Harmonization

Harmonization

In the USA, the SEC recognizes financial statements prepared using IAS but still requires listed companies to reconcile their accounts using US GAAP. The supporters of this reconciliation argue that IAS are less demanding, require less or fewer details and allow companies excess leverage in deciding what information to disclose. In contrast, IAS supporters argue that the IASB has considerably improved its standards over the years and now match US GAAP and that IAS are less expensive and less time consuming for companies to comply (Mogul, 2003).

As IASB is a UK based organization, there is widespread support for IAS in Europe. The European Union (EU) has imbibed harmonization in its laws and as per the European Parliament's recent directive, listed companies are required to report under IAS by 2005.

In 1997, the Arab Society of Certified Accountants, represented by 22 Arab countries, entered into an agreement to support IAS as the national AS for the member countries. Even in India, AS are being harmonized with the IAS, to the extent possible, in the light of the conditions and practices prevailing in India (Mogul, 2003).

Why Harmonize Accounting Standards after all?

Academicians, regulators and governments have been constantly striving to harmonize (i.e. to bring in line or match) the local/domestic Accounting Standards (AS), also referred to as Generally Accepted Accounting Principles (GAAP), with the International Accounting

Standards (IAS) issued by the UK based International Accounting Standards Board (IASB) (formerly the International Accounting Standards Committee-IASC). The IASB has been trying to harmonize international accounting principles since 1973. Further, the IASB and the International Organization of Securities Commissions (IOSCO) have been jointly working on

harmonization since July 1995, and in May 2000 the IOSCO finished its review of the IAS and recommended usage of certain IAS, supplemented with reconciliation, disclosure and interpretations.

Although criticisms of Global accounting have culminated to a height of great concern, the problems should neither be postponed nor avoided,