As I mentioned in last week's blog post, I now realize that much of the confusion about Convergence comes from certain widespread misunderstandings about International Financial Reporting Standards (IFRSs). I have begun to catalog those misunderstandings, and I plan to clear them up through my blog posts over the next several months.
In this post, I'll introduce a major reason that people in the U.S. are confused about IFRSs: they mis-perceive rationales for considering the use of IFRSs in the U.S.
Because such mis-perceived rationales can often be easily refuted, folks who mis-perceive the rationales often end up opposing IFRSs for wrong reasons.
Here are some examples of rationales for using IFRSs in the U.S. that are often wrongly inferred from publicized statements of individuals and organizations:
Financial statements prepared using current IFRSs are essentially the same as financial statements prepared using current U.S. GAAP.
Financial statements prepared using current IFRSs are demonstrably superior to financial statements prepared using current U.S. GAAP.
It is inherently and demonstrably easier to prepare financial statements using current IFRSs than it is to prepare financial statements using current U.S. GAAP.
IFRSs are developed and maintained by an organization that exhibits superior governance, financial viability, and/or due process versus the FASB.
In each of the above examples, the rationale can be easily refuted because it is patently incorrect. Although a patently-incorrect genuine rationale is a logical basis for rejecting the use of IFRSs, it is not logical to reject the use of IFRSs on the basis of patently-incorrect rationales that do not represent anyone's actual, valid opinion on why we should be considering the use of IFRSs in the U.S. In other words, it would be logical to reject IFRSs if genuine rationales for using IFRSs were patently incorrect, but it would NOT be logical to reject using IFRSs because imaginary rationales (such as the ones above) are patently incorrect.
Understanding the genuine rationales for considering the use of IFRSs in the U.S. is critically important to understanding the phenomenon of Convergence and its impact on financial reporting in the U.S. Before we get to the genuine rationales, I have identified a few more kinds of errors in thinking about rationales for the use of IFRSs in the U.S. and I'll describe those errors in my next post.
Clearing Up Misunderstandings About IFRSs
As I mentioned in last week's blog post, I now realize that much of the confusion about Convergence comes from certain widespread misunderstandings about International Financial Reporting Standards (IFRSs). I have begun to catalog those misunderstandings, and I plan to clear them up through my blog posts over the next several months.
In this post, I'll introduce a major reason that people in the U.S. are confused about IFRSs: they mis-perceive rationales for considering the use of IFRSs in the U.S.
Because such mis-perceived rationales can often be easily refuted, folks who mis-perceive the rationales often end up opposing IFRSs for wrong reasons.
Here are some examples of rationales for using IFRSs in the U.S. that are often wrongly inferred from publicized statements of individuals and organizations:
In each of the above examples, the rationale can be easily refuted because it is patently incorrect. Although a patently-incorrect genuine rationale is a logical basis for rejecting the use of IFRSs, it is not logical to reject the use of IFRSs on the basis of patently-incorrect rationales that do not represent anyone's actual, valid opinion on why we should be considering the use of IFRSs in the U.S. In other words, it would be logical to reject IFRSs if genuine rationales for using IFRSs were patently incorrect, but it would NOT be logical to reject using IFRSs because imaginary rationales (such as the ones above) are patently incorrect.
Understanding the genuine rationales for considering the use of IFRSs in the U.S. is critically important to understanding the phenomenon of Convergence and its impact on financial reporting in the U.S. Before we get to the genuine rationales, I have identified a few more kinds of errors in thinking about rationales for the use of IFRSs in the U.S. and I'll describe those errors in my next post.