Around 2007, when Canada was heading toward IFRS adoption, I helped edit a book comparing then-Canadian GAAP to the international standards, and I recall the lead author inserting a sentence into the preface to the effect that although the United States hadn’t yet moved to adopt IFRS, the climate was such that it wouldn’t be surprising if they ultimately did so faster than Canada. That prediction didn’t make it into the published volume (I was the one who took it out) but it’s amazing to recall that such optimism was ever even vaguely plausible. It came to mind on reading a recent article, How Political Ideology Stalled SEC’s IFRS Adoption, written by Kirstin Becker, Holger Daske, Christoph Pelger and Stephen A. Zeff, based on a study in which they examined “how political ideology affected SEC commissioners’ stances on whether to adopt (IFRS)… (finding) a partisan divide that stalled decision-making and left the U.S. as an outlier in global financial reporting standards.” Here are some extracts:

• In 2007, the SEC took a significant step toward aligning U.S. financial reporting with global standards by considering the adoption of IFRS for U.S. issuers. The SEC – led by Republican Chair Christopher Cox – opened its deliberations on a proposal to provide U.S. issuers the option to use IFRS instead of U.S. GAAP. This proposal received emphatic support from the two Republican commissioners at the time, Paul Atkins and Kathleen Casey. The two Democratic commissioners, Roel Campos and Annette Nazareth provided only cautious support. This step toward IFRS had the potential to enhance comparability and transparency for investors, yet despite years of discussion, the SEC never reached a definitive decision on the matter…
• …Republican commissioners, aligned with free-market principles, generally supported adopting IFRS as an option, arguing that it would give U.S. companies greater flexibility by allowing them to choose between IFRS and GAAP. This perspective is consistent with a deregulatory approach, emphasizing market-driven decision-making over government mandates. In contrast, Democratic commissioners expressed skepticism about moving away from GAAP. Their concerns centered on the perception that IFRS, which was developed by the International Accounting Standards Board (IASB), represented a form of deregulation. They also voiced unease about ceding control over U.S. accounting standards to an international body whose governance structure lacked direct accountability to U.S. regulators. These concerns, which were also shared by key congressional leaders…ultimately contributed to the SEC’s inability to reach consensus on IFRS adoption, leaving U.S. issuers to continue using GAAP.
• …With only a few months left before the end of his term, Chair Cox pushed for the release of a rule proposal. While the Commission voted in late August on the release, the rule proposal was published only in November 2008, when it was already clear that a Democratic president (Barack Obama) would appoint the next SEC chair in early 2009.
• Due to the release of the rule proposal, the Commission under the succeeding chair, Mary Schapiro, had few options other than to collect and analyze the feedback on the rule proposal. Both the international and U.S. financial reporting community awaited Schapiro’s stance on IFRS.
• While seemingly ineffective initially, releasing a rule proposal close to the end of the chair’s term allows the outgoing chair to exert “dead-hand control” over the next Commission’s agenda. It is telling that the Democratic-led commissions dragged the topic of IFRS along until 2017, without reaching an ultimate decision.

The authors note that “the IFRS debate is not an isolated case. Recent SEC initiatives, such as climate-related disclosure rules, have faced similar ideological divisions, with Republican commissioners resisting perceived overreach while Democrats push for stricter regulations.” In terms of IFRS: “The U.S. remains an outlier, and without political alignment within the SEC, the prospect of IFRS adoption for U.S. issuers remains unlikely. Despite his past support for allowing U.S. issuers to adopt IFRS, Paul Atkins, the nominee to chair the SEC, has not expressed any continued interest in the change.”

Of course, the number of major differences between IFRS and US GAAP has declined sharply over the years (although the issue is complicated by the layering on of the SEC’s regulatory requirements and expectations) and it’s dubious that those that remain somehow better reflect (in the article’s terminology) US “economic realities” or other factors; maybe their main function is as a simple, stubborn assertion of sovereignty and distinctiveness. To that end, it’s fascinating to be reminded that the Republicans were the main proponents of IFRS back then, given that in its current Trumpian incarnation, the party is savagely against anything that smacks of internationalism or ceded American self-determination: one of the standard pro-IFRS arguments, on how a single set of standards aids the flow of cross-border capital, seems almost quaint in an age of onerous tariffs, hostile immigration policies, and all the rest of it. The current Republican commissioners, one imagines, would more likely abolish financial reporting altogether than mandate that it follow an international model…

The opinions expressed are solely those of the author.