Introduction and History

          The development of International Financial Reporting Standards (IFRS) traces its origins to the mid-20th century, reflecting a growing need for standardized accounting practices in an increasingly globalized economy. In 1966, a proposal emerged to establish an "International Study Group," comprising the American Institute of Certified Public Accountants (AICPA), the Institute of Chartered Accountants in England and Wales (ICAEW), and the Canadian Institute of Chartered Accountants (CICA), now known as Chartered Professional Accountants of Canada. This initiative led to the formation of the Accountants International Study Group (AISG) in February 1967, which began publishing papers addressing significant accounting issues, thereby fostering a desire for standardized global accounting practices (ICAEW, 2025).

In March 1973, the International Accounting Standards Committee (IASC) was established with the objective of creating internationally accepted accounting standards. The IASC's mission was to develop standards capable of rapid acceptance and implementation worldwide, aiming to harmonize the diverse accounting practices prevalent across different nations (ICAEW, 2025). The IASC operated for 27 years, during which it released a series of standards known as International Accounting Standards (IAS), numbered from IAS 1 to IAS 41, covering various aspects of financial reporting (ICAEW, 2025).

         In 2001, the IASC was succeeded by the International Accounting Standards Board (IASB), an independent standard-setting body operating under the oversight of the IFRS Foundation. The IASB adopted the existing IAS and continued to develop new standards, which were designated as International Financial Reporting Standards (IFRS). The transition from IAS to IFRS marked a significant step towards achieving a single set of high-quality global accounting standards (IASB, 2025).

        A pivotal moment in the adoption of IFRS occurred on June 6, 2002, when the European Council of Ministers approved a regulation mandating that all companies listed on European Union regulated markets prepare their financial statements in compliance with IFRS, effective from January 1, 2005 (ICAEW, 2025). This regulatory move underscored the European Union's commitment to enhancing financial transparency and comparability across its member states.

       The adoption of IFRS has been a significant development in the global accounting landscape. As of 2025, over 140 countries have adopted IFRS, reflecting a broad consensus on the need for standardized financial reporting (IFRS Foundation, 2025). This widespread adoption facilitates comparability of financial statements across borders, enhancing the efficiency of international capital markets and fostering investor confidence.

       In the United States, the transition to IFRS has been a subject of ongoing debate. While the U.S. Securities and Exchange Commission (SEC) has explored the possibility of permitting or requiring IFRS for U.S. issuers, the adoption process has been gradual and complex. Factors influencing this process include the need to reconcile IFRS with U.S. Generally Accepted Accounting Principles (GAAP), the costs associated with transitioning, and the readiness of U.S. companies and auditors to implement the new standards (SEC, 2025).

Literature Review

Current Status of IFRS Adoption

       As of 2025, International Financial Reporting Standards (IFRS) are adopted or permitted in over 140 jurisdictions worldwide, including 90 countries where IFRS is mandatory for financial reporting (IFRS Foundation, 2025). The United States, however, continues to rely on U.S. Generally Accepted Accounting Principles (GAAP), which differ significantly from IFRS. One key distinction is that GAAP is rules-based, providing detailed instructions for specific scenarios, while IFRS is principles-based, offering broader guidelines and allowing for professional judgment (PwC, 2023).

      Other differences include the treatment of development costs, inventory valuation, and the classification of extraordinary items. For example, IFRS allows capitalization of development costs under certain conditions, whereas GAAP generally requires these costs to be expensed as incurred. IFRS does not permit the LIFO inventory method, while GAAP does, and IFRS does not segregate extraordinary items on the income statement (IFRS Foundation, 2025; PwC, 2023).

      Despite U.S. reliance on GAAP, many multinational companies in the U.S. still use IFRS to prepare financial statements for foreign subsidiaries or for cross-border investors. Universities and professional organizations also continue to teach IFRS to accounting students to ensure familiarity with international standards (Becker, 2023). While the SEC has explored the possibility of allowing IFRS for U.S. companies, full adoption remains unlikely in the near term due to legal, political, and cost considerations (Becker, 2023).

     Global trends indicate a continued push toward convergence between U.S. GAAP and IFRS. Initiatives such as the FASB–IASB joint convergence projects aim to reduce differences between the two standards and improve comparability for multinational investors (IFRS Foundation, 2025). While progress has been made in certain areas such as revenue recognition, leases, and financial instruments significant gaps remain, particularly regarding detailed guidance, industry-specific rules, and litigation concerns in the U.S.

     In addition, the widespread adoption of IFRS internationally has increased the pressure on U.S. companies to maintain dual reporting frameworks, which can be resource intensive. Companies that operate globally often incur additional costs for training, auditing, and preparing financial statements according to both GAAP and IFRS. Over time, the continued global adoption of IFRS may create a stronger business case for the U.S. to consider full or partial adoption, particularly as international investors increasingly demand comparability and transparency across financial statements (Becker, 2023; PwC, 2023).

Current Status of GAAP toward Adopting IFRS

         The United States continues not to adopt the International Financial Reporting Standards (IFRS) as the primary accounting framework for domestic issuers; instead, domestic companies remain subject to Generally Accepted Accounting Principles (United States) (US GAAP), while foreign issuers may use IFRS as issued by the International Accounting Standards Board (IASB) for filing with the U.S. Securities and Exchange Commission (SEC). As of early 2025, the Financial Accounting Standards Board (FASB) and the SEC have offered no formal roadmap for a transition of U.S. domestic issuers to IFRS (Brackney & Tang, 2024). In fact, the FASB’s recent meeting agenda emphasizes continuing GAAP maintenance and consistency topics rather than a conversion to IFRS (FASB, 2025).

        Efforts toward convergence between FASB and the IASB once formalized by agreements such as the 2002 Memorandum of Understanding have shifted over time from full convergence or adoption to more limited coordination. Brackney and Tang (2024) note that despite significant earlier efforts, a single worldwide standard has not been realized. According to a December 2024 publication by Ernst & Young LLP (EY), the US GAAP vs. IFRS “The Basics” update, the primary model now is selective alignment and monitoring of each board’s agenda rather than a wholesale adoption of IFRS (EY, 2024). This reflects a change in strategy from “move to adopt IFRS” to “maintain US GAAP while monitoring global standards”.

      Several practical, cost- and stakeholder-driven impediments continue to hamper any U.S. conversion to IFRS. For example, US GAAP’s rules-based tradition contrasts with IFRS’s more principles-based approach (Brackney & Tang, 2024; EY, 2024). Conversion would require major investments in systems, controls, tax and legal frameworks. Moreover, political and regulatory tensions such as debates over sustainability-related disclosures and the role of the IFRS Foundation mean that momentum toward adoption remains muted (Brackney & Tang, 2024). The result is that commentators view the U.S. pathway as one of “coexistence” rather than convergence.

        Looking ahead, the near-term outlook is one of continued coexistence and selective alignment: US GAAP will remain the domestic standard, with FASB updating it by means of Accounting Standards Updates (ASUs) and taxonomy refinements, while the IASB/IFRS Foundation continue to issue and refine IFRS standards that U.S. stakeholders (preparers, auditors, investors) will monitor closely (FASB, 2025). In short, while harmonization in certain areas may deepen, there is no firm plan or timetable announced for a U.S. switch to IFRS (Brackney & Tang, 2024; EY, 2024). Stakeholders should prepare for two parallel frameworks and continue focusing on comparability, disclosure and transparency rather than a single global accounting regime

Future of IFRS Adoption in the United States

       Considering current trends and global adoption rates, it appears that switching from U.S. GAAP to IFRS may be inevitable. However, the process is likely to be gradual and extend over several years. While the Financial Accounting Standards Board (FASB) has undertaken convergence projects with the IFRS, progress has been inconsistent. Many new U.S. GAAP standards still lack IFRS equivalents, and ongoing issuance of technical guidance continues to create divergence between the two frameworks (Becker, 2023). For example, specific U.S. GAAP guidance on complex transactions, such as “effects on historical earnings per unit of master limited partnership dropdown transactions,” does not have a counterpart under IFRS, highlighting the challenges of full convergence (PwC, 2023).

      The U.S. Securities and Exchange Commission (SEC) has recognized the potential benefits of a single set of global accounting standards. While its Strategic Plan for Fiscal Years 2020–2024 emphasizes transparency, investor protection, and harmonization, it stops short of committing to full IFRS adoption (SEC, 2024). Given the IFRS’s widespread use across over 140 countries and the European Union’s successful mandatory implementation, it is likely only a matter of time before IFRS becomes the dominant global standard. U.S. adoption would accelerate worldwide convergence and significantly enhance comparability for investors (IFRS Foundation, 2025).

      Global business trends suggest that pressure on U.S. multinational corporations will continue to increase. Companies operating across borders must currently maintain dual reporting systems, GAAP for domestic filings and IFRS for foreign operations which incur additional costs and operational complexity. Transitioning to IFRS would reduce these redundancies, streamline financial reporting, and potentially improve U.S. companies’ attractiveness to foreign investors (Becker, 2023; PwC, 2023).

      Moreover, broader U.S. adoption of IFRS could strengthen the country’s influence within international accounting standard-setting bodies. By actively participating in shaping IFRS policies, the U.S. would not only align with global practices but also gain a strategic role in determining future standards. This alignment would benefit both regulators and investors by fostering consistency, transparency, and efficiency in financial reporting worldwide (Egege, 2015).

      As global financial markets continue to expand, investor demand for comparable and transparent financial information will likely increase. U.S. companies that maintain GAAP-only reporting may find themselves at a disadvantage when attracting international capital, as investors increasingly prefer financial statements prepared under IFRS for comparability purposes (Becker, 2023). The longer the U.S. delays adoption, the greater the potential competitive disadvantage for domestic firms in the global marketplace.

      Finally, technological advancements in accounting and reporting systems make the transition to IFRS more feasible than in the past. Modern software platforms and data analytics tools can help companies manage dual reporting, reduce errors, and facilitate training for accounting staff. This technology, combined with increasing global standardization, suggests that IFRS adoption in the U.S. may accelerate once strategic alignment and regulatory guidance are in place (PwC, 2023; IFRS Foundation, 2025).

Comparison Between IFRS and U.S. GAAP

         The International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) exhibit several key differences in their approach to financial reporting. IFRS, established by the International Accounting Standards Board (IASB), is a principles-based framework that emphasizes transparency and comparability across international borders. In contrast, U.S. GAAP, set by the Financial Accounting Standards Board (FASB), is more rules-based, providing detailed guidance on specific accounting issues. These distinctions lead to variations in areas such as revenue recognition, lease accounting, and the treatment of development costs. For instance, IFRS allows for the capitalization of development costs when certain criteria are met, whereas U.S. GAAP generally requires these costs to be expensed as incurred (EY, 2024).

         Another notable difference lies in the treatment of leases. Under IFRS 16, lessees are required to recognize most leases on the balance sheet, reflecting a right-of-use asset and a corresponding lease liability. U.S. GAAP, under ASC 842, also requires lessees to recognize leases on the balance sheet but permits a dual model that distinguishes between operating and finance leases, affecting the classification and presentation of lease expenses (Deloitte, 2025).

       Additionally, IFRS tends to be more flexible in areas like impairment testing and the revaluation of property, plant, and equipment, whereas U.S. GAAP is more prescriptive, often requiring a more conservative approach to asset valuation (KPMG, 2024). These differences underscore the challenges and considerations for companies operating internationally, as they navigate the complexities of adhering to both accounting standards.

      Despite these differences, convergence efforts continue to reduce gaps between IFRS and GAAP. The FASB–IASB joint projects have successfully aligned revenue recognition, lease accounting, and certain financial instruments standards, facilitating comparability for multinational corporations and global investors (Becker, 2023). However, significant differences remain in areas such as industry-specific guidance, legal liability considerations, and the detailed prescriptive rules under GAAP, which present ongoing challenges for full adoption in the U.S.

      The growing globalization of business underscores the practical need for harmonization. Many U.S. multinational companies already prepare dual reports to comply with IFRS for foreign subsidiaries, highlighting the operational inefficiencies of maintaining two distinct accounting frameworks. Adoption of IFRS would simplify reporting, enhance comparability, and increase transparency for international investors (IFRS Foundation, 2025; PwC, 2023).

Table 1: Standard differences between IFRS and GAAP

IFRS has become the predominant international financial reporting framework, with more than 140 jurisdictions requiring its use for all or most publicly listed companies. In contrast, the United States continues to require domestic public companies to prepare financial statements in accordance with U.S. Generally Accepted Accounting Principles (US GAAP), although the U.S. Securities and Exchange Commission permits foreign private issuers to report using IFRS Accounting Standards as issued by the IASB.

Table 2: Countries and their major accounting frameworks

Table 3: Countries that use both IFRS and national GAAP.

The United States is the major example of a country that has not adopted IFRS as the required framework for domestic public companies. The SEC requires domestic issuers to use US GAAP, which is established primarily through the FASB Accounting Standards Codification. However, foreign private issuers in U.S. markets may use IFRS as issued by the IASB without reconciling their financial statements to US GAAP.

The United States is different from Canada and Japan. It is not an IFRS-adopting country for domestic public companies. Domestic public companies use US GAAP. However, foreign private issuers can use IFRS as issued by the IASB without reconciling to US GAAP.

IFRS: Used or required for public/listed companies in more than 140 jurisdictions.

US GAAP: The principal framework for domestic public companies in the United States.

Both IFRS and GAAP: Several jurisdictions permit or require different frameworks depending on the type of company, including the United States, Canada, Japan, Switzerland, the United Kingdom, and others.

Challenges to IFRS Adoption in the United States

        The adoption of International Financial Reporting Standards (IFRS) in the United States presents several significant challenges, stemming from both structural and cultural factors. One of the primary obstacles is the inherent difference between IFRS and U.S. Generally Accepted Accounting Principles (GAAP). While IFRS is principles-based, emphasizing flexibility and professional judgment, U.S. GAAP is rules-based, providing detailed and prescriptive guidelines. This fundamental divergence can lead to inconsistencies in financial reporting and complicate the reconciliation process for companies operating internationally (Becker, 2023).

       Another considerable challenge is the substantial cost and time investment required for the transition to IFRS. Companies would need to overhaul their accounting systems, train personnel, and possibly restate financial statements, all of which involve significant financial and human resources. These expenses can be particularly burdensome for smaller firms and may deter them from adopting IFRS (Arya, 2024).

      Cultural resistance also plays a pivotal role in hindering IFRS adoption. The U.S. accounting profession is deeply entrenched in GAAP, and many professionals are accustomed to its detailed rules. The shift to a principles-based system requires a change in mindset and approach, which can be met with reluctance due to unfamiliarity and perceived risks (Monson, 2025).

      Furthermore, the U.S. Securities and Exchange Commission (SEC) has expressed concerns about the convergence of IFRS with U.S. standards. The SEC's apprehensions include the potential loss of investor protection and the challenges in ensuring the independence of the International Accounting Standards Board (IASB), which develops IFRS. These regulatory uncertainties contribute to the hesitation in fully embracing IFRS (Becker, 2023).

      In conclusion, while the adoption of IFRS in the United States could enhance comparability and transparency in financial reporting, the challenges ranging from structural differences and financial costs to cultural resistance and regulatory concerns present significant barriers. Addressing these issues would require a concerted effort from all stakeholders, including regulatory bodies, accounting professionals, and businesses, to facilitate a smooth transition and reap the potential benefits of IFRS adoption.

Public Statements Sample

       Statements by the U.S. Securities and Exchange Commission (SEC) that relate to the issue of International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (United States) (U.S. GAAP) convergence or adoption. Here are a couple of the most relevant ones:

1. “Statement on the Application of IFRS 19: Subsidiaries without Public Accountability Disclosures, in Filings with the SEC” (May 17, 2024) A statement by the SEC’s Division of Corporation Finance and Chief Accountant that addresses how IFRS 19 should be approached in the U.S.-SEC filing context. (SEC, 2024)

It reiterates that U.S. GAAP remains required for domestic filers, while foreign private                 issuers may use IFRS as issued by the IASB (SEC, 2024)

It clarifies that the SEC views IFRS 19’s reduced-disclosure regime as likely necessitating additional disclosures for U.S. filings given the investor protection mandate. (SEC, 2024)

It emphasizes that the statement is not a rule or regulation of the SEC but a staff statement. (SEC, 2024)

2. “SEC Approves Statement on Global Accounting Standards” (February 24, 2010) A prior public statement in which the SEC reaffirmed its belief that a “single set of high‐quality, globally accepted accounting standards” would benefit U.S. investors, and encouraged the convergence of U.S. GAAP and IFRS. (SEC, 2024) It directed its staff to carry out a “Work Plan” to study the implications of possible IFRS    use by U.S. issuers. (SEC, 2024) It noted that while U.S. GAAP continues to underpin the U.S. financial reporting system, more international harmonization should be pursued. (SEC, 2024)

Research Questions

        In qualitative research, formulating clear and focused research questions is essential to guide the inquiry process and ensure alignment between the study’s objectives and its analytical approach. The research questions in this study are designed to explore the interpretive dimensions of accounting standards, ethical considerations, and the reliability of financial reporting practices. Following the guidance of the American Psychological Association (2020), these questions aim to promote an in-depth understanding of complex accounting phenomena rather than test predetermined hypotheses. They provide a framework for examining how institutional, ethical, and professional factors influence financial reporting and compliance within the context of evolving international accounting standards.

Research Questions:

1. How do differences between U.S. GAAP and IFRS impact the reliability and comparability of financial reporting across global markets?
2. What are the key challenges and ethical considerations accountants face when implementing international accounting standards?
3. How do authoritative accounting bodies such as the FASB and IASB contribute to enhancing the validity and transparency of financial information?
4. In what ways do professional and academic publications ensure the credibility and trustworthiness of financial reporting guidance?
5. How does qualitative document analysis help identify patterns in accounting policy development and ethical decision-making?

Methodology

        This study employed a qualitative research design to explore and interpret the status of Generally Accepted Accounting Principles (GAAP) toward adopting International Financial Reporting Standards (IFRS) in the United States. The qualitative approach was chosen because it allows for an in-depth understanding of complex accounting policy developments, professional perspectives, and institutional interactions that cannot be adequately captured through quantitative data alone (Creswell & Poth, 2018). Through this approach, the research sought to identify themes, patterns, and insights from authoritative documents and expert commentaries concerning the convergence or divergence between GAAP and IFRS.

Research Design and Data Sources

         The research design followed a document analysis methodology. Primary data sources included official reports, public statements, and meeting summaries published by the Financial Accounting Standards Board (FASB), the International Accounting Standards Board (IASB), and the U.S. Securities and Exchange Commission (SEC) from 2023 to 2025. Secondary data were collected from recent peer-reviewed journal articles, professional accounting publications (such as The CPA Journal), and technical papers issued by major accounting firms such as Ernst & Young (EY) and KPMG. These materials were chosen for their relevance, credibility, and publication within the last two years to ensure currency and accuracy (Brackney & Tang, 2024; EY, 2024; FASB, 2025).

Data Collection and Analysis

         Data was gathered through systematic online searches of academic databases such as ProQuest, Google Scholar, and professional accounting portals. Keywords including GAAP adoption, IFRS convergence, FASB and IASB coordination, and U.S. accounting standards 2024–2025 were used to locate the most recent materials.

     Each document was examined and coded according to emerging themes such as regulatory stance, convergence challenges, stakeholder perspectives, and outlook. The thematic analysis approach proposed by Braun and Clarke (2019) was employed to identify and interpret recurring patterns across the selected sources. Themes were refined through iterative reading and comparison to ensure consistency and reliability of interpretation

Table 4: Documentary Sources Included in the Study

The 2023 IASB–FASB meeting specifically addressed performance reporting, business combinations, equity-method accounting, sustainability-related matters, intangibles, and other projects, demonstrating that coordination continued even though the U.S. did not adopt IFRS. IFRS The 2024 joint meeting similarly covered post-implementation reviews of revenue and lease standards.

Table 5: Actual Coding Framework

Table 6: Evidence of Convergence and Divergence

The SEC's 2024 IFRS Taxonomy information confirms that foreign private issuers using IFRS as issued by the IASB can submit their SEC filings using the applicable IFRS taxonomy.

Table 7: Academic Evidence

Furthermore, the convergence literature demonstrates that the relationship between IFRS and U.S. GAAP has evolved considerably over time. Lin et al. find that the convergence project affected the relative rules-based and principles-based characteristics of both frameworks, suggesting that the differences between the two systems cannot be understood simply as a choice between two completely distinct approaches. Instead, the frameworks have influenced one another through standard-setting and convergence efforts. Taken together, these studies indicate that future discussions of IFRS adoption in the United States should consider the progress already made through convergence while also recognizing the institutional and practical challenges that remain.

Arya's 2024 study specifically addresses the need, challenges, and prospects of IFRS adoption in the United States. Asian J. of Econ. & Bus. Accounting Monson and Kawa's 2025 review examined 28 articles published from 2015–2024 and identified continuing differences and implementation challenges. DOI Lin et al. find that the convergence project changed the relative rules-based/principles-based characteristics of both frameworks.

KPMG                 ████████████████████████████████   8

Academic Research    ████████████████████              5

SEC                  ████████████████                  4

IASB/IASB–FASB       ████████                          2

FASB                 ████████                          2

EY                   ████                              1

                                          Number of Documents