Harmonisation of International Accounting Standards | Essay

Harmonisation of planetary news report ideals EssayIn an increasingly global business environment, issues such(prenominal) as how companies account for their relevant financial positions in unalike jurisdictions gain greater importance. Many companies are international in their scope with several different subsidiaries in multiple jurisdictions making the interpretation of accounts particularly difficult. Accounting standards in every country are true with the background of that countrys singular social and economic circumstances, which results in a range of differing standards be developed across the globe1.As a result, it is very difficult for accounts to be read accurately and to make suitable financial decisions on investment by entities from other jurisdictions. Comparing per induceances and consolidating accounts without at least a degree of international harmonisation would elicit very difficult, if not infeasible.The Importance of HarmonisationAs a result of the pro blems mentioned above, a uniform set of internationalistic Financial Reporting Standards (IFRS) have been developed with the view to mitigating or, in some cases, eliminating divergences in the mode that accounts are reported in different jurisdictions. It is recognised that a blanket standardisation is simply impossible countries need the flexibility and granting immunity to allow influences from their own social and economic backgrounds to come into play. For this reason, a surgical procedure of harmonisation has been established.By having a guideline for the slipway in which companies from different countries must deal with certain corporate issues, it makes the position of managers and investors much easier. Having a foundation of standards allows allocation choices in terms of resources and time to be made across jurisdictions. In order to do this, a like for like comparison must be possible and this can only be achieved with a degree of harmonisation.In particular, the ar ea of taxation has gained a great deal of attention from international history standard setters. For example, Financial Reporting Standard 19 states how a lodge should deal with deferred taxation situations, i.e. where the point of realising the asset and the corresponding liability are different and how this can be accounted for in the company accounts. By ensuring companies across the globe are broadly following the same principles, it is much easier to ascertain the true financial position of the company in question.The transnational Accounting Standards BoardThe International Accounting Standards Board (IASB) is a wide group of people who are independent and are involved in the reading and management of the International Financial Reporting Standards. The bunk of the IASB is supervised by the International Accounting Standards Committee and has additional support from external advisory committees.In total, there are fourteen board members, representing nine different countr ies, thus ensuring geographical diversity and representation during the standard setting serve up. The main work of the IASB is to work with the dissimilar different national score standard setters in a bid to ensure that there is a worldwide convergence of accounting standards existence put in place. As mentioned previously, the aim is not to force nations into following one set of distinct rules, but rather to encourage a partnership of standards.The work of the IASB has been widely recognised, with more than 100 countries across the world either requiring or at least allowing the use of international accounting standards. This substantially increases the freedom of trade and investment on an international scale. International companies are able to ensure that consolidated accounts are prepared to produce useful and accurate accounts of the way in which the company is performing. This ability to draw accurate comparison is vital for the truly international scope of modern bus iness2.Structure and Processes of the IASBGaining harmonisation and convergence of accounting standards is clearly an important and useful element of international business. Achieving this is, however, a particularly difficult task. No international financial reporting standard can be passed and agreed on without the due process being followed. International agreement is vital, if such convergence is breathing out to be efficiently attained across the globe.The process is carried out in six stages, each of which is open to debate and is overseen by the executive committees. Firstly, the agenda is set. During this process, the IASB provide look at the issue being brocaded, the authorized approaches being taken by the various different countries and the realistic possibility of achieving greater harmonisation. On the assumption that still harmonisation is thought possible, the IASB will and then consider and set out the scope of the international standard that is envisaged.Second ly, the bear of establishing the accounting standard is planned fully to ensure the maximum possible buy-in from the various countries. Crucially, at this point, the IASB will decide if it is going to act alone in establishing the standard or whether it requires the assistance of other standard setting bodies3.Thirdly, once the project is fully understood, a discourse paper is published. This will state the issues as the IASB sees it and the possible solutions that exist for the problem. This is absolutely crucial. The work of the IASB relies almost entirely upon the agreement of the dynamic countries and, therefore, opening the discussion up to these countries is vital.Fourthly, once the discussion stage has been duly undertaken, an exposure draft is issued with details of the proposed solution. This is essential as it will be at this point that many countries will raise objections or make further suggestions.Fifthly, all of these processes are put together and the standard itsel f is drafted and published. It takes into account all comments and issues raised during the discussion paper and exposure draft.Finally, after the standard has been issued, the IASB will review the uptake and the way it has been applied by the various countries. It may be that further amendments or new standards are needed and the process will then restart.The entire process is based on discussion and co-operation, which is vital if any form of harmonisation can be truly efficient4.Challenges to HarmonisationHarmonisation is clearly beneficial for international trade and businesses. However, such large scale convergence is going to be difficult to manage and achieve firstly, as the standards have to be incorporated into the national standards set by every individual country. This requires the relevant countries to be on board and prepared to support the various international standards being developed. Naturally, the support that is being shown for this is different between the vario us countries, with the more affluent countries being able to comply more readily because of their advanced accounting structure5.Secondly, the changing of the way in which accounts are presented is not always a quick or cheap process, which can cause difficulties for some smaller companies. In some cases, the playion of certain international standards will result in the reported wage of the company falsely appearing substantially lower than the previous year. For this reason, some companies will naturally be slower or more hesitant to adopt the new standards. Where there is resistance, the IASB does not have the power or teeth to enforce the standards. This lack of ability to enforce can ultimately make the process of ensuring total international harmonisation extremely difficult and potentially impossible.ConclusionsThe IASB plays an absolutely vital role in the move towards gaining an internationally harmonised set of accounting standards. All of the work undertaken by the IASB is mindful of the need to achieve co-operation between all countries and, as such, has been structured in the way that it establishes standards through the process of discussion and explanatory documents, encouraging the accession of all relevant parties, at every step of the way. In doing so, the chances of international harmonisation are much greater and this will bring with it all of the benefits of internationally usable accounts.BibliographyBazaz, Mohammed S., International Accounting A Global Perspective, Issues in Accounting Education, Vol. 20, 2005Collins, Katherine, International Accounting Rate Reform The usage of International Organizations and Implications for Developing Countries, fairness and Policy in International Business, Vol. 31, 2000Fleming, Peter D., The Growing Importance of International Accounting Standards Arthur R. Wyatt, Chairman of the International Accounting Standards Committee, Heralds International Harmonization, Journal of Accountancy, Vol. 172, 19 91Gornik-Tomaszewski, Sylwia, Mccarthy, Irene N., Cooperation between FASB and IASB to Achieve Convergence of Accounting Standards, Review of Business, Vol. 24, 2003Heely, James A., Nersesian, Roy L. 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