Uniformity of Accounting Standard and Conceptual Framework Essay Example for Free

supplyity of news report Standard and Conceptual Framework EssayUniformity of Accounting Standard and Conceptual Framework executive director summery Harmonization of the bill normal and conceptual framework is emerging as a requisite for of the supra study community. As business cross national boundaries so the transecting parties need renderity in the fiscal coverage for better understanding of the business limits. The mold of harmonisation gets accelerated by the enterprisingness of the ii major(ip) example setting embody of the world IASB and FASB.Although the two authoritative bodies try to uniform the accounting measuring but the major concern arises here is the biasness of the influencing nations. In the assignment, pros of the harmonization bear upon is discussed which is essential for supranational business community. The process is also disturbed by taking into account no consideration of the community and judgment of the professionals. In the assi gnment some recommendations argon made for accelerating the harmonization process. Contents Introduction economic science and politics are the two major elements that shape the accounting tired of a nation.As severally and every nation varies in their economic condition, customized accounting stock gets its appeal. Nowadays business is not captive in the national boundaries. With the integration of the worldwide market and the economic forces the process harmonizing the accounting criterion has force an emerging issue. In the process independent rather than governmental organization is most appropriate. If we account for the advantages and disadvantages of the harmonization process then in the pros side of the ledger high quality quantity of the FASB is the achievement and in the cons side I will posted the biasness of the specimen setters.The process reduces the cost of the international community because adding an spare member in the process tends to goose egg marginal cost of standard setters. Why harmony in the accounting standard and conceptual framework? With the widespread integration of the markets and policies all over the world, nowadays it becomes indispensable for the monetary institutions all over the world to follow a uniform standard for fiscal reporting. pursuit the high quality accounting standard tends to a higher standard financial reporting.The pros for informing standard all over the world are as follows (Ball, ,2005) Maintaining congruity in financial data debut standards are set to guide the contracts of the financial institutions. In the case, if the financial reporting of the entities is different, it causes problem for both the contract parties in the maintenance of the conditions of the contracts. For example- Company X lends money from Bank Y on the condition that arrive amount must not exceed 60% of the total real(a). In the situation valuation techniques of the homes are different then it affects the contrac t adversely.So following a uniform standard for valuation of tangible asset is a solution of the problem Uniform presentation of financial performance investors make investment funds decision based on the financial performance of any firm. In the situation, if the firms follow different standard to represent profitability then it becomes misleading for the investors. sideline a uniform standard for reporting green goddess resolve the problem (Lammle, ,2005) Adopting uniformity in the accounting standard offers the ordering the following three benefits 1.Uniform accounting standard offers the benefit of economics of scale. Standard once are set, the cost of adding additions user is zero 2. The auditors tasks get easy because all the financial institutions follow uniform policy and procedure for reporting 3. comparison can be made which reduce the cost of the firms contracting each other Extended cross border transactions nowadays cross border transaction has been increased. Infor mation about the foreign products and the financial education of the business are now available in internet.As a result, investors invest in foreign firms. In the situation uniform financial reporting gets very important (Buys, ,2011) Uniform financial reporting offers the investors the following benefits IFRS standards offer a more accurate presentation of the financial data than that of the national standards. Information of some firms is not readily available. In the situation uniformity in accounting standard reduce risks in decision making Usually small investors cannot evaluate all the information than that of professionals.Following the IFRS standard improves the quality of information which ultimately gives the investors more information for access Following the uniform accounting standard serves the purpose of comparability and information accessibility cost gets reduced In IFRS standard idiom is given for the comparability of information and it becomes more accessible. S o integrating the entire world standard with IFRS yields the investors the supra benefits. Some other passive pros of uniform accounting standard are as follows Improve gain of financial dataIncrease transparency which ultimately benefits stakeholders The above two factors tend to reduce self-assurance costs of the firms The above are some of the benefits of harmonization of the accounting standard. The process of harmonization is fueled by the process of globalization. As transactions occurs across national boundaries, there create a need for uniform accounting standard. In todays business world, transactions cross national boundaries. As a result uniformity in reporting financial data gets very important.IFRS standard plays a full of life role in the process of harmonization and many of the European nations follow IFRS. In the process an initiative is taken by USA to harmonize GAAP with IFRS. (HINES, ,2005) Arguments against uniform financial reporting Uniformity in financial r eporting is made at the expense of the society. Culture differs in different nations, as a result in the process of uniform accounting reporting cultural aspects are considered. Economic condition of different nations also varies, for example- some are big, and some are small. Uniformity ignores the judgments of the professionals.The process also discourages interrogation in the field and also discourages different ways of financial reporting. Shortcomings of uniform financial reporting are as follows (Sunder, ,2007) Application of the concept uniformity the concept of uniformity can never be be specifically so that the standard setters can apply it in financial reporting. For example- in case of reporting the R D expenditure, management discretion is ignored. In recording the expenditure economic nature of the firm is considered. But the economic condition of the firms is not feasible in many cases.As a result, the uniformity issues creates problem Social norms the process of un iformity in accounting standard barely considers the issues like cultural, social and political differences in the nations. As a result the process of implementation is affected largely. (Madawaki, ,2012) In applying the standard in the society the standard setters face the following three problems related with the practice in the society 1. Information problem in the process of developing standards, the stand makers have very little information about the social circumstances.Standard are set to replace the previous one but the process is very complex. Involvement in the social norms provide more information which is largely ignored in the process 2. Problem in design the standard in designing standard, it becomes very important to strike representation, impartiality and consistency. The professionals set the standard may not be impartial. In the process, the influencing stakeholders try to influence the standard setting for their benefit. This influence distorts the proper standa rd setting of the standard setting body. 3.The gaming problem the development of the standard alters the decision environment of the business firms. Standard also paves some new opportunities. The standard setters do not possess all the information for desired chances as a result misunderstanding arises. The standard setters should ensure that the standards ensure the mutual understanding between the standard setters and the business firms Legal situation of a nation in the cases where standard is conflicting the low of the nation the jurisdiction of the nation imply it shut-in to impose Education and research in the process of uniformity new standards are set.As a result, the professional teams of the standard setting body have to train the local the professionals in the new standards. In the educational programs also the subject concern with the topic should be amended. This means that the whole system much(prenominal) as educational materials, accounting software, reporting sy stem all have to be restructured (Agrawal, ,1987) The process of uniformity is questioned by the dominance of some countries. Many nations argue that the head of IASB is the representative of USA.It is a major plea against the standard setting process. In some cases, the judgmental areas of the business firms vary. In the situations, uniformity is somehow impossible. Harmonizing standard with the US GAAP in the uniform of standard is also a major shortcoming. Recommendation The process of harmonization of the two standard setting bodies FASB and IASB has already been started. The process benefits the transactions across national border.monetary value of providing information is also reduced. In the situation the process can be successful if it can make the following standards (Barbu, ,2007) To cope with the changing global marketplace, the standard setting body should update the accounting standard in a regular basis and should communicate it with the related parties for implement ation The standard setting body should be private and independent to avoid any political pressure of the government which ultimately ensures democracy.In case of governmental standard setting body, there is a chance to be biased in formulating accounting standard In setting the standard the economic variety of the nations should be considered There should be some areas for professional judgment because of the economic variety of the nations To implement the process of uniformity a monitor sell should be developed. The department oversees the maintenance of the accounting standard. If any nation does not follow the visit standard then the department can panelize the nation (Buchanan, ,2007)Conclusion The process of harmonization gets appeal of the international community in the last ten years. The process gets accelerated by the Europeans as they are currently following IAS and IFRS for financial reporting. United States is also a pioneer in the issue by creating a bridge with the international standard with GAAP. In the process the stakeholders gets advantaged by sharing a uniform financial reporting. The cross border relationship is emerged in a new horizon now. The audit process gets the vindication in the harmonization process.But the process is not without some problems also. The process reduces the independent judgment of the auditors. The major stakeholders also influence the standard setting process. An independent private standard setting body is a possible solution to the problem.