EU, US and international accounting standards: a delicate balancing act in governing global finance

Although the European Union (EU) has been a key global actor in international trade governance since the 1960s, it held no such position in international financial governance until the new millennium. Accounting standards represent one important area of international finance where the EU has finally taken a leadership position alongside the United States, as a result of its adoption of International Financial Reporting Standards (IFRSs) and its corresponding delegation of standard setting to the International Accounting Standards Board (IASB).

Surprisingly perhaps, neither the EU nor the US has been able to exercise much influence over the content of IFRSs. This is because the IASB has managed to maintain a delicate balance between American and European interests in devising its standards. Using the principal-agent framework, this contribution explains this dynamic between the IASB, the EU and the US in the period 2002-2010.