International Accounting Standards and Bonus Compensation The International Accounting Standards Board ( www.IASB.org ) is a London-based independent organization that develops and interprets international financial reporting standards (IFRS). The mission of the IASB is to develop a single set of high quality, globally accepted accounting standards. As of April 2012, 123 countries throughout the world either permit or require IFRS for publicly held companies in their country. The U.S. continues to use generally accepted accounting principles (GAAP) as developed by the U.S.-based Financial Accounting Standards Board (FASB). The FASB, under the guidance of the SEC, has developed a plan in which the FASB and the IASB work together to complete a convergence of IFRS and GAAP. The timetable for convergence is not firmly set, but many believe it will be a matter of only a few years before U.S. firms will be using IFRS or something very much like it. Some of the notable differences between GAAP and IFRS are that IFRS does not permit LIFO valuation of inventory (GAAP does), and IFRS does permit market value treatment of certain long-lived assets (GAAP does not). Experts note that the move to IFRS will certainly affect U.S.-based firms in terms of corporate taxation, international transfer pricing (Chapter 19), global investment strategies (Chapter 12), and the evaluation of the performance of foreign operations and the managers of those operations (Chapters 18 and 19).
Required How is the move from GAAP to IFRS likely to affect the development of compensation plans in U.S.-based firms?
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