Harmonization of accounting standards was not achieved until 1990, when the Accounting Board debated a new international approach. Harmonization of accounting standards had the primary goal to improve business practices across countries. While different countries may have their own accounting rules, all should use the same accounting method to help businesses succeed. The United Nations, International Accounting Standards Committee and EC are three important international organizations. These groups met in order to discuss the need to create an accounting standard that is applicable to both international and American organizations useful content.
This idea would be a way to end conflicts that arise between countries because of the language barrier. The EC is one of the most important international organizations. It had already adopted the idea of harmonizing accounts reporting. The international organizations were not able to agree on the best way to harmonize. K. Van Hulie stated: “There is not consensus about what should be harmonised: The annual accounts, the consolidated accounts, the accounts from all entity accounts, and the accounts listed businesses. Large company accounts aren’t included.” (Hulie 390). Organizations do their work differently so there is no agreement. When countries refuse to share financial information, there are issues. It is necessary for international organizations to reach an agreement about how accounting should be conducted. Harmonization between accounting standards would have a major impact on accounting in the whole world.
Harmonization in accounting standards will allow countries to share comparable financial information. Because each country follows the same accounting principles, international business would be simpler. This is a good idea, as it might reduce the number of controversies surrounding financial information. This is because everyone would follow the same guidelines to know what they could and shouldn’t do. The problem is with the size and composition businesses. All businesses are different. Harmonization may not be a good idea since there are many larger companies than others.
Aziz Jaafar claimed that “Firm Scale is another important determinant.” Larger companies are more exposed to the general population than smaller businesses. This is why they make voluntary disclosures. Both the country and the size of the business are important. There are many countries with different sizes. These countries can produce different financial data. Different accounting rules may be applied. Another factor that determines the size of a country’s economy is the number and quality of its firms. There will be differences in the financial information between countries. Some countries may not want their data to be the same with those of larger countries. Even though the harmonization standards in accounting were impressive, there was some progress over time to a new concept called “convergence accounting”.