In a post on Investopedia.com, the author notes that despite the research-indicated evidence of a higher accounting quality being experienced by firms that either apply the IFRS standards or have switched to them from the GAAP, the convergence process has not proven to be an easy task, mostly because of the differences in approach between the two accounting bodies.

The incompatibility in approach, the author notes, is grounded in the conflicts existing among the constructs of rules-based and principle-based shareholder and stakeholder primacy theories.

GAAP is a rules-based methodology, while the IFRS takes a principle-based approach, the author says noting the former is comprised of a complex set of guidelines that establishes criteria for every possible contingency and provides the rules required for specific transactions, while the latter lays out the key objectives of good reporting in each subject area and then provides guidance, explaining the objective, and relates it to some common examples, thus promoting transparency.

The author says that if the differences between the two approaches cannot be resolved, they may prolong the process of compiling a true set of international accounting standards and increase the costs required to maintain two sets of books.

To read the entire Investopedia story, click here.