July 2, 2025 – The reasoning behind why foreign firms listed in the United States choose U.S. Generally Accepted Accounting Principles (U.S. GAAP) vs. International Financial Reporting Standards (IFRS), the two primary corporate accounting standards, is the focus of new research about a longstanding question conducted by the Hebrew University of Jerusalem.
Published in The International Journal of Accounting, the study investigates the strategic factors that influence U.S.-listed foreign private issuers (FPIs) when choosing between IFRS and U.S. GAAP.
“This research shows that accounting regime selection is not merely a matter of regulatory compliance,” says lead researcher Dr. Heylel-li Biton of the Hebrew University Business School. “It reflects calculated decisions by firms to align their financial reporting with operational goals and cost structures. Understanding these motivations can help regulators and standard-setters build more responsive and effective frameworks.”
Dr. Biton’s work highlights two underexplored but pivotal considerations: the flexibility of financial reporting and the cost of compliance. Her research reveals that many FPIs favor accounting standards that offer more extensive reporting options for key financial statement elements such as assets, liabilities, revenues, and expenses. However, they specifically avoid U.S. GAAP when significant financial elements are better addressed by the multiple reporting options provided under IFRS. At the same time, U.S. GAAP is often preferred when firms aim to minimize compliance costs, especially before the U.S. Securities and Exchange Commission (SEC) eliminated reconciliation requirements for IFRS filers in 2007.
The empirical analysis draws on a dataset of 811 firms and 1,214 accounting standard choices spanning 1995 to 2015. By introducing a novel scoring method to quantify firms’ preferences for reporting flexibility and incorporating compliance cost data, the study offers a clearer picture of the strategic trade-offs that shape accounting policy at the global level.
The study not only contributes to academic discourse but also provides practical insights for policymakers, investors, and corporate decision-makers navigating an increasingly complex regulatory environment.
The research paper titled “Accounting Regime Selection” is now available in The International Journal of Accounting and can be accessed here.
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