Harmonization of Financial Accounting and Reporting: Discussion of the Progress and Achievements
It is a fact that in any enterprise, its various and numerous corporate governance policies must function within a system that makes sure that all its accounting polices are carried out only after the preparation of the financial reports of the enterprise. The same system must also be able to make sure that the reports prepared are not only fair, but are also unbiased, and are representative. The basic management of any enterprise would need more information than what is generally contained within its financial statements. This would in turn be utilized for planning, decision making, and fro control within the organization. If the financial statement were to include, for example, accounting information as well, then it would become a fundamental source of data, which could be well used for the running of the enterprise. The problem in the creation and the development of an international accounting standard is that fact that the adoption of a sort of 'dual reporting' system, wherein both financial reporting and accounting were to be harmonized, is whether or not the system would be applicable and useful to both the standards, that is, of both financial and accounting, in individual countries, and also to the several
A Brief History of harmonization, and the motives for harmonization: Cross country listings would aloes be a matter of ease, if the harmonization of financial accounting and reporting were to come into effect. In addition, there would also be a meaningful transfer and transmission of pertinent and relevant financial information to investors, statisticians, and various other third party users of the financial information. This has in fact, today, led to the development of a real fillip to the basic reconciliation of various International Accounting Standards, and of the US Generally Accepted Accounting Practices, or the IAS and the US GAAP standards respectively, and other related issues. Today, therefore, the European Commission has stated that all European Union firms and enterprises would have to perforce follow the International Accounting Standards by the year 2005. (Countdown to the Convergence) Today, as everyone is aware, most large corporations and enterprises and companies all across the globe are indulging in systematic and organized criminal acts, comprising of various financial reporting accounting and frauds. False accounting is today considered to be a real and legitimately prosecutable crime. (Passas, 2001, p. 121) There are several groups of people who are, today, questioning actual relevance of financial reporting for the purpose of decision making in a corporation or enterprise, anywhere in the world. In Australia, for example, two major factors have motivated the analysis and study of the present day accounting profession, and they are the recent collapses on account of the fraudulent practices in the profession, and the governmental intervention in regulating the financial affairs of the corporations. It is a very real possibility that Australia, within a short period of time, would discard its own accounting and financial reporting standards, and start to take up those of the IAS or the International Accounting Standards, and its basic conceptual framework. (Accounting in Crises or Rises?) What are the motives for the harmonization of financial accounting and reporting? Why is it so important today? How is harmonizing analyzed? It must be remembered that the primary objective of any financial accounting statement would be to provide the relevant information about the financial position, the financial adaptability, and the performance of the enterprise, in such a manner that it would prove to be useful to a large number of users who may be involved in making financial decisions for the company. (Higson, 2003, p. 74) However, one must also remember that the harmonization of accounting principles and reporting, on an international scale, would be a tough proposition. Today, for example, the EEC, or the European Economic Community and the International Standards Accounting Committee have both joined hands in trying to find the best way to harmonize accounting principles and reporting, and it is hoped that the result would be able to exert its influence on the Fourth Directive. In other words, the applicability of the Fourth Directive to the annual financial statements of the numerous public and private organizations that operate within the EEC would make this harmonization statement an extremely important facet of accounting unity. (Hudack, Lawrence R. 1992, p. 58) What is harmonization of financial accounting and reporting?
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Approximate Word count = 4227
Approximate Pages = 17 (250 words per page double spaced)
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