Harmonisation of accounting standards.

Harmonisation of accounting standards

International accounting harmonisation 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".

Harmonisation means that deviating rules, which do not exclude themselves, can continue to

exist next to each other. That means harmonisation does not focus on the elimination of

differences but on the reduction of contradicting rules. the aim of the international harmonisation process of Accounting Standards is to reduce or overcome differences world-wide, in order to reach a better international

comparability of financial statements. Harmonisation has been broken down into two aspects: material and formal harmonisation

* material harmonisation

Material harmonisation refers to research from a practical point of view. That means that

the harmonisation of Accounting Practice applied by different enterprises, is regarded. It

is about the consistency in actual application.

* formal harmonisation

Harmonisation in terms of formal harmonisation is researched from a theoretical point of

view, which means that the similarities and diversities between rules and regulations of

different countries, clusters or groups are regarded

Advantages and disadvantages of the IAS

Companies prepare financial statements. Therefore the following advantages can be seen from

the standpoint of preparers of financial reports

Internally multinational companies would make savings if all their subsidiaries could use the

same Accounting System. A similar internal reporting system gives the chance of better

comparisons, less confusion and mistakes between the parts of the company. It allows

uncomplicated communication and transfers of finance personnel. One set of Accounting

Standards could be used in various jurisdictions and capital markets. Further