Although weary from writing about the concerted push to embrace the International Accounting Standards Board and adopt IFRS in the U.S., we remain wary because lobbyists continue publishing propaganda-like announcements to advance their dubious interests.

We're not being glib when we use the term "propaganda," which is defined as: "information, especially of a biased or misleading nature, used to promote or publicize a particular political cause."

We're confident that most adoption apologists, especially the American Institute of CPAs, the large accounting firms, and the IASB, know that IFRS is seriously flawed. However, they maintain the subterfuge with simplistic claims that don't hold up under closer scrutiny. This column discredits their arguments by explaining the top 11 falsehoods that continue to be foisted on the profession and others.

1. Establishing uniform international standards will produce comparability.

FALSE. We first remember hearing this bogus justification for mediocrity when our early instructors said: "The results are comparable because everyone is doing the same thing." In August 1978, Paul Miller disproved that claim in The Journal of Accountancy. The Financial Accounting Standards Board's original Conceptual Framework incorporated his analysis with these words: "The consistent use of accounting methods, whether from one period to another within a single firm, or within a single period across firms, is a necessary but not sufficient condition of comparability."

Uniformity is an input quality; comparability, on the other hand, is a quality of outputs. For example, uniformly writing off R&D costs isn't useful because it doesn't distinguish successful efforts from the unsuccessful. If two companies own real estate with the same cost but different values, uniformly reporting them at cost doesn't allow users to detect their dissimilar future cash-flow potentials.

Therefore, comparability exists only when statement users can identify real similarities and differences. Uniformly applying IFRS will not produce comparability until the standards require managers to report the whole, unvarnished truth.

2. Adopting IFRS will create an efficient global capital market.

FALSE. Simply put, it takes a great deal more than common accounting standards to create an efficient global capital market.

In making their specious claim, IFRS/IASB lobbyists ignore the obvious problem that the U.S. has enforcement powers and capabilities that are orders of magnitude stronger than those elsewhere. Without similar credible avenues of recourse everywhere for all foreign and domestic users who are misled by false reports, common standards, even good ones, are pointless. Indeed, adoption could create unwarranted complacency among investors when they should instead have heightened sensitivity to greater risk from ineffective protection. Advocates haven't mentioned this roadblock.

They should have, because, to their chagrin, it isn't working out. As reported on Sept. 8, 2012, by Floyd Norris in The New York Times, rampant variations in mark-to-market accounting for Greek bond investments just within Europe prompted IASB Chairman Hans Hoogervorst to write to Steven Maijoor, chair of the European Securities and Markets Authority, pleading for consistency. According to Norris, Hoogervorst wanted the letter to be private, presumably to keep this glaring flaw in international standards a secret, but it was soon passed to The Financial Times and now everywhere else.

Thus, it's totally clear that the U.S. must not sacrifice its longstanding commitment to and dominant position in standard-setting in order to advance a will-o'-the-wisp goal that cannot be achieved for many decades, if ever.

3. IFRS is better than GAAP.

FALSE. As we see it, neither IFRS nor GAAP is significantly superior to the other. In fact, both are grossly deficient because they reflect concerns of managers and auditors without genuinely addressing the needs of capital markets or investors. As a result, they don't describe all relevant events or their full impact. For example, asset book values are reported without regard to real value, unless impairment losses occur. Overt earnings smoothing is totally acceptable. Stock options and preferred stock are included in equity. And so on.

What really matters, of course, is not which standards are adopted, but which standard-setting process is endorsed.

4. IFRS is principles-based.

FALSE. We've previously written (Dec. 12, 2010) that international standards are not principles-based, but agreements in principle reached when the IASB cannot resolve tough issues. Its new pension standard, for example, applies no valid principles to rationalize shielding reported earnings and balance sheets against volatility and other consequences of management's risk-expanding activities. We'd rather not hear this propaganda again, but it will be repeated, parrot-like, by people who can't recognize a principle even when it pinches them.

5. Only the U.S. has not adopted IFRS.

FALSE. Somehow, proponents think the U.S. can be cajoled into joining what turns out to be a non-existent IFRS "community." Although you'll hear that 120 (no, wait, now it's 130!) countries have adopted international standards, most are economically insignificant and without inclination or resources to do their own standard-setting. All developed countries that have adopted IFRS have carved out offensive parts, further undercutting the phony claim that the world is closing in on a single set of standards.

6. All that's needed is a decision by the Securities and Exchange Commission.

FALSE. Otherwise sophisticated accountants who advance this falsehood did not pay attention in their civics classes.

The SEC has no mandate to protect and serve global capital markets. Rather, it is empowered to regulate interstate trading of securities issued by a relatively small number of public companies and has no jurisdiction over the millions of non-public companies. It lacks authority at the state level, where the IASB would have to be embraced as the standard-setter for public and non-public entities. Specifically, 50 states plus five other agencies license CPAs and bar them from producing and auditing reports that don't comply with FASB standards. (We'll return to this point momentarily.)

So, even if the SEC could make IFRS mandatory, which it cannot (see below), that action would not displace GAAP.

7. The SEC can adopt IFRS for U.S. public companies.

FALSE. The U.S. Securities Acts charge the commission with creating acceptable accounting principles for public filings. Sarbanes-Oxley explicitly requires the commission to designate, oversee and fund only one private standard-setting body. This irritating detail has been overlooked by a great many, perhaps including some at the commission.

Because the IASB will clearly not submit to commission oversight or depend solely on U.S. funding, what, then, would it take to amend these statutes? Congress must be persuaded that the SEC should no longer influence accounting principles applied by issuers of securities traded in U.S. markets. To get there, one of two things would have to happen.

First, Congress would need to be legitimately convinced that relinquishing this authority would advance the interests of the American populace, which is not even remotely true.

Second, PAC fund contributions from interested parties might illegitimately persuade individual members to vote to amend the statutes. Doubtlessly, that approach would be completely despicable.

8. "Condorsement" is a legitimate path to IFRS adoption.

FALSE. In light of these obstacles to changing the laws, some SEC staff have suggested they can be evaded by (wink, wink) keeping FASB as the designated body while compelling it to rubber-stamp every past and future IFRS.

As we explained in August, this idea is an unwise and illegitimate pretense because it would cause the SEC to forfeit its influence on standard-setting. Further, we're very confident this scheme isn't actually legal. Even if not against the letter of the law, it's obviously contrary to legislative intent and the public interest.

Further, it's unethical, beneath the commission's dignity, and contrary to its mission and history.

9. Everyone in the U.S. loves IFRS.

FALSE. Upon reading most of what's printed, you'd think everybody is dying to make the IASB the U.S standard-setter. It just ain't so!

Many have forgotten that the original SEC "Roadmap" from November 2008 proposed authorizing the 20 largest public companies to apply IFRS for public filings after 2009. Of course, the map was never implemented, but have those companies' managers whined that they haven't been able to use IFRS? Not at all.

Additionally, most don't realize how much the leaders of the National Association of State Boards of Accountancy are opposed to adopting IFRS and the IASB.

On July 7, 2011, director-at-large Gaylen Hansen thoroughly condemned this idea at the SEC's roundtable on condorsement when he said: "Convergence simply for the sake of convergence is not a good idea. Further, convergence based on compromise represents acceptance of mediocrity, inconsistent with any claim to high-quality standards." He unleashed this powerful conclusion: "A beauty contestant's naive quest for a world of peace and harmony is understandable, even admirable. However, weakening oversight of our own standards is neither, and is clearly not in our national interest. [That] we would impose this upon ourselves, without compulsion, is even more remarkable."

Remember, this outspoken opponent is a leading member of the body that would have to persuade 55 licensing agencies to endorse the IASB.

10. Adopting IFRS in the U.S. is inevitable.

FALSE. We can't tell you how many times we've seen the condescending phrase, "It isn't a question of whether the U.S. will adopt IFRS, but when." This statement is either pure propaganda or unadulterated naiveté.

There are no good reasons to adopt IFRS at all, either now or later. And, as we just explained, many insurmountable structural factors make it impossible.

In contrast, there are many very good reasons to reinvigorate FASB to help it become a source of true reform.

11. Adopting IFRS in the U.S. is a good idea.

FALSE. We can't say the jury is out on this issue because there has been no legitimate trial in which suitable evidence for and against the proposition has been introduced. Instead, a non-stop barrage of manipulative press releases and other media has hyped the fictitious impression that adopting IFRS and the IASB makes sense. Frankly, we're sick of it, not only because that impression is false, but also because the lobbyists have nests to feather.

Consider this "lucky" coincidence: On May 18, 2008, the AICPA identified the IASB as a "designated" standard-setter. A mere three days earlier, it had opened up its Web site, which it uses to trumpet the need to adopt IFRS, promote its CPE courses on IFRS, and advertise its new certification in IFRS. Can there be any doubt that the institute's managers pursue adoption as a revenue-enhancement strategy for themselves and the large accounting firms?



We're challenging the lobbyists to rise to a higher level of responsibility. In the vernacular, we're calling their bluff. It's way past time for them to honor the truth, instead of disingenuously repeating falsehoods to our profession and the business world.

Further, it's time for the SEC commissioners and staff to get a firm grip on reality and just say "No" to IFRS and the IASB and stop encouraging false expectations and additional propaganda.

As for accounting's rank-and-file, we call on you to step up to your ethical responsibilities to think for yourself and reject these 11 phony claims.


Paul B. W. Miller is a professor at the University of Colorado at Colorado Springs and Paul R. Bahnson is a professor at Boise State University. The authors’ views are not necessarily those of their institutions. Reach them at

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access