The Uniformity Of The Accounting Standards Essay

Convergence has become increasingly critical across nations in accounting mainly due to the global economy and need of international capital market. In the light of that, a demand arose for standardization of financial reporting in order to enable users of accounting reports among different countries to read, understand appropriately and being in a position of analyzing financial statements came from different countries. However, the paper argues that the link between convergence and comparability of financial reporting is to be questioned when it comes to different countries such as China.

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.

As the complexity of our financial economy develops it is important that our accounting standards progress in accordance. Accounting is very important to the development of the global and local economies. Accounting is basically the gathering, summarizing and presenting of financial information of an entity to interested internal, external and possible investors. This information should be presented in a non-bias way so that other people are able understand.

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:

This difference is also tied to the movement of globalization by way of the internal customs from around the world. Based on these practices the account standards around the world are created from a different basis. In the U.S, accounting standards are based on “bright lined rules.” Whereas, in most of the world accounting standards are based off of principles, with the emphasis on principles the international rules focus on the heart of the law. Rather than in the U.S these “bright lined rules” have been created as a result of the multitude of industries located here. The rules however, do not reflect the heart of the law; rather they create a line to be maintained.

There are two sets of accounting standards that are used worldwide. One is the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). There is a huge desire for there to one set of accounting standards worldwide with the increase of companies performing business in many different countries and global expansion.

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

This article encourages me to learn more about the history of standard setting, especially for the establishment of CAP, APB, and FASB. So far as I know, the Committee on Accounting Procedure (CAP) was formed in direct response to the criticism received by the accounting profession during the financial crisis of 1929 and the years thereafter. The authorization to issue pronouncements on matters of accounting principles and procedures was based on the belief that the AICPA had the responsibility to establish practices that would become generally accepted by the profession and by corporate management. The works of the CAP was originally published in the form of Accounting Research Bulletins (ARBs). However, these pronouncements did not dictate mandatory practice and they received authority only from their general acceptances. The CAP was criticized for acting in a piecemeal fashion and issuing standards that in many cases were inconsistent. Moreover, all of its members were part-time, their independence was

The globalization of markets over the past 50 years has led to the demand for increasingly comparable financial statements across countries. In response to this demand, the International Accounting Standards Board (IASB) was formed with the purpose of developing a set of high quality global accounting standards. Although a majority of developed markets have adopted the international standards, the United States has not. One reason for the delay in adoption is that many of the standards are very similar. However, there are also several key differences between the two. Presently, the United States Financial Accounting Standards Board (FASB) and the IASB have

Generally accepted accounting principles allows the accounting profession to follow a recognized organization of objectives, to provide a structure for solving problems, to improve the understanding of financial statement and confidence in financial reporting, and to develop contrast among companies financial statements that can be generally accepted and universally practiced, “generally accepted” means that a reliable accounting organization has developed a standard of reporting that has been accepted because of the universal application (pg. 6, Kieso, Weygandt, & Warfield, 2007). There are four organizations that are evolved in the

Firstly, uniformity in accounting standards simply means when companies report their financial statements by using the same accounting procedures and process (Barron’s education system, 2014). As mentioned previously, uniformity in accounting has been discussed for a long time, as can be seen from an old paper by May (1938) where he discussed about this matter as well. Back then, there were not much of harmonisation or uniformity in

The 2007 financial crisis renewed attention on accounting standards as stakeholders sought possible contributors to the crisis (Hellenier, 2011). Accounting standards are set regulations that limit the manner in which transactions are made and accounted for. They are meant to instill sanity into the financial system. The 2007 financial crises has been attributed to weak financial regulations which encouraged accounting malpractices like mis-presentation of the financial situation of businesses in order to keep investors interested (Hellenier, 2011). Accounting standards set requirements for the preparation and reporting of financial information. They, therefore, help minimize such incidences by facilitating the flow of accurate financial information to investors, creditors, regulators, banks, etc (Hertog, 2003). Having an internationally acceptable system of presenting this information brings sanity to the financial system in addition to increasing investor and consumer confidence in banking institutions, businesses, governments, etc.

This essay is to discuss whether the efforts towards the harmonisation on accounting standards indicate that a one size fits all approach to standard setting is appropriate throughout a brief introduction of “what is harmonisation of accounting standards” , the need for harmonisation and the impact of one-size fits all approach on standard setting.

There are general rules and concepts that preside over the field of accounting. These general rules, known as basic accounting principles and guidelines, shape the groundwork on which more thorough, complex, and legalistic accounting rules are based. The Financial Accounting Standards Board (FASB) uses the basic accounting principles and guidelines as a foundation for their own comprehensive and complete set of accounting rules and standards.

Inventories constitute a major portion of current assets of an entity. A primary issue in accounting for inventories is the amount of cost to be recognized as an asset and carried forward until the related revenues are recognized.