Harmonization and Accounting

Thursday , 13, April 2023 Leave a comment

Harmonization in accounting standards didn’t happen until the 1990s, when an international accounting board proposed a new way to do business. The primary goal of harmonization was to improve business practices in each country. Different countries might have different accounting standards, so it is important that they all follow the same accounting guidelines in order to conduct business. The United Nations, International Accounting Standards Committee and EC are the three main international organisations. The discussion between these groups was to agree on one accounting standard that would apply to international organizations as well as American organizations, click here.

This idea could resolve some conflicts caused by the language barrier that exists between countries. The EC is the largest international organization that has adopted the idea of harmonization of reporting accounts. For these international organisations, however, there wasn’t consensus about what should be harmonised. K. Van Hulie, an author, said that there is no general agreement about what should be coordinated: the annual accounts and consolidated accounts, all accounts, all accounts, all accounts, all accounts of listed entities, all accounts of large corporations, etc. (Hulie 390). Because organizations operate differently, it is easy for everyone to see why there wasn’t an agreement. Problems can arise from countries refusing to provide financial information, which causes problems. It is vital that international accounting organizations come to an agreement. Harmonization of accounting standards will have a significant impact on accounting in the world.

Harmonization of accounting standards would enable countries to share comparable financial information. Because each country would use the same accounting practices, international business could be made easier. This idea is good because there might not be as many disputes regarding financial information. This would be because everyone would follow the same procedures and know what they could do. Because not all businesses have the same size, there is concern over their size. Harmonization may not be a good idea if some businesses are bigger than others.

Aziz Jaafar stated that “Firm Size is an important determinant” and evidence supports the claim that larger firms make more voluntary disclosures (Jaafar159). It is more common for larger firms to be exposed to public than smaller companies, which is a major reason why they choose to make their disclosures voluntary. Not only are the sizes of businesses important, but so is the country. Different countries have different sizes and may produce different financial information. It is possible that this could be a reason not to use the same accounting procedures. In addition to the size of each country, there is also the number or firms within that country. Although financial information can be very different from one country or another, there may be some countries that do not wish to have the same information as larger countries. Even though the harmonization was an admirable idea, it became obsolete after some time. This new idea is called convergence accounting.

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