Given the importance of accurate and transparent financial reporting to markets, market participants have placed great value upon the attainment of a set of high quality accounting standards.  

The lack of a common set of accounting standards has created barriers for users of financial statements – including creditors, investors and analysts – to compare even firms in the same industry.  

An additional issue arises in the context of capital requirements, where banking regulators wish to adopt a leverage ratio. Until the existing differences between International Financial Reporting Standards (IFRS) and U.S. GAAP over calculating balance sheet size are reconciled, it will be impossible to adopt a common and consistent leverage ratio as part of the Basel Capital Accord. The U.S. accounting standard setter, the Financial Accounting Standards Board (FASB), has been working with the IASB on converging their accounting standards for several years, but that effort is still underway. 

Over the last 10 years, the International Accounting Standards Board (IASB) has made considerable progress in developing a common set of accounting standards. Currently, the IASB’s International Financial Reporting Standards (IFRS) are required or permitted in more than 110 countries around the globe. Both Japan and the U.S. have presently taken into consideration allowing the use of IFRS by issuers in their jurisdictions.