Model Analysis of IFRS Glocalization

Currently, nearly 160 jurisdictions apply the International Financial Reporting Standards (IFRS), including voluntary applications. However, the phenomenon of diverging from IFRS, namely, the return to local standards, is observed in both the European Union (EU) and the United States (U.S.). That is, accounting standards' globalization is progressing in a way where global and local standards blend. How can these dual phenomena related to IFRS application be interpreted, and how will the globalization of accounting standards evolve in the future? Such a question is similar to the debate over the concept of globalization in international sociology. This study attempts to comprehensively interpret the dual conflicting phenomena associated with the application of IFRS by taking advantage of the globalization discussion in international sociology. Firstly, this study discusses R. Robertson, G. Ritzer, and V. Roudometof, who theoretically deal with the concepts of globalization and glocalization; then, we derive an analytical model based on the discussed theories. Next, the EU and the U.S. are analyzed as examples of these dual conflicting phenomena. The EU has assumed glocalization standards since its inception, though its interest has been gradually shifting to local standards/practices. EU countries will partially adopt IFRS but will continue to maintain local practices. Therefore, their accounting standards will become increasingly heterogeneous. On the other hand, because the U.S. does not make clear the relationship between U.S. Generally Accepted Accounting Principles (GAAP) and IFRS, the results vary. When the relationship is mutually exclusive, and the U.S. GAAP improvement is valued, a so－called localization of accounting standards will occur. Conversely, if promoting the introduction of IFRS is emphasized, the U.S. GAAP will disappear. When the relationship is mutual penetration, the result will be similar to that in the EU case. If the priority of U.S. GAAP improvement increases, U.S. accounting standards will move to heterogeneity－oriented glocalization. If enhancing convergence to IFRS is a top priority, then homogenization－oriented glocalization will follow. In the future, the glocalization of accounting standards will diversify. This study will help to develop the globalization of accounting standards in the future and to consider the role that the International Accounting Standards Board (IASB) should play in the future.