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SUMMARY “Global Accounting Convergence and the Potential Adoption of IFRS by the United States: An Analysis of Economic and Policy Factors” by Luzi Hail, Christian Leuz and Peter Wysocki: In the world of accounting, abandoning the United States’ Generally Accepted Accounting Principles (U.S. GAAP) in favor of the International Financial Reporting Standards (IFRS) would represent a seismic shift that would require changing what has been the country’s accounting gold standard for decades. This is what the Securities and Exchange Commission (SEC) is contemplating for all publicly listed companies, starting in 2014. But according to a study released today (Friday, March 6) it is not clear whether such a major shift in standards would translate into large (net) benefits for most companies or the entire U.S. economy. The study, “Global Accounting Convergence and the Potential Adoption of IFRS by the United States: An Analysis of Economic and Policy Factors,” was done by Christian Leuz of the University of Chicago Booth School of Business, Luzi Hail of the Wharton School at the University of Pennsylvania and Peter Wysocki of the MIT Sloan School of Management. One of the touted benefits of moving to IFRS is that it can enhance the liquidity of capital markets and reduce companies’ costs of capital by providing investors with better information on corporate performance. However, the authors argue that this is true only if adopting a new set of standards actually improves the quality of reporting and the comparability of reporting practices around the world. Professors Hail, Leuz and Wysocki argue that it is unlikely that a switch to IFRS will have a substantial impact on the reporting quality of U.S. companies. Yet, this is not really a question of which set of accounting rules is better. Rather, companies have an incentive to report

their numbers in a way that is shaped…...

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