global accounting bodies

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The primary goal of global accounting bodies is international accounting harmonization (Chen and Cheng, 2007, p.290). Yet, this treatment confronts problems due to issues unique to each country. This stems either from the perplexing nature of global monetary reporting standards, from clarification, from terminology and language issues, or from a lack of awareness of the similarities and differences between state accounting systems, which serve as the foundation for global accounting arrangements, with this grouping being required to better comprehend the tethering issues accounting experts face related to the harmonization process. There are no indistinguishable accounting practices in different states on a global scale. Yet, there are states that have the same effects collectively (Ghio and Verona, 2015, p.124). Even though research and studies on the managerial process have gone through specific severe alterations, incomparable with the dispersion of accounting amalgamation promoted in the EU, with a specific hastening in the past 3- years, still, there are differences. Hence, applicable for the global contexts are historical, cultural and legal alterations (Moussa, 2010, p.62). Even between member states of European Union. The consciousness of this multiplicity plus the demands enforced by globalization has led in current years to the harmonization phenomenon of accounting standards by the European Community and IASB (Hassan, Rankin and Lu, 2014, p.380). The accounting system classification is first and leading tool for comparing different state accounting practice and regulations, so that categorize states hence providing components that illustrate accounting system of a country, without the need to distinguish all their accounting practices and rules. In this essay, I shall critically discuss how some of the classification work in international accounting is now of historical interest. This will be by illustrating how efforts made by different researchers in the past to classify international accounting have helped us broaden our understanding of national differences in accounting and the challenges in achieving harmonization and convergence.

Comparability in International Accounting Standards

Worldwide accounting standards convergence is not an innovative concept. The convergence concept first rose in 1950 in reaction to post WW11 economic incorporation besides interrelated increases in the cross-border cash flows. Initial effort emphasized on harmonization decreasing modifications amongst the accounting values used on key capital arcades around the globe (Nölke, ten Brink, Claar, and May 2015, p538). By 1990, the harmonization concept was substituted by the convergence concept; the expansion of a combined set of great-quality, intercontinental values utilized in chief capital marketplaces internationally. The Intercontinental accounting standards Commission, founded in 1973, is the first global standards-setting body. In 2001, the organization was reorganized and became a sovereign intercontinental standard setter the Worldwide Accounting Standards Board. Subsequently, the application of Intercontinental standards has advanced. In 2013, the EU and about one hundred other nations either permit or enable the application of Intercontinental Financial Reporting Standards issued by the local variant or by the IASB. The IASB and FASB have since 2002 working hard to converge and improve United States’ GAAP besides IFRS (Pownall, and Wieczynska, 2016, p. 854). By 2013, China and Japan were as well functioning to unite their accounting standards with IFRS. The SEC; the Securities and Exchange Commission steadily has maintained the unity of universal accounting values. Nonetheless, the; the Securities and Exchange Commission has not yet resolved to include IFRS into the United States’ financial reporting systems.

The influence of the external factors on the evolution of the accounting system

International accounting is a science that studies the purposes for the alterations between accounting system and the objects linked with the worldwide financial reporting systems. There are external factors that influence accounting study such as Institutional (economic and legal system), economic (fiscal system, the financial role of the country), sociocultural (linguistic and cultural differences, the duty of policy and the profession).

The legal system is the most important factor of the external factors. On an intercontinental level, twofold systems are leading: the Roman legal system and standard act system. The states that are parts of the conventional ruling system (the systems have their origins from the UK however has been used in several countries under the influence of English) (Madsen, 2013, p.800). They have a system that comprised of a restricted number of rules in which it is required to gratify a particular case rather than formulating general rules for the prospect. In compare, other nations and cultures have applied systems based on the legal regime of the Romans. Business laws, which govern, on an extensive scale, the financial reporting structures, take shape from this philosophy. The alterations between common law and legal approach have impacted the accounting practices and standards (Ramanna, and Sletten, 2014, p.1513).

The first efforts to categorize accounting system goes back to an era ago (the classification of Hatfield in 1911 comprised of three groups: Continental Europe, Northern Ireland, and the United Kingdom and the United States, but by 1960, there were more researchers having the interest in the field. In the subsequent decades, emphases were engaged on the experimental foundation of the assumed studies while in 1980 and 1990; it established the key significant section of intercontinental accounting study (Phan, and Mascitelli, 2014, p.227). To restored comprehend and define the variances between the accounting systems, their arrangement would help. Parker and Nobes proposed a cataloging of the accounting system using the following classification: intrinsic and extrinsic. The external (deductive) method applied the ordering of accounting system founded on the recognition of the relevant environmental issues such as tax regime, a legal system, economic development level and culture. The inductive (intrinsic) method implies the grouping of accounting system based on accounting practices analysis. The beginning idea in the deductive accounting system analysis was provided by Muller in 1967 when he identified four growth models for accounting systems: Uniform accounting, accounting as a self-determining discipline, microeconomic and macroeconomic (Madsen, 2014, p.1110).

The American Accounting Association 1977 classification is an effort to describe each of the key characteristics that impact the accounting system. The AAA recognized eight influences termed accounting system parameters: the origin of accounting standards, accounting, and education training, ethical norms’ enforcement, and the customer, objectives of financial accounting, economic development, economic system and political system. Grounded on this morphology, the AAA recognized five zones of influence: German, Portuguese, Spanish, French and British between 1990 and 2000. Other investigators have suggested other accounting system groupings. In this respect (Mussari, 2014, p.300), it is easier to stress the theory of Nobes that established the distinction factors, which allow a more precise accounting systems classification: the topology of accounting information users from monetary listed entities’ reports, the extent to which standards and laws impose detail while eliminating personal judgment, the significance of taxation rule, the precision and caution in using historical costs, writing practices of combined monetary reporting, entity consistency in instruction application (Nobes, 2008, p.198).

Challenges in achieving harmonization and convergence.

Efforts to institute comparability accounting info across companies in different nations were implemented by the Intercontinental Financial Accounting Standards in 2005 (Shafii, Shafii, Abdul Rahman and Abdul Rahman, 2016, p.203). The principal aim of the International Financial Reporting Standards was to decrease the charges of financial statement customers. Initially, comparability of revenues and book standards happened. Eventually, there was a reduction in comparability by companies because of arranging in line reports, which provided the finest encouragements (Legenzova, 2016, p.35).

The 2012 Kang’s research exposed accounting synchronization across different states with unique implementation mechanisms, inducement of managers, cultural differences, and cognitive biases provide a challenging course to produce comparability (Eberlein, and Richardson, 2012, p.67). Additional accounting standards evolution is required to confirm transparency besides protection of depositors. The IASB procedure of merging is prone to sway by particular external factors which comprise political impact of campaigners as well fund suppliers, United States’ effect on intercontinental accounting standard situation, accounting scandal because of misuse of the values-based accounting ideals, different applications and interpretations of accounting values because of cultural alterations. It is conceivable that some these factors would hamper the convergence ability and the potential of making a significant effect on accounting values (Karacan and Badem, 2011, p.280).

The eminence of intercontinental accounting values differs by far-off countries because of ethical standards, political systems, and social values. The IASB sought to decrease alternative accounting practices by restricting the discretion of the manager for healthier reflection of the economic performance of the firm. Regrettably, accounting regulations enforcement varies in far-off nations and can impact the accounting reporting quality (Bajpayee and Srivastava, 2009. P.45). The 2003 AL Salman’s research of whether accounting morals or established factors have a change in value bearing of reporting monetary figures in the United States and Kuwait, resolved that there necessary alterations in the value significance between states, which apply the similar morals but have dissimilar institutional issues (Osei-Afoakwa, Kofi, and Matthew Asare, p56) .


The paper showed that intercontinental accounting standard harmonization might not be directly achieved because of utilitarian factors play influential roles in the dissemination of the information. International accounting has varied history in classification. The classification is confusing since each and every nation classifies the information in the way that suits the nation. Because of varied nature of accounting classification, accounting users consequently have had a deeper understanding of the accounting information. There are several challenges that face harmonization and convergence of international accounting. One of the factors is political lobbyist who influences the accounting information for own gain.


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May 10, 2023
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