Accountings - International Accountancy Standards Essay

International Accountancy Standards


The EU at nowadayss intends to enforce international accounting criterions on its member provinces. The present survey suggests that the statements the EU puts frontward in favor of this proposal are spurious.

“ The European Commission has welcomed the Council’s acceptance, in a individual reading, of the Regulation necessitating listed companies, including Bankss and insurance companies, to fix their amalgamate histories in conformity with International Accounting Standards ( IAS ) from 2005 onwards. The Regulation will assist extinguish barriers to cross-border trading in securities by guaranting that company accounts throughout the EU are more dependable and crystalline and that they can be more easy compared.

We will write a custom essay sample on
Accountings – International Accountancy Standards Essay
or any similar topic only for you
Order now

This will in turn increase market efficiency and cut down the cost of raising capital for companies, finally bettering fight and assisting hike growing. The IAS Regulation was proposed by the Commission in February 2001. It is a cardinal step in the Financial Services Action Plan, on which important advancement has been made in the last few hebdomads. Unlike Directives, EU Regulations have the force of jurisprudence without necessitating heterotaxy into national statute law.

Member States have the option of widening the demands of this Regulation to unlisted companies and to the production of single histories. Although the Commission put frontward the IAS proposal long before the Enron matter, this is one of a series of steps which will assist to protect the EU from such jobs [ sic ] others include the Commission ‘s recent Recommendation on Auditor Independence and its proposal to amend the Accounting Directives. ”( Press Release )

Measure the Arguments for Harmonisation Put Forward in This Extract and Assess the Extent to Which They Can be Extended Internationally Beyond the EU.

The termharmonizationagencies, literally, in international jurisprudence, the acceptance by different provinces of the same jurisprudence or Torahs. Thus harmonization means the same as jurisprudence.

The European Commission’s ( EC ) imperativeness release makes four points:

  • Enforcing cosmopolitan criterions of accounting ( by jurisprudence ) will assist extinguish barriers to cross-border trading within the EU-this by guaranting minutess are “transparent” .
  • Because the jurisprudence will assist extinguish barriers, the ordinance will do EU concerns more efficient, and therefore more profitable.
  • The harmonization will be jurisprudence, although the elective assemblies of national authoritiess do non hold a authorization to oppugn it.
  • The harmonization will assist extinguish concern and accounting malpractice as exemplified by the Enron dirt.

Point 1: Eliminating Barriers

The EC provinces that its proposed ordinance will assist extinguish barriers to commerce. This assumes there are barriers to commerce. It besides assumes that accounting is one of the barriers. It farther assumes that harmonization by, in consequence, diktat will better the state of affairs.

There are barriers to commerce. A European Commission ( 2004 ) study on barriers to merchandise with the U.S.A. high spots duty barriers, import prohibitions, diverse healthful criterions, export limitations, and authorities subsidies. Of known barriers to merchandise, arguably the most of import is subsidies to husbandmans, as exemplified by the European Union’s ( EU ) Common Agricultural Policy ; such subsidies subvert the economic systems of Third World states and conspire to maintain EU revenue enhancements high ( see, e.g. , Avery, 1995 ) .

However, it is ill-defined whether differences in accounting pattern comprise serious barriers to commerce. The EU study, consisting over 47,000 words, does non advert differences in accounting pattern. The lone reference of accounting in the study concerns labour mobility-it’s hard for non-U.S. comptrollers to work in the U.S.A. This suggests that differences in accounting pattern comprise at most a fiddling barrier to trade.

Equally of import, is ill-defined whether, even if one allows that differences in accounting pattern comprise a barrier to merchandise, ordinance will be a good thing. This is because commercial patterns, including accounting patterns, are complex phenomena.

The historical development of accounting in each state is different. Some states use accounting criterions provided by independent private sector organic structures, others use criterions set by authorities guidelines. Furthermore, different administrations ( public and private ) have different ends, demands, and outlooks, and this may impact their manner of accounting. At present, for illustration, most U.S. comptrollers use by and large accepted accounting rules ( GAAP ) . ( The comptrollers are non forced to make so by jurisprudence, but the U.S. Securities and Exchange Commission requires that GAAP is used in publically traded companies. ) GAAP as used by such companies is different from that used by local and province authoritiess, the criterions of which are set by the U.S.A.’s Financial Accounting Standards Board. The demands of private companies appear different from the demands of authorities ; hence the two sectors use different accounting systems.

To further perplex the issue, transnational companies have to see the peculiar demands of each state in which they operate. This may be particularly debatable when covering with Third World countries-the criterions of Third World states may be really different from those of western states. Enforcing a “correct” signifier of accounting may ask that transnational companies have, non one signifier of accounting, but several. This, evidently, would take to inefficiency within the companies.

Table 1 illustrates different criterions in five states.

Table 1. Use of National and ‘‘International’’ Standards in Five States 1999–2000.


Fiscal statements lodged with regulators

Amalgamate fiscal statements provided for the populace

United Kingdom

National GAAP used

National GAAP normally used.


National GAAP used.

‘‘International’’ criterions are sometimes used in concurrence with national criterions. Some houses provide a convenience interlingual rendition to US GAAP.


National GAAP used for single company histories. US GAAP or IAS can be used in amalgamate fiscal statements.

National GAAP or ‘‘international’’ criterions are used.


National GAAP used by most houses. Specific houses have permission to lodge US GAAP consolidated fiscal statements.

‘‘International’’ criterions are sometimes used either alternatively of national GAAP or in a convenience interlingual rendition to US GAAP.


National GAAP used

National GAAP normally used.

Beginning: Tarca ( 2004, p. 63 ) .

All the states use some signifier of GAAP, but each has its “national” version. Australia is the lone state that uses a standard signifier of accounting for everything, and, even so, it uses the Australian version of GAAP. This is despite the International Accountancy Standards Board’s ( IASB ) holding worked on international accounting criterions ( IAS ) for 26 old ages.

In this, the IASB is seeking to standardize accounting pattern of 140 states. Standardizing the accounting patterns of the five countries-all extremely developed-has proved a job. It could easy turn out even more of a job elsewhere. Much of East Asia, for illustration, shows small conformity with IAS ( Tarca, 2004 ) . This could good be because different states have different demands. In any event, there appears opposition to standardization.

The above is a familiar job, and it is non curious to accountancy, or even economic sciences. The ecologist Paul Erhlich, for illustration, writes:

“Complexity is an of import factor in bring forthing stableness. Complex communities. . . persist twelvemonth after twelvemonth if adult male does non interfere with them. . . . A corn field, which is a semisynthetic base on a individual sort of grass, has small natural stableness and is capable to about instant ruin if it is non invariably managed by man.” ( Quoted in Barrow and Tipler, 1988, p. 141 ) .

Erhlich’s point is that complex systems are stable so long as nil major interferes with them. As Barrow and Tipler ( 1988 ) observe, his point is precisely the same as that made by such economic experts as Hayek and Friedman, viz. that authorities efforts to modulate economic systems constantly fail because economic systems, being complex systems, have their ain stableness whereas regulated system, being simple systems, are delicate. Barrow and Tipler go on to detect:

“A complex system like an ecology or market economic system can non hold a end in the sense that a individual person can, andany effort to enforce one leads to disaster.” ( pp. 141–142 ; accent added ) .

One may differ with Barrow and Tipler. However, if one does so one is non merely differing with two taking figures in economic sciences ( Hayek and Friedman ) ; one is besides differing with current apprehension of ecology. In short, it is far from obvious that the EC’s attempt to better the efficiency of accounting-by diktat-will non bring forth worse effects than the disease it attempts to bring around. This is non to state that IAS is a bad thought. It’s to state that go throughing Torahs to enforce it might non be the best manner of traveling about it.

Point 2: Improved Efficiency

The worth of the EC’s 2nd point depends on the worth of its first point. Therefore it is per se fishy. One demand merely supply illustrations of where ordinance has had counter-productive effects. Table 2 provides some illustrations of the costs of the U.S.A.’s environmental statute law.


Hi there, would you like to get such a paper? How about receiving a customized one? Check it out