Global Convergence of Accounting Standards: A Report

This report provides a detailed analysis of the global convergence of accounting standards, focusing on the history, development, and critical assessment of International Accounting Standards (IAS). It traces the evolution of IAS from its inception in 1973, highlighting the role of the International Accounting Standards Committee (IASC) in promoting global convergence. The report examines the extent to which global convergence has achieved its goals, emphasizing the benefits of increased transparency, comparability, and efficiency in financial reporting. It also discusses the challenges and difficulties in achieving global agreement, including the resistance from the United States due to concerns about the impact on small businesses and the perceived shortcomings of IAS compared to US GAAP. The report concludes with a summary of the key findings and implications for the future of global accounting standards.

History and Critical
assessment of global
convergence of accounting
standards

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. History of global convergence of accounting standards.....................................................1
2. Critical analysis of the extent to which global convergence of accounting standards have
the goals..................................................................................................................................2
3. Difficulty of agreement on global convergence.................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Accounting standards are essentially in financial world. It regulates various countries
accounting framework. The enclosed report deals with the history and critical assessment of
global convergence of IAS accounting standards. IAS has been the main body which guides and
regulates accounting world by underlying various standards which provide support to
accountants in making out their financial work in effective way. Global convergence helps to
mergers and acquisitions. Accounting standards improves quality of accounting world through its
important regulations (Oulasvirta, 2014). The global convergence initiates transparency and
better comparability which is required in financial reporting in the best possible way. It also
results into greater transparency about organisation to external parties as well. It is much
important as it helps country to be effective in its working and functioning in accounting world
with much ease. It guides about financial reporting in effectual manner.
1. History of global convergence of accounting standards
Several bodies are actively engaged in achieving the objectives of global convergence of
accounting standards. Rapid growth of industrialisation as well as international trade has given
rise to making effective financial environment largely. It is important as it provides industries an
effective way to support in financing related work.
The history of global convergence dates back to 1973. The establishment of accounting
body IASC (International Accounting Standards Committee), that was previously known as IAS
(International Accounting Standards) was formed on 29 June 1973. It was accepted by 16
countries when they all signed the constitution for its effective formation. It came to force so that
it can be widely accepted in financial world (Zhang and Andrew, 2014). Its headquarter is
located in London. Its main aim is to regulate and implement accounting standards which are
globally accepted.
The global convergence was widely accepted by various countries. IAS standards have
gained convergence. Countries which were using rule based system and also using principle
based system have applied IAS standards. Apart from this, countries having different cultures
had also accepted accounting standards governed by IAS. The global acceptance mainly rely on
principle based as well as several notions of flexibility. The implementation of IAS has laid
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down various useful insights to accountants as accountants are becoming efficient and also rule
checkers.
2. Critical analysis of the extent to which global convergence of accounting standards have the
goals
Accounting standards are more important in international market as global trade is
possible by countries and in such scenario, globally acceptance of accounting standards are
essentially required. Netherlands has accepted IAS standards since its inception. They have
followed the standards so that it may be able to trade with various countries efficiently and also
financial environment is met by it in effectual manner (Backof, Bamber and Carpenter, 2016). It
has observed the significance of such standards which guide them in their functioning effectively
with full transparency and full clarity to financial environment. IAS guides country regarding
consistency in underlying accounting field, option for revaluing plant and property at fair value
(IAS 16), amortisation of negative goodwill (IAS 22). These all helped Netherlands to be
effective in accounting framework.
However, IAS has been criticised by US. It has been critically analysed that while
assessing the quality of IAS standards is found that it is not able to compare and is not
transparency in it. Such shortages are overcome by US GAAP standards which are imparted by
US investors. The staff have not been focused on accounting standards as compare to US GAAP
(Generally Accepted Accounting Principles). This makes it as a source of criticism. There is a
need to restructure accounting standards which are laid down by IAS. Effective financial
reporting shall start with management which is responsible for making effective principles that
will be counted by organisation in the best possible manner. There are concerns that accounting
standards laid by the body cannot be implemented by country rigorously. As such, it is critically
analysed that IAS has to re look its accounting standards so that it may be globally accepted by
all the nations in effectual manner.
3. Difficulty of agreement on global convergence
The global convergence is not followed by US as it hampers its small businesses
adversely. US small businesses are already facing lot of competition and are not able to compete
with larger business firms (Wagenhofer, 2014). The small businesses spend on regulatory
compliance as compare to larger companies. This increases its expenditure on complying with
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several formalities and as a result, they are not performing well and costs are considerably
increasing.
US is not accepting IAS global convergence because of such formalities and because of
lacking of transparency and accuracy in accounting standards by IAS (Convergence of
Accounting Standards). This has been main argument by disagreeing to IAS standards
(Angeloni, 2016). As such, IAS should become stable and provide reliable standards which are
globally accepted by country in their financial framework.
CONCLUSION
Hereby it can be concluded that IAS accounting standards guide several countries to
accept it and regulate their financial framework in effectual manner. It is useful for country as it
provides them with useful insight to abide by it or accept it to successfully achieve accounting
framework. It is also useful for convergence by country by which it may be able to inject its
financial environment with much ease. This is however been criticised by US that it is not such
better than US GAAP. It lays down its deficiencies which need to be applied by IAS so that it
may become viable and globally accepted by every country.
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REFERENCES
Books and Journals
Angeloni, S., 2016. Cautiousness on convergence of accounting standards across
countries. Corporate Communications: An International Journal. 21(2). pp .246-267.
Backof, A. G., Bamber, E. M. and Carpenter, T.D., 2016. Do auditor judgment frameworks help
in constraining aggressive reporting? Evidence under more precise and less precise
accounting standards. Accounting, Organizations and Society. 51. pp .1-11.
Oulasvirta, L., 2014. The reluctance of a developed country to choose International Public Sector
Accounting Standards of the IFAC. A critical case study. Critical Perspectives on
Accounting. 25(3). pp .272-285.
Wagenhofer, A., 2014. Global convergence of accounting standards. The Routledge companion
to accounting, reporting and regulation, pp.246-264.
Zhang, Y. and Andrew, J., 2014. Financialisation and the conceptual framework. Critical
perspectives on accounting. 25(1). pp .17-26.
Online
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