The Positive Aspects And Disadvantages Of The Harmonization Of Accounting Standards

As a global economy continues to become additional prevalent in today's society, there is a growing demand to set universal requirements for all companies and corporations. This specifically holds true inside the field of accounting. A single viable choice is usually to incorporate harmonization into accounting practices about the globe. The purpose of this report will be to explain the idea of harmonization and to highlight the positive aspects and disadvantages it'll have around the corporate world.

As defined by Samir Mogul in Harmonization of Accounting Requirements, harmonization is "the continuous procedure of ensuring that the Typically Accepted Accounting Principles (GAAP) are formulated, aligned, and updated to international ideal practices" (Mogul, 684). In current occasions, harmonization is directly related towards the convergence of GAAP and IFRS, that is the International Financial Reporting Standards. GAAP is usually regarded to become more rules-based whereas IFRS is deemed to become extra principles-based. Some of the variations involving these two standards contain variances in the revenue statement, inventory reporting, and earnings per share measurements. Even though lots of global economies have already adopted IFRS resulting from its additional dynamic approach to globalization, the United states of america nonetheless continues to operate under GAAP. As economic pressures of globalization continue to raise, the notion in the United states transitioning to IFRS has turn out to be more imminent.

Universal accounting standards will supply many learn quickbooks rewards towards the international economy. As highlighted in Nicolas Pologeorgis' The Impact of Combining the U.S. GAAP and IFRS, the goal from the Securities and Exchange Commission is "to consistently pursue the achievement of fair, liquid and efficient capital markets, therefore offering investors with details that may be accurate, timely, comparable, and reliable" (Pologeorgis). Very first, it is going to supply consistency across international markets. This will likely enable accountants to analyze providers across the globe irrespective of the country in which they operate. On top of that, investors will effortlessly be capable of examine monetary statements of international corporations given that all corporations are going to be adhering towards the identical set of standards. This can cause a rise in international investments and general financial growth.

Although you can find many benefits to the harmonization of accounting requirements, there are some drawbacks associated towards the method too. These consist of the length of time it can take to implement the new standards and also the fees relating to the method. Accountants, management personnel, and investors may have to educate themselves on the new accounting facts, that will be costly to many corporations. Corporations may also have to design new internal controls as the existing controls in location will come to be obsolete. A further hurdle of harmonizing accounting requirements will likely be the unwillingness of countries to commit to a uniform code as a lot of of them have different political, economical, and ethical systems. A different unfavorable effect highlighted by Grant Houston in the Disadvantages of Harmonizing Accounting Standards would be the impact it is going to have on compact organizations within the Usa (Houston). The compliance costs associated together with the transition to new accounting standards will inhibit the expansion and growth of a lot of little enterprises across America.

Harmonization is usually a idea that can continue to become discussed using the existing growth of your international economy. The idea on the Usa transitioning to IFRS continues to be an very well known subject of debate within the accounting sector. No matter whether or not the positive aspects of harmonization genuinely outweigh the costs will probably be the ultimate issue in the decision.