Harmonisation of accounting standards.

As the responsibilities of the global harmonization of accounting standards IFRS and GAAP transfer to IASB, FASB’s influence is waning. Advantages of the convergence include high quality financial reporting, which lowers cost of capital for investors and the cost of borrowing for companies. However, there are disadvantages to be noted, such as the costs of introducing IFRS to current and potential accountants and the risk of reducing the uniformity of financial reports due to the lax rulings of IFRS, which promotes earnings management amongst companies. Although arguments regarding the convergence remain prevalent, the completion of IFRS and GAAP is inevitable. Come year 2015, accountants, investors, and companies alike will discover whether or not the pros outweighed the cons; or vice versa.

The IOSCO plan does not cover accounting standards.(66) These standards are important for providing financial statements in a scheme that are prepared in the similar manner as those by issuers from other countries. The development of international accounting standards is the subject of a distinct project by IOSCO, and many accounting professionals who are concomitant with that undertaking are hopeful that a satisfactory solution is within reach.(67) Supposing, however, that an agreement is possible on a core set of financial standards and that they too are embraced by securities regulators as compulsory for foreign issuers, the road to commonality has at least two other impediments.

The convergence of two accounting systems, the US GAAP and International Financial Reporting Standards, is not a new concept. For many years, the primordial idea of convergence started in the late 1950’s in response to post World War II economic integration and related increases in cross-border capital flows. Initially, the term used was “Harmonization until the early 1990’s the politically correct term is “Convergence”.

Why do we study comparative accounting? Countries around the world have different aspects such as taxation, legal systems, culture and colonial influence that differ the way accounting is reported. Ultimately the need for fair presentation is the final objective to comparative accounting. Thousands of years ago when accounting was first practiced, each country practiced financial reporting according to the power and strengths in their country, regardless of how accounting was reported in neighboring countries. Nowadays, because the world is becoming more globalized and harmonized, standard-setters feel the need to report their accounting in a uniform way. The International Accounting Standards Board [IASB] was formed as a non-for-profit

For nearly half a century, a movement has been underway to establish a high-quality, comprehensive set of international accounting standards, with the goal of facilitating international trade and investment. In the global capital market, differences in the rules of accounting for the purposes of recognition, measurement, and reporting of financial results have impaired the smooth transfer of information across borders. Given that it accounts for nearly a third of the global market, there is considerable pressure for the United States to conform to the International Financial Reporting Standards (IFRS), as promulgated by the International Accounting Standards Board (IASB). While moving to a single set of accounting standards could create

Be that as it may, expanding the similarity of principles is difficult. It can't be refined by the FASB alone; it requires collaboration and assentation among standard setters around the globe. Distinctive beginning stages, diverse business societies, diverse administrative situations, diverse budgetary reporting targets, and diverse legitimate frameworks can make it troublesome for standard setters around the globe to concede to the same bookkeeping elective. Also, an option that is seen as a change in one nation may not be seen as a change by another nation. For instance:

A set of internationally recognized accounting standards facilitates capital flows across borders. Globally accepted standards make financial information readily comparable for its users. Foreign investors are more inclined to put money into a U.S. company if they are familiar with the company’s financial reporting. Conversely, U.S. investors will find it easier and less risky to invest in foreign companies when they know the local accounting standards (Epstein 2009). This will make U.S. companies and capital markets more competitive, since it saves costly reconcilition of different standards. Preparers, investors, auditors, and others will benefit from these cost effieciencies, since a Results of an IFAC Survey among accounting leaders around the world with respect to the importance of convergence to International Financial Reporting Standards for economic growth in their countries:

In a previous study on the usefulness of convergence, a comparison of firms implementing IFRS in 27 countries matched against sample of similar size and industry firms in the US found, the use of converged IFRS standard by US firms instead of US GAAP led to a more established accounting system with value relevance comparability (E.Barth, R.Landsman, Lang, & Williams, 2012, p. 6). In contrast, Jamal et al (2010) state “The need for a global accounting regulator is overstated. A global regulator is unlikely to help achieve the stated goals of comparability and consistency of financial reporting on a global basis” Based on the joint standard of IFRS15/ASU606 issued, there appears to be a compromise on both IASB and FASB’s part to include and exclude certain aspects therefore, although the gap is reduced, full convergence is far from being achieved. The decision makers at IASB therefore, due to inability to achieve the true goal of convergence, is resorted to undertake a vague position and compromise with the ‘allocation model’ (now known as ‘performance obligation’ model in the final joint standard issued) (Biondi, et al., 2014, p. 29). Nevertheless, in terms of usefulness to stakeholders, the joint standard addresses the problem arising from the original IAS18&IAS11/ASC605

Then, comparability of information needs an explanation. This leads into either one standard for accounting procedures or different standards with firms obliged to mention which standard they have chosen. In the past, business fought constantly against the uniformation of standards and the problem of the latter suggestion is that it needs skilled users to evaluate the impact of the different standards on the financial statement. As only a limited group will be able to do this, the number of possible financers is reduced. Capital could become more expensive since in free market systems a broader supply of capital should result into lower prices for capital and the reverse effect is true.

Besides these disadvantages, the historical background of countries also matters. “Colonial inheritance is probably the major explanatory factor for the general system of financial reporting in many countries outside Europe” (ACCA, 2011, p. 11). For instance, it is not difficult to predict how adaptation works in countries which were the former British colonies compared with Soviet countries. According to ACCA, experienced legal background and obtained cultural factors in the former countries accelerate the transition to the IFRS. Being under the control of the USSR for 70 years, the accounting and auditing system in Azerbaijan was also in the same situation as other Former Soviet Union countries: reports were prepared only for the purposes

Discussion on harmonization is started quite long time ago. Its impact on the countries economy is good or bad is the central idea of this essay. This essay is written specifically on the accounting standard used in Australia. This essay starts with introduction on various topics such as conceptual framework, IASB, Sacs then it discussed the issue of harmonization. Harmonization will have positive impact on the economy because it attracts overseas investors to invest in Australia. This essay covers difference between conceptual framework developed in Australia and IASB framework. There are given lot of difference such as treatment of non for profit entity is same as the public entity in A-IFRS. Reporting entity concepts and

At the moment a lot of international companies experience high cost of preparing financial statements in different countries as they all have different methods and even more so when it comes to consolidating their accounts. With harmonisation there will be reduced cost as they don’t have to train staff in each country differently, they can easily transfer staff without the need for retraining and consolidated accounts will be relatively straight forward. Additionally, international companies will save money as they won’t need to change the format of their financial statements when listing on foreign markets. (Nobes & Parker, 2012)

1A The factors that have led to the convergence include, multinational corporations are starting to use the accounting standards of their home country that might have more than one way for an issue, IASC has gained encouragement to create standards for transparent reporting and applicably consistently and consistently with the world, standard setters for securities and nationally are finding standard setters for other standard setters.

The benefits of international accounting standards play an important role for accountancy profession, however still risk of complex accounting standards exist. The IASB issues international accounting standards and also financial reporting regulations that are imposed by the EU, and this can lead

This would enables investors and creditors to evaluate financial information consistently over time and among different companies. Thus, the ASEAN countries would also need to move toward a single set of global accounting and financial reporting standards in the future to align with other nations.