International Harmonisation of Accounting Standards and Financial Reporting

International harmonisation of

accounting standards and financial reporting

Introduction

In the environment of the global economic co-operation, every country should strive towards the international accounting standards for achieving more globally competitive opportunities. In the views of The International Accounting Standards Board (IASB), there are more than 95 percent of the companies in the world are eligible to use Financial Reporting Standards (IFRS) based upon the unified accounting standard (Sanders, Lindberg, & Seifert, 2013). This report will first aim to discuss the consequent trend of global set of accounting standards and similar financial reporting, separately. Finally, it will inquire into the three main impediments in the operation, and then give the relevant solutions and suggestions.

1. International convergence of accounting standards

As the different contention of IASB, they declared that there are only a few countries have dared to toward the international accounting standards for their financial statement (Carmona & Trombetta, 2008). That is because they may pay more tax or sacrifice their dividends based on the items of new standards. Furthermore, they claimed that there will be number of inefficiency in the process of restating financial system, and it also would result extra expense when accountants are learning new rules and doing extra works. Besides, companies who use different accounting standards based on their different financial statement geared to specific target group. For example, American firms are mostly toward investors and potential investors, while Germans’ are geared to creditors and potential creditors. Therefore, if they changed their accounting standards, they are likely to lose their target group.

However, the international convergence of accounting standards is an inevitable choice of economic globalisation, and it will be profitable to national economic development (Moussa, 2010). After the 2008 financial crisis broke out, in the final communiqué of the Group of 20 (G20) Summit, Financial Stability Board (FSB) proposed establishing a unified high quality accounting standards (Arner & Taylor, 2009). In addition, IASB adopted a series of important measures which accelerated the pace of the international convergence of accounting standards in different countries (Etheridge & Hsu, 2013). The financial crisis has made the government realised that the accounting system has not decided by only one state. In this context, all countries need to take actions actively to adapt to the new revolution of the international situation. What is more, the unified accounting system can also reduce the risks in the global trade and investment freer. For many years, international investors have suggested adopting the unified accounting standards, which would be more propitious for enterprises to make comparisons in the international market. For example, Chinese government has realised necessities of international convergence of accounting standards (Nie, Collins, & Wang, 2013):