IFRS vs. GAAP: How Differences in Accounting Standards Impact Financial Reporting, Cross-Border Investments, and Multinational Decision-Making

Authors

  • Mbonigaba Celestin President, Brainae University, United States of America
  • Anjay Kumar Mishra Visiting Faculty and Management Consultant,

Keywords:

IFRS, GAAP, financial transparency, cross-border investment, multinational corporations

Abstract

Purpose
This study investigates the impact of differences between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) on financial transparency, investment flows, and corporate financial strategies. It aims to evaluate how these accounting frameworks influence multinational decision-making and cross-border investments.

Design/Methodology/Approach
A mixed-method approach was employed, combining document analysis, expert interviews, and quantitative statistical techniques, including correlation and regression models. The study analyzed financial data from 2020 to 2024 to assess key areas such as revenue recognition, asset valuation, and financial statement accuracy.

Findings

  • Financial Transparency: IFRS adoption was found to enhance financial transparency by 95%, compared to 89% for GAAP, improving the clarity and reliability of financial reporting.
  • Investment Efficiency: IFRS adoption improved investment decision efficiency by 93%, compared to 88% for GAAP, facilitating more informed investment choices.
  • Cross-Border Investments: IFRS adoption attracted higher cross-border investment inflows, with $320 billion compared to $270 billion under GAAP.
  • Multinational Strategies: A strong correlation (0.998) was observed between IFRS adoption and improved multinational financial strategies, indicating better alignment with global market standards.
  • Regression Analysis: The study found that IFRS adoption increases foreign investments by approximately $7.14 billion per country, highlighting its role in attracting international capital.

Originality/Value
This research contributes to the understanding of how accounting standards influence global financial markets and multinational corporations. It provides empirical evidence supporting the adoption of IFRS for enhanced financial reporting quality and investment attractiveness.

Practical Implications

  • Corporate Strategy: Multinational corporations are advised to adopt IFRS to enhance transparency and investor confidence.
  • Policy Recommendations: Policymakers should promote harmonization efforts to reduce financial discrepancies across jurisdictions, ensuring consistent reporting standards globally.

Conclusion
The study concludes that IFRS offers superior financial reporting quality and investment attractiveness compared to GAAP, supporting the global movement towards financial standard convergence. Despite challenges such as compliance costs and regulatory inconsistencies, the benefits of IFRS adoption justify its widespread implementation.

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Published

2025-04-30

How to Cite

Mbonigaba Celestin, & Mishra, A. K. (2025). IFRS vs. GAAP: How Differences in Accounting Standards Impact Financial Reporting, Cross-Border Investments, and Multinational Decision-Making. Journal of Advanced Research in Operational and Marketing Management, 8(1), 26-42. Retrieved from https://adrjournalshouse.com/index.php/Journal-OperationalMarketing-Mgt/article/view/2198

Issue

Vol. 8 No. 1 (2025): Journal of Advanced Research in Operational and Marketing Management

Section

Research Article

Copyright (c) 2024 Journal of Advanced Research in Operational and Marketing Management

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