Will Harmonizing Accounting Standards Really Harmonize Accounting? Evidence from Non-U.S. Firms Adopting U.S. GAAP

International harmonization of accounting standards appears to be inevitable. However, little evidence exists regarding whether harmonizing accounting standards will result in actual harmonization of accounting practices. Using a sample of non-U.S. firms that adopt U.S. Generally Accepted Accounting Principles (GAAP) to provide evidence on this issue, we find that most firms that adopt U.S. GAAP adjust their accounting methods to those required by U.S. GAAP. Properties of the firmsʹ accounting numbers also change significantly after adopting U.S. GAAP, but they do not fully converge toward that of U.S. firms. In the cross-section, regulatory oversight is associated with more successful implementation of U.S. GAAP; firm-specific capital market incentives are not. These results suggest that harmonizing accounting standards may result in more comparable accounting methods and numbers, but that effective regulatory oversight will be important in reaching this outcome.