Question

a) outline the reasons divergence in international accounting practices b) Is it realistic to expert complete standardization of international accounting practices?is standardization desirable? justify your answer

Answer 1

Answer:

As a international economy continues to develop into more prevalent in today's society, there's a growing demand to set universal requirements for all firms and corporations. This especially holds accurate inside the field of accounting. One viable option is always to incorporate harmonization into accounting practices around the world. The objective of this report will be to clarify the idea of harmonization and to highlight the advantages and disadvantages it'll have on the corporate globe.

As defined by Samir Mogul in Harmonization of Accounting Requirements, harmonization is "the continuous procedure of making certain that the Normally Accepted Accounting Principles (GAAP) are formulated, aligned, and updated to international greatest practices" (Mogul, 684). In present instances, harmonization is directly connected to the convergence of GAAP and IFRS, which is the International Financial Reporting Standards. GAAP is usually deemed to become a lot more rules-based whereas IFRS is viewed as to become extra principles-based. Many of the differences among these two requirements consist of variances within the revenue statement, inventory reporting, and earnings per share measurements. When lots of worldwide economies have already adopted IFRS as a consequence of its much more dynamic approach to globalization, the United states of america still continues to operate beneath GAAP. As economic pressures of globalization continue to increase, the notion?CPA in Bethesda MD in the United states transitioning to IFRS has become extra imminent.

Universal accounting requirements will supply quite a few added benefits to the international economy. As highlighted in Nicolas Pologeorgis' The Influence of Combining the U.S. GAAP and IFRS, the objective with the Securities and Exchange Commission is "to consistently pursue the achievement of fair, liquid and effective capital markets, hence supplying investors with information and facts that is precise, timely, comparable, and reliable" (Pologeorgis). Initially, it will supply consistency across international markets. This may allow accountants to analyze companies across the globe no matter the nation in which they operate. In addition, investors will quickly have the ability to compare economic statements of international corporations due to the fact all corporations are going to be adhering towards the same set of standards. This can result in a rise in international investments and all round economic growth.

Although there are actually a lot of advantages towards the harmonization of accounting standards, there are a few drawbacks connected for the approach also. These involve the length of time it will take to implement the new standards along with the expenses relating for the course of action. Accountants, management workers, and investors may have to educate themselves on the new accounting information, which will be pricey to several corporations. Providers will also have to design new internal controls because the existing controls in location will become obsolete. A different hurdle of harmonizing accounting standards will be the unwillingness of nations to commit to a uniform code as lots of of them have diverse political, economical, and ethical systems. A different unfavorable impact highlighted by Grant Houston within the Disadvantages of Harmonizing Accounting Requirements could be the influence it'll have on small corporations in the United states (Houston). The compliance fees related together with the transition to new accounting requirements will inhibit the expansion and growth of lots of small corporations across America.

Harmonization is usually a concept which will continue to become discussed with all the current development of the global economy. The idea with the United states of america transitioning to IFRS is still an particularly common subject of debate inside the accounting sector. No matter whether or not the rewards of harmonization actually outweigh the charges might be the ultimate issue within the decision,