International Accounting Harmonisation: IASB & EU Convergence

This report assesses the motives behind the convergence and harmonisation of accounting standards by the IASC/IASB and EU, highlighting the benefits for investors in comparing accounts across EU member states and increasing market efficiency. It discusses the challenges faced in achieving harmonisation, including varying aims of financial reporting, nationalism, competition between standard setters, economic gaps between nations, and different legal environments. The report also examines the achievements of the IASB and EU in harmonising accounting practices, noting the improvements in compatibility and the positive impact on financial and economic development. It concludes by emphasising the importance of convergence and harmonisation for investors and businesses, providing insights into the workings of the IASB and its role in addressing related issues.

INTERNATIONAL
ACCOUNTING

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
Assessment of the motives behind the convergence and harmonisation of accounting
standards by IASC/IASB and EU...............................................................................................3
The issues and challenges which are being faced in working towards converging and
harmonising accounting practices. Reflect in what ways IFAC and IOSCO could render
support the harmonisation efforts of such companies. ...............................................................4
A critical examination of the achievements or successes of both IASB and EU in harmonising
accounting practices....................................................................................................................5
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
The report prepared as under would help to explain in what ways International
accounting standards committee (IASC) which is a parent entity of international accounting
standards board (Astolfi, 2021). The purpose being served by IASC is for improving and
harmonising financial reporting primarily through the development of international accounting
standards and also promoting the use of those standards which in the general purpose would be
promoting the financial statements which are being published by business firms. It would
explain what benefits and advantages are being enjoyed and how it would help a business
enterprise as well.
TASK
Assessment of the motives behind the convergence and harmonisation of accounting standards
by IASC/IASB and EU.
It would be helpful for investors to compare and have a better understanding of accounts
from all EU member states, motivating them for investing across the borders. With effect it
would increase the efficiency of the market and also minimize the cost of capital for
organisations, improving the competitiveness and helping to boost the growth and expansion as
well. The issuing and preparation of IFRS and exposure drafts would be following the due
process which is being stipulated in the constitution (Hampl and Gyönyörová, 2021). The issuing
and approval of interpretations are being prepared and developed by the IFRS interpretations
committee. Harmonisation also aims at reducing and minimizing the variation or differences in
financial reporting processes across the globe. The aim is to achieve certain level of comparison
in such a way that financial records are presented. The basic objective of such harmonising
exercise is to manage and improve the compatibility and comparability in presenting and
preparing the accounting records, statements and reports as well. Harmonisation of accounting
standards would help the world economy in certain ways such as minimizing exchange costs and
facilitating international transactions as well. Benefits of harmonisation would be consisting of
conserving time and money, comparing international financial data or information, enhancing
accounting standards and making better decisions which would be in accordance of consolidated

information. IASB is useful to develop and create globalised accounting standards, in depth
research on firm and enforcing standards.
The issues and challenges which are being faced in working towards converging and
harmonising accounting practices. Reflect in what ways IFAC and IOSCO could render
support the harmonisation efforts of such companies.
Issues and challenges being faced are discussed as under:
 Varying aims and goals of financial reporting: The purpose and aim of financial reporting
might differ from country to country. Which can be possibly the cause behind variation in
reporting practice as well. Financial reporting in every region is done by considering the
targeted audience.
 Spirit of Nationalism: It can be explained as accounting professionals in various countries
which might lead to hurdles in accepting compromises which they must make in
changing their accounting practices. National pride would be preventing them from
accepting willingly the idea which his accounting principles would be inferior to those of
other territory (Marina, 2021).
 Competition between international standard setters: Unwanted competition between
international institutions that are engaged in development of accounting standards can be
explained as a big obstacle or hurdle on carrying out harmonisation. For example, ISAB,
IFAC are trying for developing and reviewing the efforts being undertaken by various
territories to minimize diversity in accounting practices in their own way.
 Economic gap between developing and developed nations: There is a huge gap being
observed between developed and developing regions. Such gap can prove to be a hurdle
or obstacle in bringing out harmonisation in different accounting practices. It would be
hence better for understanding interaction between accounting and economic system.
 Different legal environments: Statutory or legal environment would be playing a
dominant role in the development of accounting thought in every region or country. Legal
system would be varying from one country to other (Mihret, Mirshekary and Yaftian,
2020). Since, the legal system in a territory would be practising a strong impact over the
reporting practice and accounting, it is evident that until and unless uniformity laws are
possible, it would be complex for achieving the objective of harmonisation of divergent
accounting practices.

A critical examination of the achievements or successes of both IASB and EU in harmonising
accounting practices.
Harmonisation can be explained as a process which would increase the level or scale of
agreement in accounting standards and practices as well among territories. The purpose of such
study is to boost and enhance the respective researchers understanding on the international
harmonisation of financial based reporting. Harmonisation of accounting standards would be
tend to make the process of improving the compatibility of accounting based practices by
maintaining bounds for the degree of variation. There are many benefits which are linked with
harmonisation of accounting standards such as Ensuring high quality and reliable financial
reporting and disclosing in respective cases also it could prove to be vital and crucial to the
financial and economic development of a territory. Harmonisation is a process which helps to
increase the level of agreement in practices and accounting standards among countries. The
purpose of such study is to enhance and boost the understanding of researcher on the
international harmonisation of financial reporting (Sanada, 2018). Major breakthrough towards
convergence was reached in the month of May in year 2000, it would also help and allow
investors to have a better understanding and carry out comparison of accounts from all EU
member states, encourage them for making investments across the borders. It would also help to
increase the efficiency of market and cut down the cost of capital for businesses, lastly
improving competitiveness and helping boost the growth and expansion.
CONCLUSION
The report prepared as above helps to assert ways which would explain the need behind
the convergence and harmonisation of accounting standards, what have been the issues and
challenges which the company comes across while working towards converging and
harmonising accounting practices. It also takes in account achievements or successes of both
IASB and EU in harmonising accounting practices hence the report is useful for a investor and
customer to understand the working of IASB in environment and how it would help to solve the
issues a company or business goes through.

REFERENCES
Books and Journals
Astolfi, P., 2021. Did the international financial reporting standards increase the audit
expectation gap? an exploratory study. Accounting in Europe, 18(2), pp.166-195.
Hampl, F. and Gyönyörová, L., 2021. Can Fiat‐backed Stablecoins Be Considered Cash or Cash
Equivalents Under International Financial Reporting Standards Rules?. Australian
Accounting Review, 31(3), pp.233-255.
Marina, A.G., 2021. ACCOUNTING HARMONIZATION WITH IFRS: A BIBLIOMETRIC
ANALYSIS USING VOSVIEWER SOFTWARE. Revista Economica, 73(4).
Mihret, D.G., Mirshekary, S. and Yaftian, A., 2020. Accounting professionalization, the state,
and transnational capitalism: The case of Iran. Accounting, organizations and
society, 82, p.101091.
Sanada, M., 2018. The legal backing for accounting standard-setting in Japan: A historical
review. Accounting History, 23(3), pp.338-359.