18 (1984) (“The independent
public accountant performing this special function owes ultimate allegiance to the
corporation’s creditors and stockholders, as well as to the investing public. This ‘public
watchdog’ function demands that the accountant maintain total independence from the client
at all times and requires complete fidelity to the public trust.”).
67 Ruder, Canfield & Hollister, supra note 2, at 517.
68 Bratton & Cunningham, supra note 31, at 996.
Northwestern Journal of
International Law & Business
FASB was created thirty-five years ago as a result of the American
Institute of Certified Public Accountants (“AICPA”) taking the lead69 to
create a responsive standard-setting entity without ceding territory to a
federal agency.70 In the process, AICPA also allowed input from
organizations and individuals representing management and the financial
sector.71 Because the relevant federal agencies were thought to be
dominated by progressive, anti-corporate types, the private sector had a
strong incentive to keep the federal government out of the industry’s
The goal was to maintain public legitimacy, making it important for
FASB to maintain independence and remain above political pressure73
while still maintaining a sense of responsiveness to its constituents.74 Thus,
FASB became a board selected by an independent foundation, with the
foundation being populated with constituents and a monitoring advisory
body, which was also populated with constituents.75 IASB has become a
similarly structured body with a larger size and wider geographic
FASB’s, and by extension IASB’s, governance model lends itself to a
“middle way” that subjects itself to numerous political objections from both
the right and the left: conservative public choice commentators denounce
the industry regulating body calling it a rent-seeking scam77 while
progressive pluralists criticize it claiming that the standard-setting entity
should be an agency directly responsible to a larger, overseeing legislative
body.78 Applying this already heavily-criticized model of governance to
IASB arguably makes things worse, because it removes a political subject
matter to a distant venue in which U.S. domestic concerns occupy, at best, a
secondary place on the agenda.79 Perhaps this is why efforts to adopt IFRS
instead of GAAP have failed repeatedly. Convergence also requires some
degree of synchronization of goals so as to make both accounting standards
seamlessly compatible with each other without complete repudiation and
rejection by constituents of either accounting standard. To see whether
IASB’s composition would allow IFRS to move in this direction, we must
look at IASB’s composition.80
The IFRS Foundation is divided into the IFRS Monitoring Board and
the IFRS Advisory Council with the Monitoring Board taking a more
outward-facing role in the organization’s operations. The IFRS Advisory
Council is comprised of the IFRS Foundation Trustees, the International
Accounting Standards Board, and the IFRS Interpretations Committee.
IASB is comprised of eight formal advisory bodies: Accounting Standards
Advisory Forum, Capital Markets Advisory Committee, Consultative
Groups, Emerging Economies Group, Global Preparers Forum, SME
Implementation Group, IFRS Transition Resource Group for Impairment of
Financial Instruments (ITG), and Transition Resource Group for Revenue
273, 275-81 (1979). Applying this oft-criticized FASB governance model to a global
platform does not solve for this issue, but rather, simply takes the problem to a global level
with the IASB governance model serving as a conduit to multiple national regulation
agencies exacerbating the problem. Bratton & Cunningham, supra note 31, at 1000.
78 Bratton & Cunningham, supra note 31, at 1000. Liberals believe that standard-setting
is a high stakes game in which the setter has no alternative but to balance interests, a political
role. Accordingly, the standard-setter’s legitimacy depends on political responsiveness.
FASB could not provide this responsiveness at inception because it depended on
contributions from the preparers and auditors, groups with high stakes in all of its outcomes.
Northwestern Journal of
International Law & Business
Of the eight advisory bodies, “Consultative Groups” breaks down into
eight subgroups, each with a particular focus. When viewed as a whole, the
remaining seven are dominated by European membership, leaving little
room for an American presence, much less a North American one. To
contextualize, of the eight advisory bodies, there are only two advisory
bodies where the American contingency is not outweighed by its European
counterpart. One of these two groups is the Emerging Economies Group. Of
the fourteen members in this group, there are no Europeans. The group had
one U.S. citizen who served as Chairman of the group, who recently died.
The position has remained empty since November 14, 2016. Perhaps it is
fitting that this group is not dominated by either European or American
presence as the purpose of the group, as the name suggests, is to serve the
interests of emerging economies, and neither the United States nor the
major European players qualify as “emerging” economies.
The only other formal advisory body where a European presence does
not outweigh an American presence is the Transition Resource Group for
Revenue Recognition, where there are twelve Americans and only ten
Europeans. This group is comprised of twenty-seven individuals, providing
the American contingency a slight plurality advantage. Recall that we
previously discussed the fact that the SEC and GAAP have taken steps
towards convergence with IFRS on the matter of revenue recognition. This
is important to note because it may be indicative of what the United States
needs in order for its voice to be heard by a formal IASB advisory body so
as to be able to turn the dream of convergence into a reality.
Setting aside the Emerging Economies Group and the Transition
Resource Group for Revenue Recognition leaves six advisory bodies. The
Accounting Standards Advisory Forum is comprised of twelve individuals,
three of which are European and three of which are from the Americas.
Note that this encompasses North and South America, leaving some of the
world’s largest economies and the largest emerging economies to fight over
three seats on the advisory body, which serves the purpose of achieving
IASB’s “goal of developing globally accepted high-quality accounting
standards.”82 Of the 210 members on the remaining advisory committees
and consultative groups, seventy-five are European while twenty-eight are
American. The disparity between nationalities of the individuals that make
up IASB across the groups and committees is rather indicative of the
struggle that the United States currently faces in order to encourage IFRS
towards convergence. Moving forward, it is important to remember that this
struggle is only for the status quo and does not account for the changes that
bodies/ (last visited Aug. 31, 2017).
82 About the Accounting Standards Advisory Forum, IFRS FOUND.,
http://www.ifrs.org/groups/accounting-standards-advisory-forum/#about (last visited Aug.
are currently being proposed to the IFRS Constitution.
CHANGES IN THE IFRS CONSTITUTION
While we have outlined the logistical and hierarchical structure of
IASB, the entire entity is actually governed by a constitution that was
originally published in its original form by the Board of the former
International Accounting Standards Committee (IASC) in March 2000 and
by the IASB members at a meeting in Edinburgh on May 24, 2000.83
Trustees were nominated by a Nominating Committee on May 22, 2000 and
assumed their office on May 24, 2000, as a result of the approval of the
Constitution.84 These Trustees formed the IFRS Foundation on February 6,
2001.85 In order for the IFRS accounting standard to remain flexible,
dynamic, and responsive to its subscribers’ needs, the Trustees have been
amending the Constitution since its original enactment. The Constitution
requires the Trustees to review the Constitution every five years.86 The first
mandatory constitution review was commenced by the Trustees in
November 2003 and was concluded in 2005.87
Currently, the IFRS Foundation has proposed new amendments to the
IFRS Constitution, by which IASB would abide. Far from convergence,
these changes will serve to increase the divergence between IFRS and
GAAP as accounting standards by decreasing the North American
contingency, thereby decreasing the group of American representatives
within IASB. But simply eliminating American influence on IFRS by
banning Americans from IASB would be too blunt and bold of a political
statement. Instead, by enacting amendments to the IFRS Constitution that
would allow the IFRS Foundation to effectively squeeze out American
representatives, the IFRS Foundation will be foreclosing any meaningful
chance for convergence between IFRS and GAAP. The proposed changes
are likely to widen the gap between the two accounting systems.
As currently composed, the IASB Trustees are appointed from a
talented pool with a restriction on the geographic location of where the
Trustees may come from. Six of the Trustees are appointed from the
Asia/Oceania region, six from Europe, six from North America, one from
Africa, one from South America, and two Trustees can be appointed from
83 IFRS Foundation Constitution, IFRS FOUND., at 4 (Dec. 1, 2016),
85 Id. at 4.
Northwestern Journal of
International Law & Business
“any area, subject to maintaining overall geographical balance.”88 One of
the proposed changes would decrease American presence on IASB by
changing the geographic breakdown of where the Trustees may currently
come from by decreasing the six Trustee seats designated for North
America, one seat for South America, and two at-large seats to six Trustee
seats designated for “the Americas” and three at-large seats. The three
atlarge seats can be filled at discretion. While it is uncertain as to who would
have the discretionary power to fill the at-large seats, this power could
reside with the entirety of the Board or with the Chair. In either situation, it
makes sense for these seats to be filled with individuals who favor IFRS, its
independence from American influence, and a principles-based approach to
accounting where what is fair is more important than providing complete
information to investors. This shifts the composition of the Board to be
more Eurocentric, causing Americans to have less say on IASB Board of
Trustees. While other outcomes are possible, this shift in the geographic
breakdown would most likely translate to fewer voices that can advocate for
Another proposed change to the IFRS Foundation Constitution is with
regard to a Trustee’s professional background. Section 7 of the Constitution
currently states that “[n]ormally, two of the Trustees shall be senior partners
of prominent international accounting firms.”89 The proposed changes seek
to eliminate the quoted provision, which serves as a soft requirement to
serving as a Trustee. This would effectively lower the qualifications for two
of the Trustee positions. To get a better understanding of why this
amendment matters, we must look at prominent international accounting
firms and the geographic location of their proverbial brain center. Of the
“Big Four”90 accounting firms, PricewaterhouseCoopers (PwC) and
Deloitte are headquartered in the U.S. Meanwhile, the Ernst & Young
(“EY”) Global Chairman and CEO is located in Washington D.C., while
KPMG’s International Chairman is seated in New York and both are
headquartered elsewhere.91 PwC and Deloitte still have large European
offices, while KMPG and EY are headquartered in Europe, IFRS’s
geopolitical territory. Of the next five most prominent international
accounting firms, Baker Tilly, BDO, Grant Thornton, Mazars, and RSM,
Grant Thornton is headquartered in Chicago. The rest are headquartered in
Europe. While IASB already had a large pool of qualified candidates from
which to select potential Trustees, eliminating the soft requirement of two
senior partners significantly increases the size of this candidate pool.
While some may argue that this amendment can lead to more senior
partners serving as Trustees, this end-goal could have been achieved
without the proposed amendment. Alternatively, the proposed amendment
could have simply abolished the number of trustees that would normally be
senior partners at prominent international accounting firms. While anyone
who offers a reason as to why this amendment is being proposed would
likely be speculating, one reason may be a desire to increase the amount of
candidates who may be slightly less qualified than the individuals they
would be replacing, but may be more susceptible to European influence.
The amendments discussed above are relevant to the Trustees. Some
may say that geographical distribution is less important at the Trustee level
as it pertains to convergence efforts. After all, the actual accounting
standard is set by IASB.92 While this may be accurate, proposed
amendments to the IFRS Constitution do not leave IASB untouched. One
proposed amendment serves to reduce North American presence on IASB,
as well.93 This amendment would once again merge seats designated for
North Americans and seats designated for South Americans and have this
reduced number of seats be designated to “the Americas,” while also
reducing the number of discretionary at large positions.94 Sixteen members
currently comprise IASB, with four seats each designated to the
Asia/Oceania region, Europe, and North America, one seat designated to
Africa, one to South America, and another two reserved for at-large
members again, subject to maintaining overall geographical balance.95
Similar to the effect the proposed amendment will have on the geographical
distribution of the Trustees if enacted, this proposed amendment would
consolidate Board seats designated for North America and South America
while also reducing the number of at-large appointments possible to just
Because there are more international economic players than just the
United States in North America, U.S. presence on the IASB was already
diluted. Consolidating the North American and South American Board seats
serves to doubly dilute U.S. presence on the IASB. While some may argue
that the IASB can opt to appoint a U.S. national to the at-large position, the
opposite is also true—IASB can also fill the at-large position with someone
who does not favor convergence. As currently composed, the IASB’s two
at-large positions are filled: one by a European Chairman and one by a
92 About the International Accounting Standards Board, IFRS
Aug. 25, 2017).
93 Proposed Amendments to the IFRS Foundation Constitution, supra note 88, at 15-18.
95 Id. at 18.
Northwestern Journal of
International Law & Business
Canadian Vice-Chair, showing a clear willingness to fill the potential
atlarge seats with individuals from countries that subscribe to IFRS and not
GAAP. The proposed amendment would serve to shift the Board’s
composition to be more Eurocentric, leaving fewer voices advocating for
Another proposed amendment deals with the length of the renewable
term. Currently, a Board member serves for a term of five years with a
renewable three-year term. The proposed change reduces the renewable
term to a possibility while also adjusting the term length from a guaranteed
three years to a term that could span anywhere from three to five years,
subject to procedures to be developed by a Eurocentric Board of Trustees.96
This proposed amendment effectively allows the Trustees the ability to
elongate the renewable term period of European members to five years
while being able to keep the renewable term period of U.S. members at
three years. This encourages continuity of European board members,
allowing them the best possible opportunity to see projects through to
completion. It also keeps the matter of convergence away by effectively
enacting a potentially staggered Board. Enacting a system that potentially
allows term lengths for some Board members, including pro-convergence
Board members, to be limited to three years while allowing term lengths for
other Board members, potentially including anti-convergence Board
members, to run for a length of eight years encourages non-convergence
between IFRS and GAAP, if not divergence.
Proposal Nine seeks to alter the voting requirements by decreasing the
number of minimum votes required while simultaneously increasing the
percentage of votes required to publish a Standard or an Interpretation.
Currently, a measure must be approved by nine members when the Board is
comprised of fewer than sixteen members and by ten members when Board
is comprised of exactly sixteen members. This equates to an affirmative
vote by at least sixty percent of the Board when there are fourteen or fifteen
members on the Board or approximately sixty-three percent when a Board
is fully occupied. If it passes, the amendment would require any measure,
Standard or Interpretation, to be approved by eight Board members if the
Board is comprised of fewer than thirteen individuals and nine Board
members if there are thirteen or fourteen members on the Board. This
equates to approximately sixty-seven percent of the Board or more when
there are fewer than thirteen Board members or sixty-nine percent when
there are fourteen members on the Board. While this decreases the number
of votes required, every measure being considered must be approved by a
proportion of Board members closer to unanimity than would be required
without this amendment being enacted.
Barring a sudden and sharp shift in ideologies, this amendment would
96 Proposed Amendments to the IFRS Foundation Constitution, supra note 88, at 19-20.
render controversial measures including convergence essentially doomed to
fail if Board members vote according to “party lines.” The current
Constitution requires the North American voting bloc of four votes to
secure the South American vote, African vote, and the Asian/Oceanic
voting bloc, depending on whether the at-large seats are filled and
availability of the at-large vote, assuming that the European bloc would
categorically vote against any convergence measure. If the proposed
amendment is enacted, it would require the diluted U.S. voting bloc to first
secure the votes of other Board members from the Americas and then to
secure at least the entirety of the Asian/Oceanic voting bloc of four votes
and the at-large vote when the at-large seat is filled. If the at-large seat is
occupied by an individual who is partial to IFRS’s principle-based approach
to accounting standards, no convergence measure led by a diluted U.S.
voting bloc will be passed, assuming votes are cast according to party lines.
Accordingly, this amendment would provide Europeans and other
individuals with preferences for independence from U.S. influence and for
IFRS’s principle-based approach to accounting standards an added
incentive to fill the at-large position with a like-minded individual. With the
at-large position filled and its vote secured, the European bloc would only
need four votes from any Board members in order to pass Standards or
Interpretations. Such a heavily-tilted Board safeguards European interests
of independence from U.S. influence on the IASB and keeps IFRS
principle-based, as opposed to steadily shifting towards becoming a
The final proposed amendment to be discussed is one that impacts the
frequency with which the Advisory Council would meet.97 The Advisory
Council is the formal advisory body to the IASB and the Trustees and
essentially serves as a representative group of the IFRS Foundation’s
constituents.98 Members of the Advisory Council are appointed by the
Trustees.99 Currently, the Advisory Council meets at least three times a
year. If the proposed change is enacted, the Advisory Council would meet
at least twice a year.100 Some may argue that this makes no difference
because only the wording has changed and has no effect on the Advisory
Council’s actions. If this argument is accurate, it raises the question as to
why change the wording at all if the effect has remained the same. The
reality, however, is that this amendment may well affect the Advisory
Council’s actions by allowing it to meet less frequently on an annual basis
by eliminating one meeting every year. This is because having two
97 Proposed Amendments to the IFRS Foundation Constitution, supra note 88, at 22.
98 About the IFRS Advisory Council, IFRS FOUND.,
http://www.ifrs.org/groups/ifrsadvisory-council/ (last visited Aug. 25, 2017).
100Proposed Amendments to the IFRS Foundation Constitution, supra note 88, at 22.
Northwestern Journal of
International Law & Business
meetings every year still satisfies the requirement of “at least” two meetings
per year. Because the Advisory Council currently meets three times every
year, this amendment could allow the Advisory Council to meet less
This amendment allows the IFRS Foundation to be less dynamic and
less responsive to its constituents’ needs. Because the Advisory Council is
essentially a representative body of the IFRS Foundation’s constituents that
advises the Board of Trustees and the IASB as to what constituents want
and need from the IFRS Foundation as well as how IFRS can be amended,
decreasing the number of times this group meets can be dangerous to
IFRS’s goal of being a responsive and dynamic accounting standard that
robustly address its customers’ needs. If enacted, this amendment also
makes any U.S.-led effort to change IFRS, including convergence efforts,
more difficult to achieve by decreasing the number of times the Council is
required to meet and therefore hear concerns and arguments from
individuals actively pushing for convergence. Because there are fewer
opportunities to hear arguments in favor of convergence, the Council may
focus less on convergence and consider other matters that may be more
pressing to IFRS users around the world. This would help minimize U.S.
influence on IFRS, negatively impacting the effectiveness of convergence
efforts, and allow IFRS to remain a principle-based accounting standard and
not shift towards becoming a rules-based accounting standard.
All of the proposed amendments discussed in this Note have analyzed
the impact they would have on U.S. influence in general and the United
States’ influence on the IASB and the efforts advocating for convergence
between IFRS and GAAP. The logical conclusion of the analysis above is
straightforward: because European business leaders value their
independence from U.S. business leaders and government officials,
convergence is unlikely to occur. Because the IASB and the IFRS
Foundation desire independence from U.S. influence and a decreased U.S.
presence on the IASB, the proposed changes to the IFRS Constitution serve
to effectuate rules that would enforce exactly this result. Accordingly,
convergence efforts between IFRS and GAAP are likely to fail, while the
gap between the two leading accounting standards in the world may widen.
Because the IFRS Foundation and the IASB want to decrease U.S.
influence on the IASB so as to maintain their independence from U.S.
interests, the changes being proposed to the IFRS Constitution will cause
the U.S. contingent to have a lesser presence that is twice diluted, with less
voting power than before, for potentially shorter-term periods, and fewer
opportunities to enact change in a given year. As the impact of these
amendments to the Constitution trickles down to the daily operations of the
IASB, these changes will likely lead to less power with the contingency
from the United States, shifting the balance of power in favor of the
European contingency. By ensuring its independence, the IASB can
continue to cater to its interests by enacting changes to IFRS that advance
the interest of principle-based accounting as opposed to a rules-based
accounting system where the goal is to provide international investors the
information necessary to make the best investment decisions.
28 Richard Loth, Understanding the Income Statement , INVESTOPEDIA (Nov. 30 , 2015 ), http://www.investopedia.com/articles/04/022504.asp (explaining that while net income may be considered the singular most important piece of information for investors, profitability relies heavily on revenue, making revenue of equal importance to profitability, if not more important than profitability).
29 James Schnurr , Chief Accountant, Office of the Chief Accountant, Sec . Exch. Comm'n, Remarks Before the 12th Annual Life Sciences Accounting and Reporting Congress (Mar. 22 , 2016 ).
30 In accordance with the IFRS's goal of being able to give investors a “fair overview” of 50 James M. Lukenda & Michael Scannella, International Financial Reporting Standards: Hello Accounting Convergence, Goodbye, GAAP?, 28.3 AM. BANKR. INST. J . 22 , 22 ( 2009 ) (“The initial stages for this convergence began in 1988, when the SEC encouraged international efforts to develop a core set of accounting standards .”).
51 See also Tyler Weigel, Comment, A New Universal Language?: An Overview of Adopting The International Financial Reporting Standards in the United States, 80 UMKC L . REV. 1239 ( 2012 ) (considering the effects on domestic corporations if the SEC conformed to the majority of the global business community and adopted IFRS); Kyle Pine, Comment, Lowering the Cost of Rent: How IFRS and the Convergence of Corporate Governance Standards Can Help Foreign Issuers Raise Capital in the United States and Abroad, 30 NW. J. INT'L L . & BUS . 483 , 486 ( 2010 ) (“Thus, there is an overall benefit created by the convergence in high-quality regulatory standards in that it equalizes the cost of compliance across jurisdictions while still maintaining the benefits to firms attributed to the bonding theory .”).
52 Regulation 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the Application of International Accounting Standards , 2002 O.J. (L 243) 1 , 1 - 4 .
53 Lukenda & Scannella, supra note 50.
54 FIN. ACCOUNTING STANDARDS BD., COMPLETING THE FEBRUARY 2006 MEMORANDUM OF UNDERSTANDING: A PROGRESS REPORT AND TIMETABLE FOR COMPLETION ( 2008 ), http://www.fasb.org/intl/MOU_ 09 - 11 -08.pdf.
55 Lukenda & Scannella, supra note 50.
56 Completing the February 2006 Memorandum of Understanding, supra note 54.
57 See Lukenda & Scannella, supra note 50.
58 Completing the February 2006 Memorandum of Understanding, supra note 54.
59 SEC. EXCH. COMM'N , SEC Concept Release No. 33 - 7801 , 34 - 42430 , 65 Fed. Reg. 8 , 897 (Feb. 16, 2000 ), http://www.sec.gov/rules/concept/34- 42430 .htm.
60 Weigel, supra note 51.
61 Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U .S. Issuers, Exchange Act Release No. 33 - 8982 , 73 Fed. Reg. 70 , 817 (proposed Nov. 21 , 2008 ), http://www.sec.gov/rules/proposed/ 2008/33- 8982 .pdf.
62 Press Release, Sec. Exch. Comm'n, SEC Proposes Roadmap Toward Global Accounting Standards to Help Investors Compare Financial Information More Easily (Aug. 27 , 2008 ), http://www.sec.gov/news/press/2008/2008- 184 .htm (“ The increasing integration of the world's capital markets, which has resulted in two-thirds of U.S. investors owning securities issued by foreign companies that report their financial information using IFRS, has made the establishment of a single set of high quality accounting standards a matter of growing importance .”).
63 James S. Turley, Mind the GAAP, WALL ST . J., Nov. 9 , 2007 , at A18.
64 Schnurr, supra note 29.
69 Ronald King & Gregory Waymire, Accounting Standard-Setting Institutions and the Governance of Incomplete Contracts, 9 J. ACCT . AUDITING & FIN. 579 , 585 - 86 ( 1994 ).
70 The federal securities laws directed the SEC to prescribe the form and content of financial statements . See generally Securities Act of 1933 , ch. 38 , 48 Stat . 74 (codified as amended at 15 U.S.C. §§ 77 , 77s ( 2012 )).
71 ROBERT VAN RIPER , SETTING STANDARDS FOR FINANCIAL REPORTING: FASB AND THE STRUGGLE FOR CONTROL OF A CRITICAL PROCESS 8-9 ( 1994 ) ; Mohamed Elmuttassim Hussein & J. Edward Ketz , Accounting Standards-Setting in the U.S.: An Analysis of Power and Social Exchange, 10 J. ACCT . & PUB. POL'Y 59 , 76 ( 1991 ).
72 VAN RIPER, supra note 71 , at 9.
73 VAN RIPER, supra note 71 , at 9.
74 See ROBERT CHATOV , CORPORATE FINANCIAL REPORTING: PUBLIC OR PRIVATE CONTROL ? 232 - 39 ( 1975 ).
75 VAN RIPER, supra note 71 , at 13-18.
76 Concept Release on Allowing U.S. Issuers to Prepare Financial Statements in Accordance with International Financial Reporting Standards, 72 Fed. Reg. 45 , 600 , 45 ,605 (proposed Aug. 14 , 2007 ); see also Who We Are and What We Do: The IFRS Foundation and the International Accounting Standards Board, IFRS FOUND ., http://www.ifrs.org/- /media/feature/about-us/ who-we-are/who-we-are-english.pdf (last visited Aug . 31 , 2017 ).
77 According to conservative criticism, FASB should have operated as a private standard setter subject to free competition instead of serving as a conduit to federal regulation while also mandating rents to auditing firms . See Ross L. Watts & Jerold L. Zimmerman , The Demand for and Supply of Accounting Theories: The Market for Excuses, 54 ACCT . REV.
79 Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U .S. Issuers, supra note 61, at 70 , 846 - 84 7 (recognizing that substitution of IFRS for GAAP implies diminished influence for American interests ).
80 The focus is on whether IFRS could move towards convergence because if IFRS cannot move towards convergence, any convergence effort would essentially amount to GAAP unilaterally shifting towards replicating IFRS. See Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U .S. Issuers, supra note 61, at 846-47 ( discussing why IFRS would not be feasible in the United States) .
81 IFRS Consultative Bodies , IFRS FOUND., http://www.ifrs.org/about-us/consultative-
88 Proposed Amendments to the IFRS Foundation Constitution, IFRS FOUND ., at 7 (Jun. 2016 ), http://www.ifrs.org/-/media/project/2015-trustees-review/exposure-draft/published -documents/ed-proposed -amendments-to-constitution.pdf.
89 Id. at 10.
90 KPMG , PwC, Deloitte, and Ernst & Young.
91 Presumably , a business's proverbial brain and muscle is housed in its headquarters .