Financial Reporting Between The International Financial...

Many studies demonstrate the differences in financial reporting between the International Financial Reporting Standards (IFRS) and U.S. Standards. Nagle, Wasieleski, and Rau (2012) in their research focused on the code of ethics and moral duties of the company top management. The researchers studied the financial scandals and the recent financial crisis to demonstrate the gap between the market processes and accounting standards. The IFRS and U.S. GAAP differ in a contrary nature of accounting standards. GAAP is considered as rule-based standards, while IFRS viewed as a principle-based. Therefore, the professional judgment on financial improprieties is highly important (p. 479). Moreover, the code of ethics and systematic ethics trainings can diminish the inconsistencies from accounting policies (pp. 484-485). Nagle et al. (2012) examined the study of Nelson (2002), Cuccia (1995), Luthar and Karri (2005), Klimek and Wenell (2011) to analyze the quality of financial information due to more aggressive financial reporting. IFRS’ critics state that the liberal interpretation of standards increases the manipulation of financial reporting. Nagle et al. associated the negative consequences of earnings management with the open-minded principle-based standards. The aggressive reporting cannot mitigate the unethical behavior of financial executives. 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