Since 2000, Europe has led a global movement towards the creation of a single set of accounting standards for companies whose shares are listed on a stock exchange. Now U.S. firms and regulators are having to adapt.
The International Accounting Standards Board (IASB) in London is at the center of the global convergence in accounting standards. Its mission is to develop international financial reporting standards (IFRS) that could apply around the world. While acceptance of these rules is not mandatory, it is nevertheless widespread.
The fact that this process of global convergence in accounting standards has involved IFRS rather than US accounting standards (known as Generally Accepted Accounting Principles [GAAP]) has taken many observers by surprise. Given America's dominance of financial markets during the 1990s, it was commonly believed that international accounting around the world would converge to US standards. Two phenomena worked together to weaken the case of the international convergence in accounting standards towards US GAAP: (1) the European Union's decision to adopt IFRS for all its members and (2) the Enron and Worldcom scandals.
