Issues in Contemporary Accounting Global Accounting Standards

Question: Discuss about theIssues in Contemporary Accountingfor Global Accounting Standards. Answer: Introduction The acceptance of IFRS or global accounting standards is a proposal that has unwearyingly waited in the wings for decades. The enhancing complexities in the financial dealing together with the increasingly global nature of the business environment boosted global accounting standards to be in the limelight. IFRS have been adopted by no. of nations including EU nations; on the other hand, other nations are attempting to adopt the same goal. As the progress has been observed at a higher speed, it does not mean that oppositions are not in existence regarding it. One of the major among it is political factors, but a major extent of these obstacles are easily diffused by the proponents of IFRS. International Harmonization It can be said as a process of regulating and standardising laws of accounting in a globalisedeconomy in order to smoothen the progress ofgrowth. According to Barth, (2013) it is a means through which equality in all accounting laws will be achieved. It aims at promoting efficienciesof competing world by integrating internationalaccounting standards and harmonisedpractices of trading. This process will give way to sharing of technologies for dissemination of information. Such laws of accounting shall be based on four major pillars- Consistency, comprehensiveness and clarity in principles which allow reflection of economic reality into financial reports; Well-built internal controls and efficient corporate governance practices; Self-reliance and realistic auditing practices which reflect the true financial position and economic performance of entities to the outsiders. Establishing an enforcing mechanism which ensures that the principles of accounting and auditing that are laid down are followed. Advantages of International Harmonization The decrease in risk allocable to investments- The world economy will be advantaged from enhanced educated investment decisions. The same will provide speed overall global economic growth. As per the study of Beke (2013), if same standards would be applicable, experts will be able to interpret financial information relating to an entity of any nation in an appropriate manner. Making investment decision more appropriate by making comparability easier- One of the important method adopted for financial analysis of enterprises is comparing financial information of a kind of organisations in the competition. Internationally adopted of AS will enhance the methodology of comparing similar industries and would make investment decisions efficient and appropriate (Bazley and et.al. 2013). Decreasing cost- Multi-national corporations have to assess their accounting information to check whether the same is in accordance with multiple applicable accounting standards or not .In case same standards are applicable, countries having limited resources could also take advantage of international accounting standards. Easy listing on Stock Exchanges- It is necessary for an entity to comply with financial reporting requirements in order to get listed on the stock exchange through which it wishes to sell its securities (Bentley, Omer and Sharp, 2013). The benefit will be received to the stock exchanges at the global level as harmonisation of accounting standards, as after harmonisation of standard more companies begin to adopt the international standard for getting eligible for listing. Challenges in Standardisation of Accounting Standards The above-specified advantages can be achieved after implementing the harmonised standards of accounting, but the same has to face a variety of challenges. Every country has their own accounting methods which are governed through different specified authorities. In some countries accounting standards are regulated through government authorities; on the other hand in some countries, same are governed by professional organisations. In case harmonisation is implemented a major change will come in power of above authorities and accepting such change is a major challenge for those authorities. The disparity in Accounting Practices- The profuse dissimilarity in practices followed globally for accounting, would definitely lead to substantial changes (Bonin,2013). These changes would lead to major expenses on the part of the businesses in complying with the new international standard. Thereby would reduce the sovereignty of all businesses. Designing a structure which works for all countries- Formulation of a structure of international accounting standard that is asequaltely bendable in order to deal with all the issues faced by nations with differing circumstances is difficult to discover (Deegan, 2013.). Standardisation- The international harmonisation gives rise to a controversial issue that what standards should be adopted globally. Owing to vast cultural differences between nations, countries may outlook observance with international standards as a danger to their autonomy and nationalism. According to Hellman and et.al. (2015), harmonisation of accounting standards at international level will surely raise the question of rules versus principals. IFRS are principally based thus the countries which implement standards as per the rules will experience considerable obstacles in achieving it. Smoothen working of capital markets- It is believed that U.S. accounting standards very complicated and it is argued that when capital market have already adjusted to international business without a harmonised set standard then why to make such changes. Critics also believe that as the present system is working in an appropriate manner, hence there is no need for harmonising standards (Harrison and et.al. 2014). Shortage of trained manpower- It is one of the big challenges for countries who are attempting to adopt IFRS, as there is a shortage of manpower and specifically IFRS-trained manpower. The same has been observed recently when Chinas listed company adopted IFRS, a drastic growth in demand for accountants was seen. It was because new standards affected not only listed companies but all the companies. No serving for different reporting philosophy- International Accounting Standard Board is majorly focused on accomplishing needs of investors and capital markets (Wang, 2014.). It would be a tough job to harmonise standards for countries which have a different financial reporting philosophy)by. Conclusion The above report depicts that if the convergence project succeeds into converting in a future agreement between these two standards sets than global financial reporting will be based on one set of standards. Thus, with the adoption of same the ultimate goal of international reporting will be attained. References Books and Journal Barth, M.E. 2013. Measurement in financial reporting: The need for concepts. Accounting Horizons. 28(2). Pp.331-352. Beke, J. 2013. Problems Caused by Accounting Diversity. InInternational Accounting Harmonization(Pp. 79-83). Palgrave Macmillan US. Bazley, M., Hancock, P., Fisher, C., and et.al. 2013.Financial Accounting: An Integrated. Thomson Pty Ltd, South Melbourne. Bentley, K.A., Omer, T.C. and Sharp, N.Y. 2013. Business strategy, financial reporting irregularities, and audit effort. Contemporary Accounting Research. 30(2). pp.780-817. Bonin, H. 2013.Generational accounting: theory and application. Springer Science Business Media. Deegan, C. 2013.Financial accounting theory. McGraw-Hill Education Australia. Harrison, W.T., Horngren, C.T., Thomas, C.B. and et.al. 2014. Financial accounting: international financial reporting standards. Hellman, N. and et.al. 2015. The persistence of international accounting differences as measured on transition to IFRS.Accounting and Business Research. 45(2). Pp.166-195. Wang, C. 2014. Accounting standards harmonization and financial statement comparability: Evidence from transnational information transfer.Journal of Accounting Research.52(4). Pp.955-992.