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Globalization of Accounting Standards

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Globalization of Accounting Standards

ACC 201

This year, the Securities and Exchange Committee is looking to make a decision on international rules regarding accounting standards. The United States has expressed support of accounting harmonization rather than accounting convergence. Accounting harmonization is the goal to adjust the consistencies among the different methods, procedures, or systems of other countries in order to make them more compatible with each other uniformly. Accounting convergence, on the other hand, has a distinctly different definition; it is the goal to come to an agreement on accounting standards to become a unified whole. Only a few years ago, however, the United States strongly favored convergence over harmonization. Regardless of the nitpicking of words and what the United States supports and what it does not; the task at hand, which is to create an infrastructure for global standards in accounting, is a very challenging one.
The International Financial Reporting Standards is a set of accounting standards developed by a self-regulating, nonprofit organization called the International Accounting Standards Board. The IFRS is extremely important for large companies because they usually have subsidiaries in foreign countries but a major challenge for these companies, evidently, are the differences in accounting procedures. Adopting a set of international standards would allow companies to report finances to investors or auditors in one “accounting language” and would also help streamline accounting procedures. Presently, there are over 100 countries that require the use of IFRS for companies and many more that are joining the movement. Arguments in favor of the transition are that the costs involved with maintaining these global standards will be offset by improved credit ratings.
In the years 2005-2006, European...

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