The U.S generally accepted accounting principles (GAAP) and International accounting standards (IAS) is two different sets of financial reporting standards. It has created a widespread debate about which set of standards is superior over another and should be adopted by firms. In the ongoing debate, IAS proponent state that U.S GAAP is being too detailed and too complex to implement than IAS. Nonetheless, IAS opponents argue that IAS are less detailed and less rigorous, therefore it has lower quality than U.S GAAP. Contributing to this debate, Leuz conducted an experiment to test out which standard will produce a higher informational quality financial statements on Germany’s New Market firms. She compares financial reports from firms that used either IAS and U. S GAAP under the same regulatory environment.To summarize her findings, the difference between U.S GAAP and IAS has a statistically insignificant and economically small difference. Leuz claims that the global accounting debate focuses excessively on the accounting standards rather than on market forces and institutional factors, such as the structures and culture in society, that primarily determine the accounting quality. Altogether, Leuz proved that there are subtle differences between two standards, for that reason, she does not support widespread claim that U.S GAAP produces financial statements of higher informational quality than IAS. In my humble opinion, I would research more on the difference between U.S GAAP and IAS because I could not get enough information from Leuz’s finding to conclude that both standards will always bring the same outcome at every situation. There might be some biased in this experiment since both tests take place at German’s New Market which has the same social structure. Meanwhile, I will stay neutral on the superiority of both standards.

Leuz, C. (2003). IAS Versus U.S. GAAP: Information Asymmetry–Based Evidence from Germany’s New Market. Journal of Accounting Research, 41(3), 445-472.