Securities and Exchange Commission.Mednick Cited in: www. IFRS initially was formed to harmonize accounting across European Union, but the value of harmonization was so overwhelming and attractive around the world that became a benchmark globally. For instance, today's global corporation may have more than one headquarters, and its production and distribution facilities are probably scattered throughout the world. The sample essay is available to anyone, so any direct quoting without mentioning the source will be considered plagiarism by schools, colleges and universities that use plagiarism detection software. The IASB must consider the needs of its varied users, setting additional hurdles for harmonisation. The intricacy of rules-based standards allows manipulation which can be justified as compliance Nobes and Parker, , whereas the principle approach focuses on portraying the economic substance of a transaction. Accounting harmonization is also beneficial for multinational corporations operating and raising capital in different countries. This is advantageous for companies seeking finance larger than what domestic lenders can provide. And if the language of financial information is to be put to use, so that investment and credit decisions can more readily be taken, it should not only be intelligible, it should also be comparable. A recent development is the concession offered to foreign companies in the United States with regard to their financial reporting. The IASC began a project of reducing its options within standards and trying to increase comparability by , which enabled companies to list themselves with any IOSCO member in the world Deegan and Unerman, And if the language of financial information is to be put to use, so that investment and credit decisions can more readily be taken, it should not only be intelligible, it should also be comparable. Walters Cited in: Biscay and Jayson Harmonization is necessary because standard national financial statements are virtually useless; financial markets in more regulated countries are threatened with a loss of market share; and multinational corporations must prepare multiple reports for different nations they do business in. This demonstrates a major disadvantage of rules-based standards; providing rigid rules allows companies to circumvent these in such a way and justify compliance.
It will also improve the tendency for accounting standards throughout the world to be raised to the highest possible level and to be consistent with local economic, legal and social conditions.
Emenyonu and S. The IASB must consider the needs of its varied users, setting additional hurdles for harmonisation.
Certain EU members are not habituated to this and are familiar with using judgement and guidance in portraying a fair view of their company, rather than following such rigid rules which can prevent this.
Some progress has been made in this direction, although slowly.
These two methods are the methods both prescribed by the U. The IFRS has since gained widespread acceptance among national regulators permitting or requiring publicly listed companies to comply with them in their financial reporting.
In the early years of the IASC, its standards were too broad and thus were ineffective in improving comparability of financial statements internationally. However harmonisation cannot be restricted to European members, the needs of all countries who have relations with the EU must be acknowledged Alves and Antunes,And if the language of financial information is to be put to use, so that investment and credit decisions can more readily be taken, it should not only be intelligible, it should also be comparable. The Norwalk agreement was a significant step towards harmonisation highlighting the FASBs attempt to move towards the principles-based approach of the EU Mogul, We now have a global economy and it has affected the entire business world. The way in which they hid their liabilities was legal but ethically dishonest. Securities and Exchange Commission. A predominant obstacle between the FASB and IASB harmonising is their contrasting approaches; whereby rules-based standards are very detailed, complex and rigid rules compared to principles-based standards which provide guidance and encourages professional judgement. With the harmonization of reporting standards it would be easier for MNC's to fulfil the disclosure requirement for stock exchanges around the world. Such comparability would eliminate the current misunderstandings about the reliability of foreign financial statements and would remove one of the most important impediments to the flow of international investment. Since foreign companies that are listed on U. Such comparability would eliminate the current misunderstandings about the reliability of foreign financial statements and would remove one of the most important impediments to the flow of international investment. Obstacles to harmonisation However numerous obstacles, existing due to the natural differences between countries, hinder the speed and completion of harmonisation. The appeal of international accounting harmonization has been extensively discussed.