In a June 2007 article in The New York Times, Floyd Norris discusses recent moves by the SEC to speed up its proposed halting of reconciliation to US.

GAAP by foreign companies whose shares are traded in the United States and whose financial statements are prepared according to (ASB accounting standards. Mr. Norris indicates that the SEC will propose halting reconciliation beginning with 2008 financial statements. At the same time, the SEC may allow U.S. companies to prepare financial statements in accordance with IASB GAAP If so, companies would be able to choose between two sets of GAAP, resulting in a degree of competition between IASB and FASB standard-setting bodies Mr. Norris mentions the possibility of a race to the bottom, also raised by Dye and Sunder (2001) outlined in Section13.

6.5. However, he raises an alternate possibility, of a "race to the top." Note: In 2007, the SEC did decide to halt reconciliation.

Required

a. What is meant by "a race to the top" in this context?

b. Assuming that standard-setting bodies wish to maximize the number of firms using their standards, why might a race to the top, rather than a race to the bottom, result?

c. Assuming the SEC does drop its reconciliation requirement, what difficulties are created for investors who wish to use financial statements for investment decisions?