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Accounting Quality: International Accounting Standards and US GAAP

Accounting Quality: International Accounting Standards and US GAAP 2025

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The document compares accounting quality between firms applying International Accounting Standards (IAS) and those using US Generally Accepted Accounting Principles (US GAAP). It finds that IAS firms generally exhibit lower accounting quality, characterized by more earnings management, less timely loss recognition, and lower value relevance of financial statements compared to US firms. The study suggests that while the adoption of IAS improves accounting quality for these firms, it does not fully align with the higher standards of US GAAP. Additionally, when comparing IAS firms to non-US firms reconciling to US GAAP, the results indicate that IAS amounts are of comparable quality to reconciled US GAAP amounts.

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What is the difference between GAAP and international accounting standards?

Summary. IAS represents International Accounting Standards, while IFRS alludes to International Financial Reporting Standards. The IAS Standards come between 1973 and 2001, while IFRS guidelines come from 2001 onwards. IAS Standards fall under the IASC, while the IFRS come via the IASB, which succeeded the IASC.

What are the key differences between GAAP and IFRS?

The key differences between GAAP and IFRS include: GAAP is a framework based on legal authority while IFRS is based on a principles-based approach. GAAP is more detailed and prescriptive while IFRS is more high-level and flexible. GAAP requires more disclosures while IFRS requires fewer disclosures.

What is the main difference between FASB and IASB?

The idea behind these standards is to ensure transparency, consistency, and trust in accounting practices across the globe, particularly as it relates to global trade. Technically, IAS was replaced by International Financial Reporting Standards (IFRS) in 2001, but the terms are still often used interchangeably.

Are international accounting standards based and US GAAP based accounting amounts comparable?

Findings based on the price and return metrics, but not the cash flow metric, indicate IFRS-based accounting amounts are comparable to US GAAP-based accounting amounts for firms from common law legal origin countries.

What types of differences can cause issues between International Financial Reporting Standards and US GAAP?

IFRS allows companies to elect fair value treatment of fixed assets, meaning their reported value can increase or decrease as their fair value changes. In addition, IFRS requires separate depreciation processes for separable components of PPE. US GAAP allows but does not require such cost segregations.