Vol. 4, No. 1
International Journal of Business and Management
China Accounting Standards System, that are basically in line with IASB (International Accounting Standards Board)norms. But, there is far more at stake than improving accounting practices at China’s listed firms. Chinese companiesare increasingly looking overseas for funds and acquisitions. Adopting international standards will make this easier byincreasing their transparency and credibility.From above deliberations, it can be believed at this moment that, the IOSCO’s endorsement of the IASC standards has paved the way for unification of accounting standards globally and emergence of the true artificial language designedfor global use in the field of accounting (Srkant, 2005). Today the world of accounting feels that InternationalAccounting Standards should be that language, as it is the only set of standards that has been prepared through wideinternational consultations and participations. 7. What will happen if USA does not adopt IAS?
Now it is realized that, barring very few, almost all countries of the world are interested to follow IAS as their accounting standards. USA is the only main country reluctant to adopt it. Now question arises what will happen if super-power of the world and a highly developed economy like USA does not adopt IAS?Executive search firm, Russell Reynolds’ survey of chairmen across 145 European companies has found: (a) over half the chairmen of companies with US listings said they would consider de-listing because of Sarbanes-Oxley, in spite of the difficulties in taking shares off the US exchanges; (b) 70% of those heading companies not yet listed in the US saidSarbanes-Oxley would dissuade them from seeking a US listing.With the relatively tighter regulation in the US, several large companies are understood to be evaluating other capitalmarkets that accept IFRS (Memani, 2006). While such situations provide an opportunity for IFRS to flourish, it wouldstill be inappropriate to stay limited to that perspective. This is because IFRS stands a fair chance on its own, with itsacceptance by EU, and also given the fact that many countries have traditionally followed IFRS or IFRS-inspirednational accounting standards. 8. Issues and challenges in adopting global accounting standards In spite of all, achieving global convergence in accounting standards is not an easy task. There are a number of issues toovercome.First of all, there seems to be a reluctance to adopt the International Accounting Standards Committee (IASC) norms inthe US. This is definitely a problem. The US is the largest market and it is important for IASC standards to beharmonized with those prevailing there. The US lobby is strong, and they have formed the G4 nations, with the UK,Canada, and Australia (with New Zealand) as the other members. IASC merely enjoys observer status in the meetingsof the G4, and cannot vote. Even when the standards are only slightly different, the US accounting body treats them as a big difference, the idea being to show that their standards are the best. However, except US all other members of G4 hasadopted the IAS more or less to some extent.Second, accounting standards have been developed in different countries under different legal, economic, social andcultural environments. For this reason there exists such diversity in accounting standards among the countries throughthe globe. If convergence is to be achieved, it is first necessary to arrive at an agreement as to the central objective of financial reporting. The IASB standards are oriented to serve the needs of investors and capital markets. Countries thathave a different financial reporting philosophy would find it extremely difficult to converge their domestic standardswith International Financial Reporting Standards.Third, the quality of financial reporting depends on the quality of accounting standards as well as the effectiveness of the process by which those standards are...