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In the early years of the 21st century, investors had good reason to hope that a single, globally accepted accounting framework would soon emerge to unite the world’s financial markets. It seemed inevitable that the Securities and Exchange Commission (SEC) would abandon its devotion to U.S. Generally Accepted Accounting Principles (GAAP) and adopt the Esperanto-like .

Then came the financial crisis, which punctured optimism around globalization. In 2012, an SEC staff report confirmed the shift in sentiment, pointedly withholding an anticipated timeline for IFRS adoption.

However, the dream of convergence continues, and may be slowly coming true, albeit in a low-key way. According to , assistant professor of accounting at at George Mason �鶹����, having two competing frameworks may even be a net benefit for cross-market comparability.

Koo's latest paper, forthcoming in The International Journal of Accounting and co-authored with John X. Jiang and Isabel Wang of Michigan State �鶹����, plumbs accounting research, industry analyses and corporate data to draw high-level conclusions about the “competition” between U.S.-GAAP and IFRS.

After 2012, some experts were concerned that the apparent snub from the SEC would dissuade undecided countries from signing onto IFRS, thereby increasing fragmentation. Yet Koo and his co-authors show that the opposite happened: Between 2011 and 2022, IFRS adoption surged from 53.3% to 76.7% among non-North American firms.

“People were concerned that IFRS’ influence would diminish if the U.S. did not adopt, but it didn’t happen,” Koo summarizes. “According to our survey, IFRS is thriving and has become the most widely used accounting standard.”

Another fear was that U.S.-GAAP and IFRS would become more distinct over time, which would hamper comparability. However, the researchers note that the SEC maintains a position on the IFRS Foundation Monitoring Board. Also, several Americans sit on the 14-member International Accounting Standards Board, the oversight body for IFRS.

Indeed, the researchers found that the discrepancies between the two frameworks peaked before 2012, according to comparisons performed over time by KPMG and PricewaterhouseCoopers.

“The accounting boards work tightly together; they have corresponded in an active way for the past 10 to 15 years,” Koo says. “It seems that they are learning from each other. They are separate—however, when they introduce new standards, they collaborate.”

Koo surmises that this sort of “managed divergence” might be preferable in some ways to universal adoption of IFRS. Because the two frameworks are seen as roughly equivalent in terms of quality, the informational benefit of switching from one to the other might not justify the transition cost.

Additionally, competing frameworks create a balance of power that might prove more sustainable over the long term than a global monopoly. “If we adopt IFRS universally, most companies would follow the same standard,” Koo says. “This widespread influence would be so huge in that case that it might cause conflict or tension about the standard-setting process. Having Independent processes can allow countries to have some autonomy, which can be beneficial.”

The researchers suggest that the same principle could apply to current efforts to develop global standards for mandatory sustainability reporting. The European Union, Asia, and North America differ greatly from one another in economic development, cultural values, etc. As a result, multinational companies doing business across these regions face a frustrating patchwork of expectations when it comes to climate and other impact-based disclosures. Here, too, some form of “managed divergence” might be the best way forward, with jurisdictions remaining separate while engaging in close collaboration.

“Companies want to have standardized expectations in terms of sustainability, but it is not easy,” Koo says. “Similar to financial reporting, the two main pillars will likely be the U.S. and EU, which both have advanced standards. Other countries will choose depending on their comfort.”

“Having two good standards in the world may be better than one.”