Harmonization
Argument Against Harmonization
As stated in the book, International Accounting: A User Perspective, harmonization is defined as “the process by which differences in financial reporting practices among countries are reduced with a goal of making financial statements more comparable and decision-useful across countries.” Harmonization would require that all countries comply with an international set of standards. There has been a large debate over the need for harmonization ever since the 1960’s and still continues to this present day. Many organizations have emphasized this need bringing about several attempts at constructing an international set of standards. All of these were unsuccessful! One reason why there is such a controversy over this matter is because even though efficiency is the goal, harmonization is not practical. While harmonization will benefit many large global corporations, it will in turn actually do more harm than good to the small businesses. For example, in developing countries where there is little to no emphasis on the accounting profession, harmonization will be costly. Accountants will be obligated to pursue a higher education to fulfill the requirements that will follow the standardization of accounting. This will be costly to the individuals who must pay for the schooling and also to the companies who will be compelled to pay them higher salaries. Another consequence for small establishments who only require simple accounting is the intricacy that would be involved in international standards. Harmonization also takes away a sense of nationalism for some people. The main goal of using an international set of standards is so that investors who wish to invest in companies in other countries can do so without spending as much time and research into translating another country’s accounting standards. These investors could be placing their money into stocks in companies in their own country and helping to stimulate their own economy.
As stated in the book, International Accounting: A User Perspective, harmonization is defined as “the process by which differences in financial reporting practices among countries are reduced with a goal of making financial statements more comparable and decision-useful across countries.” Harmonization would require that all countries comply with an international set of standards. There has been a large debate over the need for harmonization ever since the 1960’s and still continues to this present day. Many organizations have emphasized this need bringing about several attempts at constructing an international set of standards. All of these were unsuccessful! One reason why there is such a controversy over this matter is because even though efficiency is the goal, harmonization is not practical. While harmonization will benefit many large global corporations, it will in turn actually do more harm than good to the small businesses. For example, in developing countries where there is little to no emphasis on the accounting profession, harmonization will be costly. Accountants will be obligated to pursue a higher education to fulfill the requirements that will follow the standardization of accounting. This will be costly to the individuals who must pay for the schooling and also to the companies who will be compelled to pay them higher salaries. Another consequence for small establishments who only require simple accounting is the intricacy that would be involved in international standards. Harmonization also takes away a sense of nationalism for some people. The main goal of using an international set of standards is so that investors who wish to invest in companies in other countries can do so without spending as much time and research into translating another country’s accounting standards. These investors could be placing their money into stocks in companies in their own country and helping to stimulate their own economy.