Harmonization of accounting standard did not occur until the 1990s when the Accounting Board discussed a new international technique. The primary objective of harmonization in accounting standards was to promote better business practices between countries. Different countries may have different accounting rules, but they should all be using the same accounting methods in order for business to succeed at https://accountantsglasgow.net/. The United Nations, International Accounting Standards Committee, EC, and EC are three of the most important international organizations. These groups met to discuss the need for one accounting standard, which would be applicable to both United States and international organizations.
This idea would help to resolve conflicts between countries that arise from the language barrier. The EC, one of the world’s largest international organizations, had adopted the idea to harmonize accounts reporting. There was not consensus among these international organizations about what should harmonize. K. Van Hulie stated, “There is no consensus about what should harmonized: The annual accounts or the consolidated, the accounts from all entities, and the accounts listed companies. Large company accounts are not included.” (Hulie 390). There is no agreement because organizations do their work in different ways. Some issues arise when countries are unwilling to disclose their financial information. The international organizations must come to an agreement on how accounting should be done. Harmonization among accounting standards would have a profound impact on accounting all over the world.
Harmonization in accounting standards would allow countries sharing compatible financial information. It would make international business simpler to do as each country would follow the same accounting principles. This idea may be good as there might not be so many controversies regarding financial information. This is because if everyone followed the same guidelines, they would know exactly what they could and couldn’t do. The concern is about the size and composition of businesses. Not all businesses are alike. Harmonization might not be a good idea because there are many larger businesses than the others.
Aziz Jaafar said that “Firm scale is another important determinant” (Jaafar159). Larger companies are exposed to the general public more frequently than smaller businesses, which is an important reason they make voluntary disclosures. The size of the business is important as well as the country. There are many countries that have different sizes. This means that some may produce better financial data than others. It’s possible for different accounting rules to be applied. The number of firms in each nation is another factor that influences the size of the country. The financial information of each country will differ, and some countries may not want their information to be the same as those from larger countries. As great as the harmonization accounting standards sounded, there was some change after some period to a new idea called “convergence accounting”.