International Business Research
Harmonization of Accounting Standards through Internationalization Nikhil Chandra Shil, ACMA (Corresponding Author) Department of Business Administration East West University 43, Mohakhali C/A, Dhaka – 1212, Bangladesh Tel: 9887989(Off.) ext 253, 01819289589 (M) Dr. Bhagaban Das P.G. Department of Business Management, Fakir Mohan University P. O.: Balasore, Pin.: 756019, Orissa, India E-mail: email@example.com Alok Kumar Pramanik Department of Commerce, Bhatter College P. O.: Dantan, Pin. : 721426, Paschim Medinipur, West Bengal, India E-mail: firstname.lastname@example.org Abstract The journey to have a common set of accounting standards started long before to give it a professional shape and essence. And accountants all over the world feel the necessity to shorten the gap among different streams of accounting practices through harmonization. Still, we have a couple of strong variants of accounting practices (say, for example, US GAAP, UK GAAP, IAS etc.) over the world existed and practiced simultaneously. These variants are working as threats towards harmonization of accounting practices. However, the profession has also witnessed some improvements in recent years in the process of global convergence putting some ray of hope. International and even local standard setting bodies have come up with projects of harmonization and in most of the cases became successful. The day is not far away when we will observe that accounting world is controlled and guided by a single set of standards giving it a status of legal discipline in true sense. The paper focuses on this harmonization issue, its current status, challenges with special reference to Indian perspective. Keywords: Harmonization of Accounting Standards, International Accounting Standards, International Financial Reporting Standards, Generally Accepted Accounting Principles, Securities and Exchange Commission, International Accounting Standards Committee, Convergence of accounting standards. 1. Introduction Harmonization of accounting standards has become a highly demanded issue of discussion and debate among accounting professionals around the globe. Accounting Standards are the authoritative statements of best accounting practices issued by recognized expert accountancy bodies relating to various aspects of measurements, treatments and disclosures of accounting transactions and events, as related to the codification of Generally Accepted Accounting Principles (GAAP). These are stated to be the norms of accounting policies and practices by way of codes or guidelines to direct as to how the items, which make up the financial statements, should be dealt with in accounts and presented in the annual accounts. In fact, such statements are designed and prescribed to improve and benchmark the quality of financial reporting. They bring about uniformity in financial reporting and ensure consistency and comparability in the data published by enterprises. These are aimed at furnishing useful information to different users of the financial statements, such as shareholders, creditors, lenders, management, investors, suppliers, competitors, researchers, regulatory bodies and society at large. The process of harmonization gives the global community a single entity. The diversity of stockholding doesn’t matter today if the accounting system can generate general purpose financial statements in real sense. Thus, along with the process of globalization, the awareness of investors in capital markets has increased manifold and the size of investors 194
International Business Research
is multiplying. Foreign institution investors (FIIs) are investing in significant volume globally, as also are several Indian companies through GDRs (Global Depository Receipts) and ADRs (American Depository Receipts). Hence, the need for harmonization of accounting standards has been strongly advocated globally in...