International Classification of Accounting Systems

Classification of explanation Systems Critically evaluate to w get into extent gone research into classification of bill systems has become irrelevant because of world-wide harmonisation efforts. Let us motivate that IASC was replaced in 2001 by IASB (Inter field Accounting Standards Board). We ar going to start this paper with the different classification researches, taking for cause Hofstede and Grays studies.Then we forget draw the main differences in the midst of GAAP (Generally authoritative Accounting Principles) and IFRS (International Financial Reporting Standards). We go forth also speak about the Americanocentrism problem. To finally dealing with the differences and harmonization. * 2 Main Example*s* of Past Studies* *Hofstedes* societal dimensions and Grays bill set Different Classification Researches The first one is the deductive or judgmental method.Environmental factors ar set and they are linked to national account statement practices. Then, global conventionings and development patterns are proposed. The second one is the inductive or empirical approach where individual practices are analyzed the grouping or development patterns are identified, and where the explanations are based on economic, social, political and cultural factors proposed. In the deductive approach, Mueller developed four approaches to write up development.Macroeconomic pattern where commerce account statement is tied to national economic policies (Sweden, France, Germany) Microeconomic pattern where accounting is a branch of business economics (Holand) Independent discipline pattern where accounting is a help function derived from business practices (US, UK) and where accounting is enumerateed to be capable of developing its induce conceptual framework from business practice. Uniform Accounting pattern where accounting is an efficient mean of control and administration. It takes into account that culture and historic roots are very important.Hofste de define four societal dimensions individualism versus collectivism, large versus small billet distance, un legitimatety avoidance degree to which a firm is ok with ambiguity, masculinity preference for achievement, assertiveness, material success. right off let us focus on Gray who has developed the following pairs of contrasting accounting determine Professionalism VS Statutory Control in that respect is a preference for individual judgment, self regulation. Uniformity VS flexibility there is a preference for enforcement of uniform practices.Conservatism VS Optimism there is a preference for cautious approach. Secrecy VS foil there is a preference for confidentiality. There are a lot of world(prenominal) pressures like the exploitation international interdependencies and the harmonization of the regulatory framework. But also the new opportunities, joint ventures and alliances. *GAAP/*IFRS Let us start by an analysis of the GAAP (Generally Accepted Accounting Principles). Financial accounting relies on certain standards of the GAAP. Principles of GAAP derive from tradition.There are seven main rulers regularity or consistency, sincerity, permanence of methods, non compensation, prudence, continuity, and periodicity. In any report of monetary statements (audit, compilation, or review), the auditor must indicate to the reader whether or non the information contained within the statements complies with GAAP. The convergence of accounting standards, that the majority of the industrialized countries support is advantageous for the companies in the live telephone circuit throw they should not have to produce several financial statements and thus save important sums of money. The financial risk is reduced.The investors, for their part, can better compare and examine the financial data of companies wherever they are established. Their close making is thus improved. This international harmonization is a parade making it possible to arrive to a basic b ringing together various accounting standards One big advantage can be seen when we face a merger or an acquisition. Decisions are much easier to take. However, the experience of convergence IASB/FASB shows that many eld are necessary to ensure the convergence of twain reference frames all the same based on the alike(p) Anglo-Saxon culture of the businesses.This is due primarily to an existence of an opposition among an approach by the rules in the case of FASB and an approach by the principles which follows IASB. IASB is at the center of the convergence movement. The IFRS are described like founded on principles, which means that they leave a big freedom of action to the companies about the evaluation of the accounting data. The US GAAP are described like founded on rules and they aim to regulate all the possible aspects of the monstrance of the accounts. These standards thus require very detailed information on behalf of the companies.In the case of convergence between IASB and FASB, the harmonization of the IFRS and US GAAP is currently working and common solutions have already been found. That do not prevent from the divergence of several points of view, among the principal aspects to be solved one we ideate about the financial instruments and the presentation of the performances. Some of the differences between US GAAP and IFRS are embodied in the standards themselves. They are intended deviations from US requirements. Americanocentrism Some countries adopted some international standards coming to replace their national standards or to affix them.Some stock exchange places, first of all the London one, admitted companies of which accountancy is in agreement with standards IAS and more(prenominal) than 200 great groups (majority domiciled in Canada, in France and Switzerland) produced a second set of accounts established according to these standards. randomness even conceded at certain remote companies the right to observe certain rules IAS as the standard relating to the fudge of financing (IAS 7), to currencies (IAS 21), companies (IAS 22) and inflation effects (IAS 29).Within the European Union, some harmonization efforts about accounting methods were undertaken. Those however knew the same fate than others and must still produce tangible effects. Moreover, European countries have adopted the principle of mutual recognition of the standards. In spite of the creation of an ad hoc work group in 1990, the accounting harmonization is not a priority anymore, no proposal nor declaration has been made since. It is use consider American standards as the reference.That does not imply their superiority that just reflects economic and political reality. Unless standards IAS are not accepted by the atomic number 16, the companies which follow them do not meet the conditions to be allowed on the American stock exchange places. To be allowed, a German group like Daimler-Benz must satisfy the regulations and specifications of the persuade Exchange where its shares will be exchanged and to match the regulations imposed by the SEC, slightly amended for the foreign transmitters.SEC requires in circumstance that foreign companies present either their accounts in conformity with the US GAAP or a table showing together the US GAAP rules and the accounts drawn according to the accounts chart of their own country (Germany in the case of Daimler-Benz). Few companies choose the first method nevertheless, even the second method is expensive. If the American Stock Exchange remains one of the more world significant markets, standards IAS non in conformity with the American rules will become obsolete. But if the SEC persists in its exclusive attitude, the domination of the American Stock Exchanges could be compromised.Can we solve the problem? Is harmonization the answer? Then harmonization in accounting standards shall serve many of the following benefits Decrease in the costs of data collection Increase in the compari son of the information, Development in the capital markets, Facilitation in the fund movements Provision of competition advantage in favor of the firms Decrease in the audit costs and increase in the efficiency of the audit For multinationals, the advantages of harmonization are much more important.The impacts are cultural and social, on the employment and consumption pattern for example which are significantly influenced. The SEC made understand that any international reference moving away(predicate) from philosophy and specificity of the American standards would not be acceptable. It profits from the support of Financial Accounting Standards Board (FASB), as yet as generalized acceptance of standards IAS could compromise the credibility of standards FASB. *Why do the differences persist? And w*hat is *mainly *stopping* the harmonization*?Let us take another example. In Japan, Keiretsu is a group of companies undertaken with cross participations which maintain very close congress s of customer-suppliers type. Similar systems exist in Korea. The relations between these companies are not comparable with those which bind a holding and its subsidiary companies this system is running in United Kingdom and the United States. Moreover, no economic argument could be brought to justify the regulation of the accounting standards. Why the practices differ o clearly from one country to another? We can for sure think about culture, tradition and history. Then, external environment, legal systems (Common law & Codified Roman law), taxation, the level of inflation, accidents and external influences (such as the framing of law in response to economic or politic events for example) are the main causes of international differences. Also, liabilities, consolidation, segment reporting and foreign currency translation can be big issues in international accounting.However, the economists privilege the explanations relating to factors such as the legal system and the legislation o n the property rights, even if, in the final analysis, these factors themselves form part of each culture intrinsically. Conclusion While convergence and harmonization are admirable goals with a lot of benefits, that may not easily or quickly achieved. The success will not depend only on the ability of the FASB and IASB to work together, but also on the willingness of national regulators to cooperate and to avoid issuing local interpretation of IFRS.In April 2005, SEC published the road map. This is an term by then Chief Accountant discussed the possible elimination of the US GAAP reconciliation for foreign private issuers that use IFRS. This Road map laid out a series of milestones which if achieved would result in the elimination of the US GAAP reconciliation by 2009, so quite soon. It is often noted that the process of IASC standards are influenced by Anglo-American approach, which partly explains the reserve of certain countries to adopt the international accounting standards.T he difference between Anglo-American philosophies and European ones can be explained by the importance attached to two essential characteristics of accountancy dependability and relevance. To conclude, despite the existence of many convergence points, this research show several major differences between two countries supposed to follow relatively similar rules. This thus tends to catch our attention on the difficulty of international harmonization. This study seems to illustrate perfectly (unfortunately? difficulties of the international accounting harmonization. It could be interesting to carry out a reflection on other ways of making accountancies comparable in order to avoid a fundamental opposition. However, new laws gave (or will give) to companies of several countries, including France and Germany the possibility of presenting their group accounts according to the international standards, in particular those of the IASC and USGAAP, rather than the national rules. Almost all t he companies having a world activity do it already, or will probably do it soon.BIBLIOGRAPHY Evolution of research on international accounting harmonization a diachronic and insitutional perspective , Socio-Economic Review, October 2007 Bosco T. , Corporate Accounting Information Systems Cook D. 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