International Business

International Accounting

Introduction

International accounting is moving towards one global accounting standard, IASB and FASB are working together to create accounting standards which are likely to become the most preferable accounting standard. IASB and the European Union have so far made it compulsory by 2005 for listed company in European to follow the new standards. (Economist 20th December 2003).

There are certainly many advantages by introducing one global accounting standard, but it has undoubtedly met fierce resistance towards the new approach. The process of introducing one global accounting standard is definitely not easy, as it involves many countries, governments, investors, companies, and so on, but it however furthermore involves the countries social development and their culture, which can provide vast transformation.

FASB and IASB have in 2006 published the first part of the proposal for their new joint conceptual framework, a significant step towards using only when set of international accounting standards.

The once talking the most warmly of harmonisation of the international accounting standards are investors, as they today have to use many resources recalculation and reformations of the reporting from the international companies.

The big question concerning one global accounting standard, is if that one can fit "all"?

"All" relating to:

 All companies (MNE, Small, Medium, Large, Listed, Unlisted, Profit-making-Charities, and so on.)

 Investors (Internationally, nationally, ethically, and so on.)

 Governments

 Banks

 Financial Institutions

 Etc.

To examine the question if one size can fit all when it comes to global accounting standards, as this is not an easy or simple question will it requires to look into several aspects concerning:

Key players

Types of companies/players

Accounting models

Other issues

Conclusion

This structure will provide an attempt to predict the future, in which everyone only can conjectures.

Key players

Key players in international accounting standards is primarily the prepares, who regulates and issues the international accounting standards, users which in practise apply the international standards to either their company or knowledge, regulators make the international accounting standards a reality.

Users

Multinational companies

The users for international standards are many; first and foremost are the listed and multinational companies the ones who use the standards to present useful information. They use the standards for making financial reports there can attract investors and thereby liquidity for merger and acquisitions. Today there is just that problem that it can be difficult for investors to compare companies in different countries with diversity in how the financial reports are made.

For multinational companies the availability of one set of global accounting standards reduces the costs compared with dual reporting. The dual reporting involves additional costs to preparation and may confuse readers who cannot understand why accounting number differs when the operations of the business are unchanged. (Roberts, C, Wetman, P, and Gordon, P 2005).

Investors

Investors who today invest internationally have great benefits of global accounting standards as it provides the investor with assurance about the comparability and the high standard of the accounting information provided. Besides the comparability are there several benefits for the international investor: (Roberts, C, Wetman, P, and Gordon, P 2005).

 Reduces the likelihood of making poor decision by reducing the risk of misunderstanding different accounting systems.

 Reduces the risk of missing investment opportunities through avoiding unfamiliar national accounting.

 Allows investors to focus on global comparability of activity across industries rather than being confined to investments within particular countries.

National governments

International accounting standards differ from country to country, but one global accounting standard could make it easier for national governments, because accounting information gives a basis for taxation and for ensuring that companies operating in their country show sufficient care for the resources used in that country. (Roberts, C, Wetman, P, and Gordon, P 2005).

Some national governments set accounting rules in legislation, to assure that company taxation is remunerated correctly. Some governments allow independent standard- setting bodies to set national standards, because of several matters in which they do not believe that the international standard setting can fulfil their demand and needs. Culture and the historical background is often the reason why a country decides to use independent standard-setting.

Regulators

There are today two mayor players in regulating and issuing international accounting standards:

IASB - The International Accounting Standards Board

o Founded in 1973 by 10 accounting professions.

o In 1989 a conceptual framework for making and issuing standards where made.

o In 2001 the structure were changed after the FASB technique.

o Today the board consists of 14 members of the board chosen by the trustee which consists of 19 members from all over the world.

FASB - The US Financial Accounting Standards Board

o Founded in 1973, where it overtook APB (Accounting Principles Board).

o FASB developed in the period 1978-1985 a Conceptual Framework

o FASB