Chapter 3, Problem 1Q

To determine

Explain how harmonization is diverse from convergence.

Answer to Problem 1Q

Harmonization states that accounting practices can be different across countries, but there should not be any conflict between the standards. Convergence, on the other hand aims at integrating all accounting standards into one and every country following the same accounting standards.

Explanation of Solution

Harmonization aims at reducing options while maintaining flexibility in accounting procedures. Every country has its own regulation with respect to accounting practices. Harmonization permits countries to follow different rules in accounting practices provided these rules do not conflict each other. For instance, companies could use different computation methods in valuing their books, provided appropriate disclosures were made.

Convergence on the contrary, aims at having universally accepted accounting standards that every country flows so as to eliminate disparities in financial statements and other accounting practices.