Accounting Standards from Capitalist Countries: US and the UK

Accounting Standards from Capitalist Countries: US and the UK

Common accounting standards eliminate the efferent interpretations that are caused by disparities between accounting

The project of harmonistic of standards in different jurisdictions. Accounting standards faces the following barriers:

  • International issues
  • Tax and legal systems
  • Stage Of development

Of accounting profession and economic development International Issues Harmonistic is difficult because the world’s countries offer different social, political, and economic environments.

Accounting standards from capitalist countries such as the US and the UK are more principle-based, and those room socialist and communist countries are rules-based and this makes the job of harmonistic accounting standards more difficult. The difficulty also emanates from the fact that many countries view their accounting standards as superior to accounting standards from other countries; therefore, they find it difficult to accept standards designed and developed by other countries or by a group of people from very few countries who may not share the same values as they do.

Issues such as language and cultural barriers play an important role in undermining the harmonistic project. In the US, for example, they use terms such as inventory, accounts receivable, and accounts payable when describing what other jurisdictions term stock, debtors, and creditors. Tax and Legal Systems Accounting is developed in response to the tax and legal systems in each jurisdiction.

Financial reporting in some countries is dictated by the vagaries of the law; for example in some jurisdictions the accounts are prepared so that they meet certain tax rules; therefore, when accountants are preparing financial reports they will be following a certain rule book. Accounting also developed as a consequence of the company laws in each jurisdiction. This means if the accounts are to pass the legal test they have to meet the minimum requirements set out in the law of each country.

Harmonistic can therefore be fully achieved if company laws and other relevant country specific regulations are also harmonicas. Stages of Development Of the Accounting Profession and Of Economic Development The accounting profession and economic development in each jurisdiction are not at the same stage or level. Some countries’ accounting professions re more mature than others and some countries are more prosperous and advanced economically than others. Harmonistic would mean coming up with common accounting standards that are applicable and relevant to all countries.

Accounting is more mature in the advanced or the developed countries such as the UK, France, and the US than it is in developing countries such as Jamaica, Zambia, or Fiji. Some of the economic events covered by certain accounting standards such as AS 39 or AS 32 apply mainly to countries with mature financial services industries. The migration to moon accounting standards is costly for developing countries as they have to re-educate their accountants and re-align current accounting systems, and they may not have the resources to cope with the change.

Cultural Differences One of the criticisms of harmonize accounting standards is that the SAAB has failed to fully take into account the cultural, political and social differences between countries. This is particularly relevant to their implementation in developing countries, where language barriers, attitudes toward accounting and other socio-cultural aspects may affect their interpretation and application. For example, when the harmonize standards were implemented in Jordan, they were first translated into Arabic.

Even though technical accounting terms have been well-defined in Arabic, challenges arose when the English terminology was hard to interpret or used inconsistently and, therefore, difficult to translate accurately. Worldwide Acceptance National accounting standards are highly politicized and there is often a natural tendency to place the interests of the national economy ahead of those of the global economy. Private sector businesses and professional counting bodies also have a vested interest in accounting practices and financial reporting.

Pressure from these groups to change or reject certain standards can carry a lot 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 implementation difficult. International Enforcement The success of harmonize financial reporting depends on individual overspent enforcing adherence to the international standards once they have been implemented.

In 2008, the French authorities allowed the bank Society General to transfer some of its losses from 2008 to 2007, meaning its financial statement for 2008 looked much better than the reality. This provoked an international Outcry, not the least from the SAAB. When exceptions are made, it undermines the integrity of the whole system and renders it ineffective. 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 tankards and reporting procedures for financial statements.

College and university programs in this field also have to undergo significant changes in order to educate new people 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 new learning materials and curricula, new examinations for professional licensing and new accounting software and reporting systems. To further complicate matters, the adoption of harmonize standards has to be phased in, so for a number f years, two different systems are in operation.

Such a complex transition requires a lot of safety mechanisms to ensure it achieves uniform results. International Sovereignty Issues In a working paper regarding accounting standards integration from Arcadia University by Jennifer Carr, the Financial Accounting Standards Board (FAST) 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. Statute law, but also constitutional law associated with “states’ rights. ” Reduce the policy space of the government Harmonistic will reduce the flexibility of the government to use the patent as a tool to devise economic and industrial policies. Developing countries are used to design their patent system according to their level of industrial development.

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