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International Accounting Harmonization

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Introduction

International Accounting Harmonization Abstract Harmonization is the process of reducing differences in financial reporting processes across the world. The goal is to achieve some comparability with financial statements. When harmonization exists, complications for individuals and corporations who use these financial statements decrease significantly. There are several organizations around the world***, who have formed in hopes of creating an international system of accounting. This could mean a standard that would apply across the world. The implementation of such a process could be beneficial for all countries, especially with the expansion of businesses offshore. International Accounting Harmonization Introduction "Harmonization" in the field of accounting is the process of creating a similar set of procedures by establishing boundaries as to how much they can differ across the world. "As a result of globalization, the accounting profession has become increasingly aware of the need to establish a single set of accounting standards that would be valid in the international arena" (Garrido, Le´┐Żn, and Zorio, 2002). Businesses that have expanded offshore have witnessed firsthand the problems when dealing with national accounting differences. National governments and regulatory agencies all over the world have typically set accounting and auditing processes. ...read more.

Middle

Additionally, investors, lenders, and other businesses would have better information available to them if they could better understand where foreign businesses stood financially. If unfamiliar with their accounting practices, poor decisions can be made due to lack of information. Trading partners are able to determine who they can contract with. With globalization, businesses will be more apt to trade across borders. Disadvantages Critics of international accounting systems argue that information will be difficult to derive from non-domestic accounting standards. They also contend that "with different social and economic institutions and with different cultures, laws, business practices, and business ethics, one wonders whether a single set of accounting rules truly harmonizes anything" (Ketz, 2004). In areas where different economic environments exist, harmonization could be considered useless. If a nation has its own practice in place, adapting to one of an international nature where items exist that are irrelevant to the situations of that nation could create more harm than good. Accepting and adopting international standards could be impossible in some cases. The practice could also create overload for corporations who attempt to comply. ...read more.

Conclusion

companies with companies that use IASC standards for financial reporting, and to give FASB and the IASC a basis to raise the quality of their standards while narrowing the differences between them. The result of the study meant many things for U. S. investors. It became import to understand the differences between the two standards. Previously, U. S. investors in U. S. markets were provided with "either U.S. GAAP financial statements or reconciliations from foreign financial statements to U.S. GAAP" (FASB, 1999). Conclusion There appears to be a need for international accounting harmonization with the amount of business that is going offshore. In 1989, transactions in U. S. securities by foreign investors and transactions in foreign securities by U. S. investors may have reached $5.4 trillion. Accounting harmonization could save time and money for some nations. Organizations such as the IASB, IOSCO, OECD, et al are working hard to push their missions. However, as shown under disadvantages, some locations may serve better maintaining the current accounting practices versus using an international set of standards. The standards may not be applicable and could cause confusion. Nonetheless, a global GAAP may be in the future. ...read more.

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