The effect of the FASB-IASB convergence project on the rules- and principles-based nature of US GAAP and IFRS

Steve Lin, Grace Pownall, Assma Sawani () and Changjiang Wang
Additional contact information
Steve Lin: University of Memphis
Grace Pownall: Emory University
Assma Sawani: University of Colorado at Colorado Springs
Changjiang Wang: University of Cincinnati

Review of Accounting Studies, 2025, vol. 30, issue 2, No 13, 1500-1542

Abstract: Abstract This paper investigates if the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) convergence project changed the underlying natures of both sets of accounting standards. Using the rules-based continuum score and a new principles-based continuum score, we find that before convergence, US Generally Accepted Accounting Principles (US GAAP) contained more rules-based standards, while International Financial Reporting Standards (IFRS) contained more principles-based standards. After the convergence project, US GAAP became relatively more principles-based, while IFRS became relatively more rules-based, consistent with both standard-setters compromising in their approaches to standard setting in order to facilitate convergence. Overall, our results suggest that the convergence project achieved its goal of improving alignment between US GAAP and IFRS. However, it appears to have had a possibly unintended consequence of making IFRS contain more rules-based characteristics.

Keywords: IFRS; US GAAP; Rules-based standards; Principles-based standards; Convergence (search for similar items in EconPapers)
JEL-codes: M41 M48 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11142-024-09851-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:reaccs:v:30:y:2025:i:2:d:10.1007_s11142-024-09851-7

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1007/s11142-024-09851-7

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

More articles in Review of Accounting Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().