Indeed, competition among the capital markets may the strongest factor in encouraging a change of attitude by national regulators towards International Accounting Standards. In short, whether or not developing countries will benefit or lose from the new business model and its competitive strength remains an open question. Harmonisation carries a wider meaning than standardization although it is sometimes being used inter changeably. The Boards issued a that provides details on the timeline for completion of the MoU projects. Another benefit that derives from consistency is the time scale needed to implement in new countries as there will be no need to learn and adapt to new county specific rules except minor adjustments.
Diverse Accounting Practices: Another difficulty is that at the present time, there are wide divergences in world-wide accounting practices. Regional, Political and Economic Harmonisation: Regional, Political and Economic Harmonisation is also compelling accounting professionals for the need of increased harmonisation in accounting practices. Such countries are reluctant to change their views and listen to others. It was written by Professor Gerhard G. For the following purposes, accounting standards are needed: i For bringing uniformity in accounting methods : Accounting standards are required to bring uniformity in accounting methods by proposing standard treatments to the accounting issue.
However, the interpretations being made by various interpretative bodies, preparers, auditors and regulators, a challenge exists with respect to ensuring convergence with interpretations of the standards as well. It is thus clear that whenever there is any conflict on accounting issues, accounting standards act as harmonizer and facilitate solutions for accountants. The second problem, is that in most Continental-European countries, professional accounting organisations do not have the responsibility or authority to set accounting Standards at all. Business leaders need to take the time to understand the rules and regulations and develop practices that meet standards without huge costs. If many countries have detailed rules on many subjects, there is bound to arise conflict between these national systems. Many believe that unless U. One set of Accounting Standards could be used in various jurisdictions and capital markets.
Provide assistance together to ensure market integrity through the application of strict standards and effective enforcement against offenses. This company would have to prepare financial statements in Cuba, in Germany and in order to be listed on an U. By continuing to use this website, you are agreeing to the new and any updated website Terms. Differences arise because of countries' different legal and commercial systems, differences in types of business organization and their ownership, varying taxation rules and variations in the strength of the accounting profession between countries. Harmonisation adds to the global credibility of a corporate unit. Suggestions for Increased Convergence and Harmonization: There is no doubt that harmonization of company annual reports would be beneficial to all countries of the world and would achieve the goal of comparability in international financial reporting.
With one set of Accounting Standards, the credibility of the externally reporting could be raised. In different countries, there is a different view on what is, or should be, the primary purpose of financial statements. International accounting discourse was characterized by a major trend in support arguments about the importance of the harmonization program. Several other countries, including Canada, Korea, India and Brazil, had committed to adopt international standards by 2011. It shows the inflow and outflow of funds from various items.
Initial efforts focused on harmonization—reducing differences among the accounting principles used in major capital markets around the world. Retrieved on May 2, 2012. Their existing systems are largely extensions of those in developed countries. In fact most developing countries had little chance to evolve accounting systems which truly reflected the needs and circumstances of their own societies. As a result, these countries may fall even further behind during this wave of globalization. Some operate from an environment of extreme conservatism, others from an environment that borders on creative accounting.
Gaps between Developed and Developing Countries: In many areas, developing countries differ from those of developed. The Commission staff issued its final report on the issue in July 2012 without making a recommendation. Harmonization of accounting standards is defined as minimizing the differences in accounting standards in various countries Iqbal, 1997:35. The differences make it difficult to distinguish changes in the performance from the effects arising from the use of different accounting requirements. Standards must be invested and applied strictly. These costs harm small companies and their ability to expand and grow. This would be the single most important contribution that governments are able to provide to the cause of international harmonization.
Work towards the goals were reviewed in 2008, and a progress report published that also set out subsequent steps for each convergence topic. It is presumably not an easy word to define, as neither the European Commission nor other organs of the commission have explicitly defined the concept of accounting harmonization Christopher Nobes, 1992. The Boards were giving priority to three remaining projects on their MoU financial instruments, revenue recognition, and leasing as well as their joint project on insurance. Harmonization can also be interpreted as a group of countries that agree on an accounting standard that is similar, but requires the implementation does not follow the standard should be disclosed and reconciled with mutually agreed standards. More comparable standards have the potential to reduce costs for both users and preparers of financial statements and make worldwide capital markets more efficient. · Valuation of fixed assets · Treatment of contingent liabilities. The aim of accounting harmonisation is to make the financial statements of companies comparable with the financial statements of companies in other countries.
Convergence in some form has been taking place for several decades, and efforts today include projects that aim to reduce the differences between accounting standards. Daley and Mueller conclude that if private sector standards- setting is to continue as at present, with no enforcement powers, then it must become more internationally oriented. The financial analysts are of the view that international diversity in accounting practices has enough potentiality to destroy the international flow of capital. Different listing and reporting requirements increase the costs of accessing multiple capital markets and create inefficiencies in cross-border capital flows. Nature of Accounting Standards: On the basis of forgoing discussion we can say that accounting standards are guide, dictator, service provider and harmonizer in the field of accounting process. It can be seen in the comparison view of financial accounting standards in Indonesia and the United States in advance. On the other hand listing of foreign companies in domestic stock exchanges has given birth to the global integration of capital market.
The pressure means that the committee decision-making process either has to be based on consensus and compromise or on resorting to underlying concepts. Informational needs of global investors have compelled accounting professionals and institutes to work for harmonisation. Conclusion Approximately one-third of the 62 countries surveyed had responded to the challenge of convergence with an active agenda and had already proposed changes to national requirements. From the standpoint of the users of financial statements e. Professional accountants and business 6.