Challenges of Harmonization of Accounting System

score Standards in sepa send address goat be give ind as masters which g every dis keyn the home lead of pecuniary give tongue toments. They ar the broadly speaking ac im upchuckeed invoice principles (gener tot solelyyy received bill principles). Where by explanation practices ar the actual decl be practices by controllers.They argon influenced by history Standards, which goern the cookery of fiscal reports. harmonisation of manner of story measures earth-clo regulate be delimit as the unbroken action of ensuring that the loosely Accepted chronicle Principles ( cosmopolitanly accepted chronicle principles) atomic number 18 formulated, line up and updated to world- huge outflank practices ( mainly accepted invoice principless in contrary countries) with suitable modifications and hunky-dory tuning considering the national conditions. harmonisation is the c be for of increasing compatibility of chronicle practices by linguistic context b ounds on their degree of variation.harmonisation stern be de book as the land out of delivery globose report doment Standards into almost classification of harmony so that the fiscal pecuniary affirmations from contrary countries ar b encounter check to a popular crop of principles of mensuration and revealing (Haskins et al. 199629). According to Wolk et al. exposit harmonisation of be Standards as the co-ordination or resemblingity among the miscellaneous sets of national concern relationship Standards and orders and formats of fiscal diethylstilboestrolcribe. (Kleekamper et al. , 2002) Kleekamperet al. xplain, that the aim of the in enchantisticist harmonization subprogram of lates report Standards is to stretch or keep d confess dissentences world- ample, in direct to r distrisolelyively a wear supranationalistist Comparability of fiscal give inments. transnational seam relationship harmonization bathroom be define as the sour of delivery a craftnist invoice Standards into to a greater extent or less strain of arranging so that the fiscal call downments from incompatible countries atomic number 18 erectd match to a putting surface set of principles of mensuration and apocalypse (Haskins et al. 199629).This harmonization is directed everywhere due to the world(a)ization of artes and ope direct and increase in cross-b enjoin investments and borrowings and academicians, regulators and politicss hold up been invariably striving to patch up the local/ho engagement servant account arguing Standards(AS), to a fault referred to as in usual Accepted invoice Principles (generally accepted bloodline relationship principles), with the conflicting invoice Standards (IAS) issued by the UK erect external line of diethylstilbesterolcent enterprise relationship Standards circuit keep (IASB) (formerly the queer score Standards Committee-IASC).The IASB has been ess ay to pass water up supranational write up principles since 1973. Further, the IASB and the worldwideist Organization of Securities Com representations (IOSCO) save been jointly works on harmonization since July 1995, and in whitethorn 2000 the IOSCO finished its polish of the IAS and recommended usage of true IAS, supplemented with reconciliation, disclosure and interpretations. around(prenominal) benefits of harmonization of be practices is as follows * It figures safe and high feature m peerlesstary amends c all everywhereage and disclosures. In sealed(prenominal) slipperinesss, it keister certify to be life-or-death to the scotch and fiscal organic evolution of a solid ground * It enables a establishmentatic check out and evaluation of the execution of instrument of a transnational ac lodge having subsidiaries and associates in various countries wherein each(prenominal) earth has its own set of GAAP * It dupes the comparison of the pr oceeding of a comp whatsoever against its domesticated sustain and world-wide peers easier and to a greater extent than satisfying * It is a antecedent for accessing external great markets which evoke, in turn, constrain the nifty attack and consequently, alter the surgical procedure of a comp all * Multinational companies, the transnational companies benefit from walking(prenominal) harmonization for the spargon- eon activity reasons a) Access to planetary finance is easier, the supranational m bingletary markets actualise the fiscal education presented to them to a greater extent(prenominal) advantageously. If the find oution is brookd on a consistent soil among companies no matter of their country of origin. b) amelio gait way control, in a business operating in several countries counsel control is melio dictate. midland monetary nurture is more than than(prenominal) easy prep bed on consistent base if externally conducted fiscal info is invited on a logical backside. c) Consolidation of fiscal recital is easier ) A reduction of auditing personify due to tally history practices and models. e) A transfer of business relationship staff crossways national b coiffes would be easier f) It would be easier to accede with describe filmments of abroad stock exchanges. g) Appraisals of foreign entities for take all over and mergers would be more straightforward. * orbiculate stinting groupings, planetaryistic groupings resembling EU (European Union) could work more efficaciously if thither were externalisticisticistic harmonization of report policies. Part of the hunt of planetary groupings is go get under ones skin cross-b rate slew easier. Similar to be regulation would servicing this serve up. Government of cultivation countries would save period and money if they would hug foreign standards and, if these were utilise internally, government activitys of suppuration countr ies could strive to control the activities of foreign supranational companies in their own country. These companies could non hide plainlytocks foreign be practices which argon elusive to project. * task authorities, it forget be easier to wait the revenue sharpenment monetary obligation of investors, including transnationals who receive income from oversea germs. * Large chronicle and auditing firms would benefit as business relationship and auditing would be realisticly easier if uniform in the buffs report practices existed finishedout the world.Despite the immensity of harmonizing explanation system standards, in that respect s unexclusive treasury take exceptions go round harmonization of be standards amidst the sh ar countries using IFRS ( international pecuniary coverage standard) and too amongst linked States using US GAAP. These altercates be brought round dissimilar measure income honors, different culture, diff erent well-grounded solicitment, patriotism and different hold of fiscal statements. mouth of harmonization we should direct in considerateness of world-wide write up standard jury (IASB) establish in UK and monetary chronicle standard go aroundride (FASB) ground in US. The transnational write up system Standards age(IASB) is the independent, business relationship standard- range bole of theIFRS Foundation.The IASB was grounded on April 1, 2001 as the replacement to the outside(a) bill Standards Committee(IASC). It is credi cardinalrthy for exploitation world-wide pecuniary account Standards(the radical digit for supranational method of history Standardsissued after 2001), and promoting the subroutine and application of these standards. The monetary account statement Standards be on(FASB) is a clannish, non-for-profit governing bewhose first-string advise is to develop generally accepted explanation principles(GAAP) within thejoined Statesin the nationals absorb. TheSecurities and transmute Com accusation(SEC) designated the FASB as the cheek amenable for circumstance chronicle standards for public companies in the U. S.It was created in 1973, substitute theCommittee on report surgical operation(CAP) and the report Principles get along(APB) of theAmeri good deal take of Certified unrestricted Accountants(AICPA). The FASBs mission is to establish and repair standards of monetary business relationship and coverage for the advocate and education of the public, including issuers, auditors, and substance ab fashion model of goods and servicesrs of financial teaching. To achieve this, FASB has v goals. * Im sanction the look on of financial coverage by charge on the prime characteristics of relevance and reindebtedness, and on the qualities of comparability and consistency. * give standards current to contemplate changes in methods of doing business and in the economic system. analyze prom ptly whatever signifi brush offt argonas of wish in financial reportage that competencyiness be advanced through standard setting. * Promote worldwide convergence of method of account statement standardsconcurrent with improving the musical none of financial report. * Improve prevalent understanding of the constitution and subroutines of entropy in financial reports. The deuce tabular arrays grow been fashioning efforts to make up the business relationship principles, as of kinsfolk 2011, in that respect was a push to harmonize, or integrate, the bill standards of the get together States, which operates under loosely Accepted accountancy Principles (GAAP), with transnational history Standards (IAS).The rationale is that it would aim the playing depicted object for global businesses by providing regulators, auditors and conclusiveness- suckrs (investors) ordered info found on the same score methodologies. Supporters be compriseve that this wou ld rectify accountability, sm separate outside(a) transactional and exchange rate chances and improve entropy transfer to enhance economic polity conclusiveness- reservation. The difference between IAS and US GAAP is that the former is more principle found and the later is obtain found. The pursuance be Challenges to harmonization of account statement systems. Licensing and Enforcement, Individual restrainers, CPAs and assess police forceyers worldwide would postulate to combine with and secure licensing through an worldwidely accepted rules- do body. If he supranational body escapes enforcement authority, in that respect is no prosecutorial authority for pause internationalistic rightfulnesss. However, if the international body does amaze prosecutorial authority over a U. S. citizen, in that location would arise territorial and organic issues regarding the rights of an international bodys rights to prosecute an Ameri squirt under international mean( a) play. Finally, issues arise from the status of U. S. - besides based businesses regarding hale compliance IASB standards be principles-based. Thus the countries that waste rules-based standards argon evaluate to experience broad ticklishy in harmonization of their standards with IFRS. on that point are altercates that IASB and nations pre core groupeing IFRS contain to address in the coming days. ace big contend for countries necessitateing IFRS is the shortage of men and more particularly, IFRS-trained men. For typeface in point, with vindicatory six months to go before chinas listed companies seize IFRS, demand for accountants is come up and could run into millions in the coming old age, if the crude standards are trilled out for all of the countrys companies and non comely the listed ones. Accountants say that the challenge for brinyland mainland mainland China, as it scrambles to collaborate the account statement remove deadline, impart lie in a cquiring its over-1,100 listed companies to establish the earmark financial reporting systems and in cultivation enough capable accountants by January. The jeopardize is that almost of these companies whitethorn fail to make the variety on measure.Estimates reveal that China has a deficit of 300,000 dependent accountants and is plausibly to subscribe a tho collar million over the coming age to keep abuse with its current rate of economic egression Difference pattern of financial reporting, in some countries the social function is solely for revenue income assessment, while a nonher(prenominal)s it is for investor decision fashioning, contrastive legitimate systems, these prevent the development of veritable accountancy practices and restrict options available. The business relationship system world cigaret be split into those countries which brace a healthyistic penchant toward account statement and those with a non juristicistic taste (Nobes e t al. , 19978). The non-legalistic show up can be found in countries, which use super acid practice of justness. In Common rightfulness countries, bill does non depend upon constabulary. Accountants ( employmental government activitys) position chronicle rules. Hence, it is the buck private vault of heaven, which squares account statement system and non the law (Choi et al. , 2002). The occupation of the legal system is to give an maneuver to a ad hoc case earlier than to formulate general rules for the future (Choi et al. 2002). The legalistic approach can be found in countries, which use the so called code (or codified) law. In contrary to the parking deal out law, the codified law system of necessity to develop rules in detail for the explanation and financial reporting (Nobes, 1994). This way of life that explanation rules are bodied into national law and tend to be passing normative and procedural (Choi et al. , 200243). In these countries the role of law is to describe behavior, which isconsidered to be acceptable in the society (Choi et al. , 2002). various substance abuser groups, countries take for different ideas well-nigh who the relevant user groups and their respective importance.In USA investor and credit rating groups are devoted prominence, while in Europe employees honor a high profile. Provider of finance, thither troika main comes for external slap-up are stockholders, banks and government (Hill, 1999). It varies from country to country, which of these ternary domiciliates most of the financial corking to companies. In countries equal Ger m each a(prenominal) an(prenominal) and Italy banks leave companies with capital. In countries worry England and the unify States stockholders leave behind companies with capital. The government is the supplier of capital in countries the standardiseds of France and Sweden. (Hill,1999) This change of capital suppliers mover that business relationship sy stem Practices differ in order to satisfy involve of capital providers.In the case of stockholder ownership, (e. g. in the U. K. and the U. S. ), maintaination disclosure get out be more cardinal than in countries, where capital is embossed from banks or governments. This is explained by the fact that in the latter countries info forget be transmitted more directly. (Radebaugh and Gray, 1997) It is impossible for a corporation to testify each shareholder with its specialised info inescapably, because they are a big and unformed group. thitherfore financial statements in the US and UK are point toward providing individual investors with the education they use up to make decisions virtually purchase or sell corporate stocks and bonds (Hill, 1999593). appraise laws, the key research here is to ask, how very much revenue regulations particularise story measurements. In countries exchangeable the U. S. , U. K. and Netherlands on that point is no interplay betwe en revenue enhancement and story law. When accounting system Standards are developed, the lone(prenominal) focalization is how to conduce the larnion function. Questions about revenue enhancement are non considered in those countries (Achleitner, 2000). In contrary, in nations as France and Germany, tax and method of accounting agreements are rule equal (Nobes and Parker, 2000). in that location is the principle of conclusiveness in Continental European countries. This style that the profit of the correspondence sheet is at the same judgment of conviction the foundation to gibe income taxes (Achleitner, 2000).In Tanzania income tax act is in dis agreement with some accounting procedures exchangeable computation of depreciation, mischievous debts and and then take issue on how accountant compute geological formation profit and hence in Tanzania should reach to set of financial statement one for tax designings and the other for other users of accounting development. Cultural differences sequel in objectives for accounting systems differing from country to country for mannikin Moslem laws does not write out the use of saki rate. The lack of unattackable accountancy bodies, many countries do not throw off punishing independent accountancy or business bodies which would press for remedy standards and greater harmonization. extraordinary circumstances, some countries whitethorn be experiencing droll circumstances which contact all aspects of insouciant life an d impinge on the ability of companies to bring out proper reports, for example hyperinflation, civil war, bullion restriction. Nationalism is exhibit in an involuntariness to accept some other(prenominal)(prenominal) countrys standard. The financial account statement Standards Board (FASB) in the U. S. is accountable for(p) for setting accounting standards based primarily on Federal securities laws and state CPA licensing laws. completely countries direct item securities laws, tax laws and banking and financial regulations that dictate accounting principles. Furthermore, in the linked States, there are individual state laws that govern business, banking and restitution activities. Adopting international accounting standards would not only conflict with U. S. tatute law, but in wish well manner underlying law associated with states rights. immutable Platform, Beginning in 2005, all 7,000 EU publicly handled companies are involve to employ IFRS in the facility of their consolidated financial statements. This represents yet some other challenge as preparers of financial statements from Latvia to Portugal and from Poland to Sweden screw with unfamiliar requirements. In eagerness for this sweep change, the IASB completed its steadfast platform of standards in March 2004. sassy and revised standards include v saucy IFRSs and 17 amend IASs, numbering from the IASBs Improvements jump out and Phase I of its communicatio n channel Combinations jump out. approximately of the more of import revisions to IFRS that resulted from these projects include * The last in first out method for be inventories is no thirster allowed * The concepts of fundamental shift and extraordinary items are eliminated * Trading securities are straightway include in a larger outlined category of financial instruments at honest set through profit or loss and entities whitethorn designate any financial plus or indebtedness into this category ( roughhewnly referred to as the fair value option) * modal(a) value skirt accounting may now be employ more readily for a portfolio put off of affaire rate lay on the line * Guidelines for share-based payments bring been added The pooling-of- pursuits method for business crews is no endless allowed * thanksgiving is no interminable amortized, and negative state of grace is not put down in a business crew World wide acceptance, National accounting standards are ex ceedingly politicized and there is often a raw(a) tendency to place the cheer groups of the national economy ahead of those of the global economy. Private welkin businesses and employmental accounting bodies to a fault have a vested interest in accounting practices and financial reporting. pressure sensation from these groups to change or reject sure standards can place a component part of weight with semipolitical decision makers. Adopting international financial standards is met with additional challenges in maturation countries. They often lack the resources and infrastructure to set national legal and legislative frameworks in which to house the standards, making proper droping out difficult.Training and Re raising, When a country decides to harmonize with the international standards, its companies, accountants and auditors need to be retrained in the saucy-fangled standards and reporting procedures for financial statements. College and university programs in this orbital cavity in any case have to afford significant changes in order to tutor parvenue state entering the profession. before any of this can happen, trainers and professors will require training so they can instruct professionals and students. This will require the development of raw learning materials and curricula, forward-looking examinations for professional licensing and new accounting software package system and reporting systems. To merely complicate matters, the sufferance of conformable standards has to be phased in, so for a number of years, ii different systems are in operation. much(prenominal) a omplex changeover requires a litter of safety mechanisms to discover it achieves uniform results. To nerve centre up with, harmonisation of financial statement is very pivotal for accounting profession and overly for the global business addition especially for multinational companies which will now find slowly in readiness of parent and marcher fi nancial statement since have to be watchful fit to IFRS. IFRS IS very great to developing countries like Tanzania such as increasing self-assurance of investors, ignore speak to of doing business, facilitate unflustered operation of international groupings like EAC and the countries accountant become matched worldwide. REFERENCES WORD distance 3517 lecture Arbnor, I. Bjerke, B. (1997) methodological compendium for Creating wrinkle Knowledge, sharp frequentations, kilobytes Oaks, second edition. Ghauri, P. Gronhaug, K. (2002) query Methods in channel Studies, prentice Hall, London. Choi, F. icing the puck C. Gary, K. (2002) world(prenominal) invoice, learner Hall, bleak Jersey, quaternate edition. Choi, F. Mueller, G. (1992) planetary history, assimilator Hall, youthful Jersey, second edition. Epstein, B. Mirza, A. (2001) IAS, Interpretation and Application, tail end Wiley Sons, new(a) York. Ghauri P. Gronhaug, K. Kristianslund, I. (1995) resear ch Methods in commerce Studies A applicatory guide, prentice Hall, Bodmin. Gummesson, E. 2000) qualitative Methods in counseling enquiry, keen Publications, Inc, constant of gravitation Oaks, second edition. Helgesson, T. (1996) destination in worldwide communication channel an Introduction, academia Adacta, Lund. Hill, C. (1999) Competing in the planetary Marketplace Irwin McGraw Hill, Boston, tertiary edition. Hofstede, G. (1991) grows and Organizations Software of the Mind, McGraw-Hill ledger Company, stark naked York. Howard, K. Sharp, J. (1983) The circumspection of a school-age child seek Project, Gower publish Company Ltd. , Aldershot. Johansson, L. (2000) Introduktion manger Vetenskapsteorin, AIT Falun AB, Stockholm. Kam, V. (1990) accounting system Theory, trick Willey and Sons, bran-new York, second edition. 70 Kleekamper, H. Kuhlewind, M. Alvarez, M. 2002) Grundlagen, Ziele, Organisation, Entwicklung und Bedeutung des IASB, in Rechnungslegung na ch external be Standards (IAS), edity by Baetge, D. Kleekamper, H. Wollmert, P. Kirsch H. (2002), Schafer-Poeschel, Stuttgart, second edition. Naciri, A. Hoarau C. (2001) A comparative abridgment of american and French financial reporting philosophies the case for international account statement Standards, in Advances in transnational write up, edited by Sale, J Salter, S Sharp, D. (2001), Elsevier Sience Ltd, Oxford. Nobes, C. Parker, R. (2000) Comparative internationalistic score, pecuniary generation scholar Hall, Hartlow. Nobes, C. 1999) Towards a General copy of the Reasons for international Differences in monetary insurance coverage, in internationalist be and Comparative fiscal reportage, edited by Nobes, C. (1998), Edward Elgar make Limited, Cheltenham. Nobes, C Mueller, G Gernon, H Meek, G. (1997) story an International view, Richard D. Irwin, Inc Chicago, fourth edition. Nobes, C. (1994) chronicle Harmonisation in Europe function, fortify and prospects, FT short letter Information Ltd, London. North, D. (1990) Institutions, institutional Change and scotch Performance, Cambridge University Press Cambridge. Miles, M. Huberman, A. (1994) soft Data depth psychology An expanded source book, Sage Publications, Inc, Thousands Oaks, second edition. Mueller, G. 1997) harmonization Efforts in the European Union, in International accounting and Finance Handbook, edited by Choi, F. (1997), Wiley and Sons, New York, 7th edition. Mueller, G. Gernon, H. Meek, G. (1991) bill an International scene Richard D. Irwin, Inc Homewood, 2nd edition. Radebaugh, L. Daniels, J. (2001) International Business, Environment and Operations, apprentice Hall, London, 9th edition. Radebaugh L. Gray S. (1997) International accounting system and multinational enterprises, put-on Wiley and Sons, New York, quaternate edition. Remenyi, D. Williams, B. silver A. Swartz E. (1998) Doing Research in Business and focal point An Introduction t o answer and Method, SAGE Publications, London. 71 Riahi-Belkaoui, A. 2000) explanation Theory, Thomson training Business Press, Padstow, Cornwall, quaternate edition. Roberts, C. Weetman, P. Gordon P. (1998) International monetary bill a comparative approach, Financial time coal miner Publishing, London. Samuels, J. Piper, A. (1985) International explanation A survery, Croom Helm, London. Wolk, H. Tearney, M. Dodd, J. (2001) A Conceptual and intestinal Approach accounting system Theory, South-Western College Publishing, 5th edition. Wollmert, P. Achleitner A. (2002) Konzeption der IAS Rechnungslegung, in Rechnungslegung nach International accounting system Standards (IAS), edited by Baetge, D. Kleekamper, H. Wollmert, P. Kirsch, H. (2002), Schafer-Poeschel, , Stuttgart, 2nd edition.Challenges of harmonisation of write up Systemaccount Standards in other words can be stated as rules which govern the proviso of financial statements. They are the generally a ccepted accounting principles (GAAP). Where by accounting practices are the actual utilize practices by accountants.They are influenced by Accounting Standards, which govern the set of financial reports. harmonisation of accounting standards can be delimit as the persisting process of ensuring that the more often than not Accepted Accounting Principles (GAAP) are formulated, line up and updated to international best practices (GAAPs in other countries) with suitable modifications and fine tuning considering the domestic conditions. Harmonization is the process of increasing compatibility of accounting practices by setting bounds on their degree of variation.Harmonization can be defined as the process of bringing international Accounting Standards into some sort of agreement so that the financial statements from different countries are prepared fit in to a common set of principles of measurement and disclosure (Haskins et al. 199629). According to Wolk et al. describe harmoni zation of Accounting Standards as the co-ordination or similarity among the various sets of national Accounting Standards and methods and formats of financial reporting. (Kleekamper et al. , 2002) Kleekamperet al. xplain, that the aim of the international harmonization process of Accounting Standards is to reduce or overcome differences world-wide, in order to reach a better international Comparability of financial statements. International accounting harmonization can be defined as the process of bringing international Accounting Standards into some sort of agreement so that the financial statements from different countries are prepared according to a common set of principles of measurement and disclosure (Haskins et al. 199629).This harmonization is needed due to the globalization of businesses and go and increase in cross-border investments and borrowings and academicians, regulators and governments have been continuously striving to harmonize the local/domestic Accounting Sta ndards(AS), also referred to as chiefly 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 nerve-racking to harmonize international accounting principles since 1973. Further, the IASB and the International Organization of Securities Commissions (IOSCO) have been jointly functional on harmonization since July 1995, and in whitethorn 2000 the IOSCO finished its check out of the IAS and recommended usage of real IAS, supplemented with reconciliation, disclosure and interpretations. some(prenominal) benefits of harmonization of accounting practices is as follows * It ensures accredited and high quality financial reporting and disclosures. In certain cases, it can prove to be of the essence(p) to the economic and financial development of a country * It enables a systematic recap and evaluat ion of the accomplishment of a multinational union having subsidiaries and associates in various countries wherein each country has its own set of GAAP * It makes the comparison of the functioning of a company against its domestic and international peers easier and more meaning(prenominal) * It is a precursor for accessing international capital markets which can, in turn, reduce the capital address and consequently, improve the murder of a company * Multinational companies, the multinational companies benefit from impending harmonization for the following reasons a) Access to international finance is easier, the international financial markets understand the financial tuition presented to them more substantially. If the culture is provided on a consistent basis between companies disregarding of their country of origin. b) amend management control, in a business operating in several countries management control is improve. internecine financial tuition is more easil y prepared on consistent basis if externally required financial teaching is required on a uniform basis. c) Consolidation of financial statement is easier ) A reduction of auditing follow due to harmonized accounting practices and standards. e) A transfer of accounting staff crossways national borders would be easier f) It would be easier to comply with reporting requirements of afield stock exchanges. g) Appraisals of foreign entities for take over and mergers would be more straightforward. * International economic groupings, international groupings like EU (European Union) could work more effectively if there were international harmonization of accounting policies. Part of the function of international groupings is go make cross-border trade easier. Similar to accounting regulation would help this process. Government of developing countries would save time and money if they would adopt international standards and, if these were used internally, governments of developing countr ies could get down to control the activities of foreign multinational companies in their own country. These companies could not hide lav foreign accounting practices which are difficult to understand. * Tax authorities, it will be easier to guess the tax liability of investors, including multinationals who receive income from afield sources. * Large accounting and auditing firms would benefit as accounting and auditing would be much easier if similar accounting practices existed throughout the world.Despite the importance of harmonizing accounting standards, there still challenges cladding harmonization of accounting standards between the division countries using IFRS (international financial reporting standard) and also between fall in States using US GAAP. These challenges are brought about different tax laws, different culture, different legal requirement, nationalism and different necessarily of financial statements. public speaking of harmonization we should put in con sideration of International accounting standard board (IASB) based in UK and Financial accounting standard board (FASB) based in US. TheInternational Accounting Standards Board(IASB) is the independent,accounting standard-setting body of theIFRS Foundation.The IASB was founded on April 1, 2001 as the substitute to theInternational Accounting Standards Committee(IASC). It is responsible for developingInternational Financial Reporting Standards(the new stool forInternational Accounting Standardsissued after 2001), and promoting the use and application of these standards. TheFinancial Accounting Standards Board(FASB) is a private,not-for-profit organizationwhose primary objective is to develop generally accepted accounting principles(GAAP) within the united Statesin the publics interest. TheSecurities and substitute Commission(SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U. S.It was created in 1973, replenish ment theCommittee on Accounting single-valued function(CAP) and theAccounting Principles Board(APB) of theAmerican make for of Certified Public Accountants(AICPA). The FASBs mission is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial info. To achieve this, FASB has five goals. * Improve the returns of financial reporting by focussingsing on the primary characteristics of relevance and reliability, and on the qualities of comparability and consistency. * come up standards current to chew over changes in methods of doing business and in the economy. understand promptly any significant areas of inadequacy in financial reporting that might be improved through standard setting. * Promoteinternational convergence of accounting standardsconcurrent with improving the quality of financial reporting. * Improve common understanding of the record and purposes of teaching in financial reports. The two boards have been making efforts to harmonize the accounting principles, as of kinsfolk 2011, there was a push to harmonize, or integrate, the accounting standards of the united States, which operates under chiefly Accepted Accounting Principles (GAAP), with International Accounting Standards (IAS).The rationale is that it would train the playing field for global businesses by providing regulators, auditors and decision-makers (investors) uniform education based on the same accounting methodologies. Supporters believe that this would improve accountability, reduce international transactional and exchange rate risks and improve randomness transfer to enhance economic constitution decision-making. The difference between IAS and US GAAP is that the former is more principle based and the later is rule based. The following are Challenges to harmonization of accounting systems. Licensing and Enforcement, Individual accountants, CPAs and tax la wyers worldwide would need to comply with and obtain licensing through an internationally accepted rules-making body. If he international body lacks enforcement authority, there is no prosecutorial authority for happy chance international laws. However, if the international body does have prosecutorial authority over a U. S. citizen, there would arise jurisdictional and constitutional issues regarding the rights of an international bodys rights to prosecute an American under international law. Finally, issues arise from the survey of U. S. -only based businesses regarding strained compliance IASB standards are principles-based. Thus the countries that have rules-based standards are judge to experience hefty difficulty in harmonization of their standards with IFRS. in that respect are challenges that IASB and nations adopting IFRS need to address in the coming days.virtuoso big challenge for countries adopting IFRS is the shortage of manpower and more particularly, IFRS-trained manpower. For case in point, with still six months to go before Chinas listed companies adopt IFRS, demand for accountants is move up and could run into millions in the coming years, if the new standards are rolled out for all of the countrys companies and not dear the listed ones. Accountants say that the challenge for China, as it scrambles to catch the accounting breakage deadline, will lie in getting its over-1,100 listed companies to establish the appropriate financial reporting systems and in training enough qualified accountants by January. The risk is that some of these companies may fail to make the transition on time.Estimates reveal that China has a famine of 300,000 qualified accountants and is promising to require a further third million over the coming years to keep rate with its current rate of economic harvest-time Difference purpose of financial reporting, in some countries the purpose is solely for tax assessment, while others it is for investor decision making, Different legal systems, these prevent the development of certain accounting practices and restrict options available. The Accounting world can be split up into those countries which have a legalistic orientation toward accounting and those with a non legalistic orientation (Nobes et al. , 19978). The non-legalistic approach can be found in countries, which use common law. In Common law countries, Accounting does not depend upon law. Accountants (professional organizations) arrange accounting rules. Hence, it is the private sector, which determines Accounting and not the law (Choi et al. , 2002). The task of the legal system is to give an respond to a specialised case alternatively than to formulate general rules for the future (Choi et al. 2002). The legalistic approach can be found in countries, which use the so called code (or codified) law. In contrary to the common law, the codified law system needs to develop rules in detail for the Accounting and financial report ing (Nobes, 1994). This government agency that Accounting rules are embodied into national law and tend to be highly normative and procedural (Choi et al. , 200243). In these countries the role of law is to describe behavior, which isconsidered to be acceptable in the society (Choi et al. , 2002). Different user groups, countries have different ideas about who the relevant user groups and their respective importance.In USA investor and credit groups are wedded prominence, while in Europe employees sleep together a higher(prenominal) profile. Provider of finance, there three main sources for external capital are shareholders, banks and government (Hill, 1999). It varies from country to country, which of these three provides most of the financial capital to companies. In countries like Germany and Italy banks provide companies with capital. In countries like England and the United States shareholders provide companies with capital. The government is the provider of capital in cou ntries like France and Sweden. (Hill,1999) This form of capital providers means that Accounting Practices differ in order to satisfy needs of capital providers.In the case of shareholder ownership, (e. g. in the U. K. and the U. S. ), information disclosure will be more important than in countries, where capital is embossed from banks or governments. This is explained by the fact that in the latter countries information will be transmitted more directly. (Radebaugh and Gray, 1997) It is impossible for a company to inform each shareholder with its specific information needs, because they are a big and nonunionized group. Therefore financial statements in the US and UK are point toward providing individual investors with the information they need to make decisions about buy or marketing corporate stocks and bonds (Hill, 1999593).Tax laws, the key interview here is to ask, how much taxation regulations determine Accounting measurements. In countries like the U. S. , U. K. and Net herlands there is no interplay between tax and Accounting law. When Accounting Standards are developed, the only focus is how to conduce the information function. Questions about taxation are not considered in those countries (Achleitner, 2000). In contrary, in nations as France and Germany, tax and Accounting Systems are command equal (Nobes and Parker, 2000). There is the principle of determination in Continental European countries. This means that the profit of the equilibrate sheet is at the same time the foundation to focussing income taxes (Achleitner, 2000).In Tanzania income tax act is in dis agreement with some accounting procedures like computation of depreciation, heavy(a) debts and therefore differ on how accountant compute organization profit and therefore in Tanzania should prepare to set of financial statement one for tax purposes and the other for other users of accounting information. Cultural differences result in objectives for accounting systems differing fr om country to country for example Islamic laws does not bang the use of interest rate. The lack of powerful accountancy bodies, many countries do not have punishing independent accountancy or business bodies which would press for better standards and greater harmonization. remarkable circumstances, some countries may be experiencing unusual circumstances which fall all aspects of general life an d impinge on the ability of companies to uprise proper reports, for example hyperinflation, civil war, specie restriction. Nationalism is show in an unwillingness to accept another countrys standard. The Financial Accounting Standards Board (FASB) in the U. S. is responsible for setting accounting standards based primarily on Federal securities laws and state CPA licensing laws. all countries have specific securities laws, tax laws and banking and financial regulations that dictate accounting principles. Furthermore, in the United States, there are individual state laws that govern business, banking and insurance activities. Adopting international accounting standards would not only conflict with U. S. tatute law, but also constitutional law associated with states rights. horse barn Platform, Beginning in 2005, all 7,000 EU publicly traded companies are required to apply IFRS in the preparation of their consolidated financial statements. This represents yet another challenge as preparers of financial statements from Latvia to Portugal and from Poland to Sweden move with unfamiliar requirements. In preparation for this brush change, the IASB completed its unchanging platform of standards in March 2004. New and revised standards include five new IFRSs and 17 revise IASs, resulting from the IASBs Improvements Project and Phase I of its Business Combinations Project. both(prenominal) of the more significant revisions to IFRS that resulted from these projects include * The last in first out method for cost inventories is no yearlong allowed * The concepts of fundamental error and extraordinary items are eliminated * Trading securities are now include in a larger defined category of financial instruments at fair value through profit or loss and entities may designate any financial asset or liability into this category (commonly referred to as the fair value option) * elegant value hedge accounting may now be used more readily for a portfolio hedge of interest rate risk * Guidelines for share-based payments have been added The pooling-of-interests method for business combinations is no longer allowed * grace of God is no longer amortized, and negative good will is not put down in a business combination World wide acceptance, National accounting standards are highly politicized and there is often a inbred tendency to place the interests of the national economy ahead of those of the global economy. Private sector businesses and professional accounting bodies also have a vested interest in accounting practices and financial reporting. cart from these groups to change or reject certain standards can carry a solidification of weight with political decision makers. Adopting international financial standards is met with additional challenges in developing countries. They often lack the resources and infrastructure to adapt national legal and legislative frameworks in which to house the standards, making proper writ of execution difficult.Training and Retraining, When a country decides to harmonize with the international standards, its companies, accountants and auditors need to be retrained in the new standards and reporting procedures for financial statements. College and university programs in this field also have to bear with significant changes in order to enlighten new mass entering the profession. forwards any of this can happen, trainers and professors will require training so they can instruct professionals and students. This will require the development of new learning materials and curricula, new ex aminations for professional licensing and new accounting software and reporting systems. To further complicate matters, the credence of harmonized standards has to be phased in, so for a number of years, two different systems are in operation. such(prenominal) a omplex transition requires a lot of safety mechanisms to ensure it achieves uniform results. To sum up with, Harmonization of financial statement is very of import for accounting profession and also for the global business growth especially for multinational companies which will now find easily in preparation of parent and subsidiary company financial statement since have to be prepared according to IFRS. IFRS IS very important to developing countries like Tanzania such as increasing trustingness of investors, reduce cost of doing business, facilitate still operation of international groupings like EAC and the countries accountant become rivalrous worldwide. REFERENCES WORD length 3517 words Arbnor, I. Bjerke, B. (199 7) methodology for Creating Business Knowledge, Sage Publications, Thousands Oaks, 2nd edition. Ghauri, P. Gronhaug, K. (2002) Research Methods in Business Studies, Prentice Hall, London. Choi, F. hoarfrost C. Gary, K. (2002) International Accounting, Prentice Hall, New Jersey, 4th edition. Choi, F. Mueller, G. 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