SEC's acceptance of IFRS-based financial reporting: An examination based in institutional theory

In 2007 the Securities and Exchange Commission (SEC) made an historic ruling allowing foreign registrants to file IFRS-based financial statements without reconciling to U.S. GAAP. With that decision, the SEC changed its longstanding practice of adhering to a single set of accounting standards in the U.S. The decision diminishes the standing of two previously powerful institutions: U.S. GAAP and the SEC itself. We examine this important change drawing generally on institutional theory. We draw on several models to obtain insights into the likely roles of both regulator and regulatees, into the reasons the particular type of incremental change mechanism was observed, and into the influence of…