The need of the study is to examine the ethical, cultural and regulatory requirements of financial reporting for the corporate conduct of the company. Financial reporting, overall, is undertaken for the reports to be certified and recognized auditors to depict the accurate and the sufficient reflection of the financial performances of the company. Consequently, transparency and reliability in the financial reporting system are matter of substance that defines the complex structures and procedures (Pratt 2013). However, this report will help in analyzing the importance of regulatory, ethical and cultural requirements in financial reporting.
International harmonization as stated is the effort to bring different systems to work together in orderly practices that generate an outcome that involves elements and contributions. The harmonization of financial reporting has not only seen as the means of assisting the globalization of capital markets but also enhancing investors' capability to make well-versed decisions concerning venture options (Gray et al. 2013). Earlier studies portray that basic aim of harmonization was to reduce the comparability in the financial reporting processes. It was done to diminish the difficulties and complexities of the error occurrence in the interpretation of preparing or presenting the financial statements. However, some organizations are following this process of harmonization, though it is not accepted universally. Nonetheless, if harmonization was considered to be adopted internationally, then this will enhance the financial markets as well as improve the assurance in the investors for further investments. Therefore, as stated by Wang (2014), there will be disparity that will exist in presenting and preparing financial statement because of international differences in cultural, political and economical factors like taxation that outline the country's accounting standards. The need for this accounting process is increasing and depending on the business that is globally expanding and growing across the cross-borders. The growing business will not only benefit harmonization but may lay an environment that brings together business analysts, corporations, government bodies, investors together working with coordination and cooperation.
Convergence of accounting standards, on the other hand, defines to reduce the major differences affiliated in international financial reporting by generating a similar set of actions by instituting limitations as to how much they can diverge globally. Nevertheless, its basic focus is on the quality assurance of the financial reporting. According to Pacter (2013), "the goal of convergence is a single set of high quality, international accounting standards that companies worldwide would use for both domestic and cross-border financial reporting." The path of the goal is based on efforts that are collaborative in nature and to reduce the differences between IFRS and GAAP. The standards applied rigorously will help the capital market to grow in making better decisions or possessing the high quality information. However, the principle of convergence will comply with a single set of accounting standards against multiple. For this reason, convergence has attained attention in professional as well as academic literature but has arguably being negated even after adoption. The negation arrives from the nature of flexibility of accounting standards in developed and developing countries that still exist with prevailing differences in culture and business practices across nations. Hence, convergence stands under the possibility of not achieving the required objective since its adoption by U.S. GAAP and IFRS (Alfredson et al. 2012).
The advantages of harmonization can be stated as under
The disadvantages of harmonization are given as following:
The EU (European Union) adopted IFRS for the evidence of benefits about financial reporting for transparency, comparability, market liquidity, cross-border capital flows, the cost of capital and corporate investment efficiency (Icaew.com 2016).
The adoption process that was carried out by the European Union can also be called as ‘endorsement.' The process described in the adoption of IFRS in the European Union is depicted using a diagram. The structure is illustrated in Figure 1.
Figure 1 "Endorsement Process."
Source: (Icaew.com 2016)
The Commission response to the role of each Board was outlined as that IASB (The International Accounting Standards Board) will always concern a standard whereas EFRAG (the European Financial Reporting Advisory Group) will hold discussion for different interest groups. Moreover, EFRAG will even deliver the requirement of meeting the consideration of the endorsement. In addition, it will prepare the effective study of the potential economic effects encountered in EU by the commission. The adoption of Regulation by SARG (the Standards Advice Review Group) performs a scrutiny with the Council decision 1999/48 such that ARC (Accounting Regulatory Committee) and European Parliament have only 3 months to oppose the draft of the regulation depending on the favorable votes. If the draft remains unopposed, then it adds to the Office Journal and lays the foundation of Regulation (Icaew.com 2016).
The two groups that contributed to IFRS adoption were accounting harmonization and market efficiency. On the first, accounting harmonization had relationship contributing to national tax issues that lead to main impediments to full convergence from the tax base. Moreover, it eliminated part of harmonization that presented several feedbacks. The second group defines the relationship between accounting practices and financial market efficiency that adopted the goal to make the markets better by lowering the cost of capital and increasing the admission of financing for companies. However, this voluntary adoption would have made the companies better but in turn, it did not show any positive effects (Guggiola 2010).
The adoption led to the implementation of two observations mainly. Firstly, the adoption was majorly influenced by the member states such that the principle of IFRS matches with the Anglo-Saxon, which is based on "Investor-Oriented" standards. Even though, the countries with "Creditor Protection Oriented" remained cautious about adopting a local GAAP because of the adoption of quality data for individual accounts. Hence, IFRS adopted for individual accounts was extensively adopted by Cyprus and Malta. Secondly, a tighter connection between the financial reporting and taxation was adopted that not only gave several drawbacks for financial purposes but also limited the adoption of IFRS to limited accounts (Guggiola 2010).
The co-existence and coordination hampered the compliance costs and reduced the ability to contrast companies performance over different countries. However, though IFRS acquired a greater international recognition but on the other hand, it enhanced a convergence program with U.S. that is GAAP, which was in operation (Singleton-Green 2015).
The conceptual framework of financial reporting highlights the need for revising IASB when developing IFRS to analyze the significant areas that were not covered, the guidance which did not had clarity and the out of date aspects that needed revision. The conceptual framework was jointly done by IASB and FASB to carry out the above objectives (Hoogervors and Mackintosh 2015)
The qualitative characteristics distinguish the final framework of work into two kinds of characteristics that are qualitative in nature and are essential to provide basic financial information. The characteristics are fundamental qualitative characteristics and enhancing qualitative characteristics. The former gives a faithful and relevant information whereas the latter defines the characteristics namely as verifiability, timeliness, understandability and comparability (ey.com 2010).
The fundamental qualitative characteristics are analyzed based on the relevant financial information that has been provided to the users for decision-making. The difference can be well emphasized based on the predicted value and confirmatory value or the existence of both together. The revised framework forwards the view of materiality as a component of ‘relevance'. Nevertheless, the boards indicate it to be a ‘material specific’ aspect that is based on the magnitude that covers the information of every condition. On the other hand, faithful representation explains the notion of ‘reliability’ that represents three economic characteristics that are complete, neutral and free from error. However, the revised framework does possess limitations that are due to estimations, assumptions and intrinsic uncertainties (Iasplus.com 2010).
The four characteristics that it will be examined are mentioned as:
Verifiability means that unrelated well-informed and autonomous observers could attain an agreement, even though not necessarily complete agreement, but an exact representation that is a "faithful representation."
Information can be more practical if evaluated about a reporting entity with associated information concerning other entities with the same body for an additional period. Comparability not only allows users to recognize and know similarities but also helps them to differentiate amongst them (Iasplus.com 2010).
Timeliness signifies that the information will be readily available in time for the decision makers that are competent enough of controlling their decisions (Hoogervors and Mackintosh, 2015).
Categorizing, differentiating and presenting information undoubtedly, in brief, makes the users understandable. At the same time, information could make financial reports unfinished and potentially misleading because some experiences are intrinsically complex and cannot be made simple to comprehend. However, to prohibit such information would make financial reports ready for users who have purposeful information of business and basic economic activities. Moreover, for the users who could evaluate and examine the information with thoroughness.
The enhancing characteristics could be maximized to the extent where the information will be made useful if not represented faithfully or is irrelevant in nature (ifrs.org 2010).
The initial task was to study the convergence and harmonization in accounting, which emphasized that harmonization, is a better accounting standard than convergence because convergence could not fit the cultural, ethical, economical, and regulatory requirements of financial reporting. However, the adoption of IFRS in EU further led to several drawbacks that brought in account the new financial reporting system to be envisaged on. The conclusion could be made based on the financial reporting carried out by IASB and FASB for IFRS that highlights the relevance and truthful information on the four qualitative characteristics of verifiability, timeliness, understandability and comparability to carry out the new concept for financial reporting.
Alfredson, K., Leo, K., Picker, R., Pacter, P., Radford, J. and Wise, V., (2012). Applying international accounting standards. John Wiley & Sons.
Bloomfield, M.J., Brüggemann, U., Christensen, H.B. and Leuz, C., (2015).The Effect of Regulatory Harmonization on Cross-border Labor Migration: Evidence from the Accounting Profession (No. w20888). National Bureau of Economic Research.
Dudovskiy, J. (2013). Need for Harmonisation as a Reason for International Differences in Financial Reporting. Research Methodology. Available at: https://research-methodology.net/need-for-harmonisation-as-a-reason-for-international-differences-in-financial-reporting/ [Accessed 9 Mar. 2016].
ey.com. (2010). Conceptual Framework: Objectives and Qualitative Characteristics. Available at: https://www.ey.com/Publication/vwLUAssets/Supplement_86_GL_IFRS/$FILE/Supplement_86_GL_IFRS.pdf [Accessed 9 Mar. 2016].
Gray, S.J., Coenenberg, A. and Gordon, P., (2013). International Group Accounting (RLE Accounting): Issues in European Harmonization. Routledge.
Guggiola, G. (2010). IFRS Adoption In The E.U., Accounting Harmonization And Markets Efficiency: A Review. [online] Cluteinstitute.com. Available at: https://cluteinstitute.com/ojs/index.php/IBER/article/viewFile/350/339 [Accessed 9 Mar. 2016].
Hoogervors, H. and Mackintosh, I. (2015). Conceptual Framework for Financial Reporting. kjs.mof.gov.cn. Available at: https://kjs.mof.gov.cn/zhengwuxinxi/gongzuotongzhi/201506/P020150629528305757224.pdf [Accessed 9 Mar. 2016].
Iasplus.com. (2010). Conceptual Framework for Financial Reporting 2010. Available at: https://www.iasplus.com/en/standards/other/framework [Accessed 9 Mar. 2016].
Icaew.com. (2016). The Effects of Mandatory IFRS Adoption in the EU, | ICAEW. Available at: https://www.icaew.com/en/technical/financial-reporting/information-for-better-markets/ifbm-reports/the-effects-of-mandatory-ifrs-adoption-in-the-eu [Accessed 9 Mar. 2016].
ifrs.org. (2010). Conceptual Framework for Financial Reporting. [online] Available at: https://www.ifrs.org/Current-Projects/IASB-Projects/Conceptual-Framework/Objectives-and-qualitative-characteristics/Documents/CFFeedbackStmt.pdf [Accessed 9 Mar. 2016].
Nobes, C.W., (2014). Harmonization of accounting within the European communities: The fourth directive on company law. International Accounting and Transnational Decisions, p.111.
Pacter, P., (2013). What Have IASB and FASB Convergence Efforts Achieved?. Journal of Accountancy, 215(2), p.50.
Pratt, J., (2013). Financial accounting in an economic context. Wiley Global Education.
Singleton-Green, B. (2015). The effects of mandatory IFRS adoption in the EU: a review of empirical research INFORMATION FOR BETTER MARKETS INITIATIVE. Icaew.com. Available at: https://www.icaew.com/~/media/corporate/files/technical/financial%20reporting/information%20for%20better%20markets/ifbm/effects%20of%20mandatory%20ifrs%20adoption%20oct2014%20execsum.ashx [Accessed 9 Mar. 2016].
Wang, C., (2014). Accounting standards harmonization and financial statement comparability: Evidence from transnational information transfer.Journal of Accounting Research, 52(4), pp.955-992.
To export a reference to this article please select a referencing stye below:
My Assignment Help. (2017). Convergence And Harmonization In Accounting. Retrieved from https://myassignmenthelp.com/free-samples/convergence-and-harmonization-in-accounting.
"Convergence And Harmonization In Accounting." My Assignment Help, 2017, https://myassignmenthelp.com/free-samples/convergence-and-harmonization-in-accounting.
My Assignment Help (2017) Convergence And Harmonization In Accounting [Online]. Available from: https://myassignmenthelp.com/free-samples/convergence-and-harmonization-in-accounting
[Accessed 27 January 2020].
My Assignment Help. 'Convergence And Harmonization In Accounting' (My Assignment Help, 2017) <https://myassignmenthelp.com/free-samples/convergence-and-harmonization-in-accounting> accessed 27 January 2020.
My Assignment Help. Convergence And Harmonization In Accounting [Internet]. My Assignment Help. 2017 [cited 27 January 2020]. Available from: https://myassignmenthelp.com/free-samples/convergence-and-harmonization-in-accounting.
MyAssignmenthelp.com boasts a pool of 3000+ experts from different backgrounds, who are solely dedicated to providing premier quality assignment help. Due to the diversity in our expert team, we are capable of providing academic assistance in more than 100 subjects. Some of our popular services include math assignment help, economic assignment help, accounting assignment help, statistics assignment help, law assignment help and more at a reasonable price.
Answers: Introduction The main purpose of this report is to explore the different aspects in the law of taxation in context of the Australian legal consideration. This report also focused on the determination of annual income in case of lottery or jackpot winning. The legal aspects of tax exemption in calculation of annual income are also assessed as per the given cases of situation arises. This report also includes the several types of issue...Read More
Answers: Introduction: Taxable income comprises of the ordinary income and statutory income. The term ordinary income does not has any kind of definition but its meaning is derived from the case law and it is based on the principles that arises from the decisions (Graetz et al. 2015). The taxable income of the taxpayer is subjected to income tax when it is added into the taxable income of the taxpayer. The taxable income creates focus on the ...Read More
Answer: The Project Plan With the end of the financial year of 2015, Fast Track Couriers hired consultant for initiating external change management for the revision of the communication strategy. With an effective communication plan, the employees or the truck drivers of the organization were evaluated via the procedure of change management (Omotayo 2015). A survey gauge was conducted targeting all the ten dimensions of the employee sat...Read More
Answer: 1.Issue: The issue currently on the consequences of the capital gains taxation under the section “104 of ITAA 1997” Laws: According to “section 102-5 of the ITAA 1997”, taxpayer is required to include Capital gains in to the assessable income. . It is very important to understand that whether there is any CGT event that has occurred with the taxpayer that has initiated the situation of capital gain or l...Read More
Answer: Introduction Tourism is a dynamic sector that relies on different factors. In other words it can be argued that an array of elements are responsible to encourage tourism and lead to popularise a particular destination. In this regard, the purpose of this report is to create an in-depth understanding of tourism in Canada. For making the discussion more accurate and contextual the report intends to deal with the problems that the countr...Read More
Just share your requirements and get customized solutions on time.
Our writers make sure that all orders are submitted, prior to the deadline.
Using reliable plagiarism detection software, Turnitin.com.We only provide customized 100 percent original papers.
Feel free to contact our assignment writing services any time via phone, email or live chat.
Our writers can provide you professional writing assistance on any subject at any level.
Our best price guarantee ensures that the features we offer cannot be matched by any of the competitors.
Get all your documents checked for plagiarism or duplicacy with us.
Get different kinds of essays typed in minutes with clicks.
Calculate your semester grades and cumulative GPa with our GPA Calculator.
Balance any chemical equation in minutes just by entering the formula.
Calculate the number of words and number of pages of all your academic documents.
Our Mission Client Satisfaction
The quality of work was well organized according to the rubrics asked and had all the in-text citations, the way I wanted. Was submitted to me before the deadline. Thanks for the help
It would be better if I receive the same kind of work for all other assignments.
the assessment helper has been very helpfull and i got HD for this assessment. Thankyou my assignment help team
I am excited to get the grades for the paper submitted. I will call on your help again.