Single Set of Accounting Standards

Discuss about the Issues In Contemporary Accounting for Organization Studies.
 

The research is about the issues in the contemporary accounting of the Single set of accounting standards in the worldwide. An effort is underway to change the trend in which the financial and management information is received globally. For this reason, there is need to shift the method of the process and form a uniform system call the single standard methods which are recognized globally. The process is facilitated by the Standard setter, e.g., IASB; in providing the policy and the international convergence and harmonizations. The report will deeply investigate the information on the single set standards including the challenges that may be faced out of this new system (Hodgdon, Tondkar, Adhikari and Harless 2009). The report also investigates the roles of the IASB in the implementation of the system to the worldwide set. The idea of the whole set is being spearheaded by the London based agency called the International Accounting Standards Board (IASB). The proposed system should be one with comparability and the uniformity in its function. The paper will critically look at the aspect of the system ranging from the literature point of view to the challenges that will be incurred in its implementation. The literature will be the source of information for the report. The single set standards is aiming at working with other already set standards to form a uniform standard which provides the high-quality standard that is globally accepted. The joint system is perfect for joint business but sometimes not accepted by a number of the member states.  

A single set of accounting standards is considered as one of the approaches to the problems associated with the accounting globally. For this reason, the IASB is in the front line for its formation and functionality (Botzem 2012). Different accounting failures have been witnessed globally. The United States of America and the United Kingdom were the first victims of the financial challenges. Later in the year 2002, the corporate scandals on the accounting around the world have been strengthening the call for the formation of a single set of the accounting standards which will be used globally. It is believed that by an adopting the system, receiving the information on financial issues will be easy (Leuz 2010). The standards will also provide for the uniformity, and the quality of the service will as well be improved. There is some arguments concerning the establishment of the single set of accounting standards. The arguments are critically examined as stated below.

Roles of the International Accounting Standards Board

Through the formation of the Single set of accounting standards, the investors will be able to access the financial transaction from all the headquarters from whichever the location they will be. In addition to this, the investors can understand and have a comparison of the different company’s financial statements. This may be achieved from the respective headquarters irrespective of the private placement of the investor (Chen, Tang, Jiang and Lin 2010). The investors can expand on their profiles because they will be able to have a more significant fraction of the foreign securities. It is also argued that through the Single set of accounting standards, the countries can form a cross-border alliance among themselves. The two known standard setters that are the Financial Accounting Standards and the International Accountancy Standard Board is believed to have announced their intention of having a single standard by 2005. They agreed upon the formation of the single standard; they will not be able to coexist. But the body will be internally recognized and its functionality (Judge, Li and Pinsker 2010). It is still not clear whether the standard setters will be able to operate jointly. But through the set international standards and policies, the joint body is argued to be beneficial to the member states.

By coming with a common standard, the investors will be able to enjoy quality service. This is because of the competition that will exist between the joint and the already existing standards. Some scholars argued that through the formation of a joint standard it is like proving both the difficulties and impossibilities (Rezaee, Smith and Szendi 2010). That is, the system may allow for the exchange of among the countries with minimum procedures and the import duties that may arise. In the normal condition, the standard setters possess the stronger market based on the incentives to respond to the pressure. The pressure may be caused by the need of achieving the uniformity by the concern standard setters. Under the normal condition, it would not be possible for the two standards to offers uniformity in the service delivery. But due to the pressure from the investors, the standard setters will be able to give the financial information in the way; and the financial comparison is also possible out of this (Holthausen 2009).

The single set of accounting standards is very beneficial mostly to the investors than the existing standard setters. Through the formation of the joint body, there is a possibility of the comparability. The investors can compare the financial statement of different countries from one country. Before the formation, the investor was able to harmonize the two standards to make the comparison (Li 2010). By evaluating the creditworthiness of the two companies, the difference in the accounting standards will make the companies have different economic status even if they are similar in the financial statement. By using the single set of accounting standards, the global accounting would have the comparison of the companies. This will make the small business owners in the evaluation of the international options in both the investment and the financial management (Burnett and Murphy 2014). If there is a comparison of the country’s financial statements, the business owners would be able to complete more of their rights within the region.

Arguments for and Against a Single Set of Accounting Standards

A new set of the standards allow for the international expansion. It eases the barriers related to the expansion of companies. For example, if a company is expanding internationally, they have to consider the global cost and the compliance (O’neil 2015). That is adopting the complete requirements of the accounting records that meet the new standards. The new joint system is not popular with the individual accounting standards because of lack of independence. Migrating from one system to another is sometimes characterized by rejections from the former directors of the already dissolved companies (Botzem and Dobusch 2012).

A single set of accounting standards is the general way of coming up with the rules that govern the financial statement. The set principles are always regarded as the General Accounting Acceptance Principles (GAAP). Accounting standards are a code of conduct that is set by the regulatory setters to govern the financial statements globally. They are sometimes agreed up by the accountants from the individual nations (De Simone 2016). A single set of accounting standards have been considered very useful to the international standards. However, there are some challenges experienced to its full implementation. The system has been considered very useful for the harmonization of the international financial standards. Despite that, there are some challenges facing it (Zeff 2010). The challenges faced have been brought between the member countries by use of International Financial Reporting Standards (IFRP) and the United States GAAP. The problems have been caused due to some factors such as: different in tax laws from individual countries, legal requirements, diversity of the culture and the difference in financial conditions. Some of these factors have contributed a lot to the adoption of the system. When talking about the single set standards, we must consider both the International Accounting Standard Board and the Financial Accounting Board based in the United States because they are considered the standard setters for the accounting standards (Malsch 2013).

One of the significant challenges is the lack of workforce. A single set of accounting standards is faced with the problem of manpower during the shifting process. Training of new personnel to adapt the new international accounting standards is sometimes expensive and time costs. Most countries would rather maintain their previous accounting rules than enter into a new system which may be considered costly (Iatridis 2010). The new system requires some personnel in almost all the departments to meet the international standards. Some of the challenges include the following: 

Challenges of Implementing a Single Set of Accounting Standards

The legal requirements on international accounting may differ from one country to another. For example in India, the legal requirements vary with the IFRS. In India, both the companies Act of 1956 and the Bank regulatory Act of 1949 and other regulations gave the detailed prescription of the guidelines to be followed. This would cause much difference with the requirement of the IFRS in India (Shortridge and Smith 2009). And this becomes a challenge in the implementation of the single set of accounting requirements.

Some of the countries have resisted in the changing from their accounting systems to International Accounting systems (IAS). This is due to the complexity. Examples of these countries include England, Canada, United States and Japan. The same integration challenges make it difficult to change from the GAAP to the IAS. The changing to IAS means that the countries must also change their internal taxation law (Arner and Taylor 2009). This is not easy for them at the first stage of the joint accounting system. During the Internal Revenue Service Tax codes, the companies are to use the Modified Accelerated Cost Recovery system for the depreciating assets rather than the straight depreciating method that is used in GAAP.

Small business is experiencing the tight competition from large multinational companies. During the payment, the small companies pay a lot of compliance regulators. The small-scale companies believe that by entering into the joint Accounting System, they will be paying additional tax from what they have been paying (Shortridge and Smith 2009). The problem is mostly faced by most of the small-scale business in the United States of America. These additional costs harm the companies and interfere with the growth and expansion of the small companies. Challenges integration to the accounting standards will make the small companies incur additional costs during the tax compliance. 

All the countries enjoy their sovereignty. They have the specific security laws, Banking laws and the financial accounting which govern the principles. Most of the countries do not wish to abandon their standards because of the new standards (Iatridis 2010). Therefore adopting the international standard laws would bring the conflict to the rights of the other states. This become one of the challenges that face the full implementation of the Single Set of Accounting Standards. Lastly, the licensing and enforcement is also a significant challenge that affects the application (Malsch 2013).

The institutional theory is critical tools in the organizations. It provides the complex views of the organizations. The theories operate under the normative pressures which may arise from the States or the companies themselves. These pressures may lead the company to be guided by the professional standards which may lead it to the performance of the task (Zeff 2010). The theory is very important because it provides alternative ways to the acceptance of the new system in an organization or companies. Some of them develop from external pressures to the full adoption of the rules. The International Accounting Standard Board’s goal is justified for the formation of the Single Set of Accounting Standards. With the help of the institutional theories, the following supports the justification (De Simone 2016). Due to the increase in the foreign companies, the policy setters have decided to harmonize all the financial and accounting related issues. This will help the cross-border relationship among the investors. Through the common accounting standards, the corporations and borrowers can think beyond their home country for the access to capital. 

Differences in Legal Requirements and Cultures of Different Countries

Another goal for the International Accounting Standard Board (IASB) was to have a common financial reporting framework. To achieve this , the standard setters must design and harmonize policies on the Accounting Standards which will be internationally accepted by the investors (Botzem and Dobusch 2012). The common Accounting standards may force the individual States and countries to change their financial policies to adopt the new international standard. The transition may later become law in the member states.

The proposed goal by the IASB was to come up with the international Accounting Standards which are easy to interpret and applied by the member states. The individual nations were to comply with the laws and standards which is understandable and easy to interpret (O’neil 2015). These may include the high-quality Auditing and Accounting Standards that are accepted globally. The effective Auditing firms with the worldwide outlook, qualified personnel to offer training and finally the active oversight regulatory systems. The formation of the joint accounting standards has enabled for the international expansion. The individual countries can enjoy the incentives associated with the international issues (Burnett and Murphy 2014). 

The policies that are established by the Standard setters sometimes differ from country to country. The individual train Accountants should always train the respective nations to have a common and acceptable Accounting Codes.

The Single set Accounting Standards improved the quality of service on the accounting. It enhances completion. The completion existed between the newly formed joint Standards and the other existing standards. The formation was to enable the Standard setters to come up with fully trained personnel that will be able to prepare the individual staff from individual nations (Li 2010).

The idea for the formation of the joint Accounting standard body was to have a central authority Body. In a policy-making, having a single set of worldwide accounting standards was to have the rules under one agency. For example in the current states, accounting standards are still under different nations with the different standards (Holthausen 2009). One set of measure is considered the best because it will reduce the challenge of disagreement among the countries on accounting matters. Apart from lowering the controversy, it was also intended to harmonize the international standards of accounting which may end up cutting cost. Like in some countries the businessmen are required to pay some fees that are used in funding those Standard setting bodies. But this become expensive than having one standard body (Rezaee, Smith and Szendi 2010). This cost sometimes doesn’t affect large companies; the small business suffers a lot. Sometimes operating accounting under one body is essential to the small business. This because the funding of the harmonized body will be done by the member countries on their behalves (Judge, Li and Pinsker 2010). The single set of accounting standards is very essential globally. Its existence is key to the unity and harmonization of the member states regarding international trade. The accessibility of the different countries financial statements is also simple. Finally, the main intention was to reduce and ease  the barriers during the cross-border.

Conclusion

Conclusion /Summary

The migration from the old systems to the Single Set of Accounting Standard has facilitated the international relations among the countries. From the above report, solutions to the challenges of the joint accounting Standards should be identified to allow the smooth implementation of the system. International Accounting Standard Board has played a lot in enhancing the international standards in accounting. The joint Accounting Standards is accepted by most of the member nations, but this is affected by some international relation issues such as license and regulations, international Sovereignty, negative effects from small businesses among others. By use of the Institutional theories, the IASB has some goals that justify the feasibility of the formation of a Single set of Accounting Standards. Finally, with the full implementation of this new system, the international fraud on accountancy will come to an end. This is because of the good Standards and policies that have been set. The small business investors should also be protected from the problems associated with the new set.   

References 

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