DISCUSSION OF THE DEVELOPMENT OF INTERNATIONAL ACCOUNTING STANDARD | IMPLICATIONS OF CONVERGENCE
International accounting standard has over the years been made an object in the hands of politicians and wealthy businessmen / women. There have been so many cycles of business failure that can one way or the other be traced to failure of accounting standards at the international level.
The quest for international accounting standards became pronounced in the wake of business globalisation and the world becoming a global village. Barriers that have hitherto been created by country border were forever removed by great advancement in information technology and other major technological / scientific breakthroughs of our time. Companies in the quest to gain access to global cheaper funds seek to establish presence at the global financial market- which entails meeting the accounting requirements of many nations of the world.
Companies will find themselves in deep mess if they try to meet the accounting requirements of all the countries that form the international capital market. In order to create a soft landing spot for companies that are aspiring to gain the status of multinationals, calls were made for international accounting standards and subsequent convergence of accounting standards.
The issue of setting an appropriate accounting standard for a single economy has up to the time of this writing not been settled. Watts and Zimmerman seminal work on positive approach to setting of accounting standards partially solved the problem of country specific accounting standards. This didn’t make much impact as the call for a single set of international accounting standard continues to get lauder.
The major obstacles that the movement towards setting a single high quality international accounting standard includes:
FACTORS AFFECTING INTERNATIONAL ACCOUNTING STANDARD SETTING AND CONVERGENCE
CULTURAL DIFFERENCES
Cultural difference is one of the major problems facing human race. It is not just only in accounting standard setting process that cultural differences pose problem. People from certain parts of the world prefer to maintain a level of secret in their dealings while some can tolerate a higher level of openness in business dealings. Enforcing an accounting standard that will act contrary to this culture might be seen as an attempt to disrespect the cultural values of the people.
POLITICAL DISTURBANCES
The activities of the politicians will always be channelled towards bending regulations, laws and standards to favour them. In fact, politicians of all ages used accounting profession in ways and manner that suites them just like the porter uses the clay in his or her hand. They lobby so as to make the accounting standard fit into their general plan- which in most cases does not benefit the general masses. Some scholars and researchers also accused businesses of taking similar stance.
VARYING LEVEL TECHNOLOGICAL DEVELOPMENTS IN DIFFERENT COUNTRIES
It will be a herculean task trying to integrate a system that is underdeveloped with an advanced system. Actors in a less developed accounting system may want to resist change that will make them leave their comfort zone. The issue of cost that will be incurred in order to upgrade the infrastructure and human capital is another matter all together.
DIFFERENCES IN LEGAL AND TAX SYSTEMS
The existence of differences in both legal and tax system is yet another huddle that must be crossed if any success will be made in establishing a single accounting standard setting body that will live up to its expectation.
DIFFERENCE BETWEEN CONVERGENCE OF ACCOUNTING STANDARDS AND CREATION OF SINGLE SET OF INTERNATIONAL ACCOUNTING STANDARDS
So many people assume that convergence of accounting standards and creation of a single set of accounting standard are the same. Well, if you are among those dwelling in this kind of thinking, carefully note the not too obvious distinction made in the next paragraph.
While convernece of accounting standards is all about the bringing together of various accounting standards to a common meeting point, the creation of a single set of accounting standard is about replacing accounting standards of different nations with just one set by a global accounting standard setter.
IMPLICATIONS OF CONVERGENCE OF ACCOUNTING STANDARDS
Manipulations and more political chaos will characterise any attempt to create a single set of accounting as there will be no room enough to accommodate the various interests that will be begging for attention. The best that can be achieved is to seek a neutral point where all parties involved would be willing to setting at. The issue is finding that point where all parties will feel adequately represented.
CONCLUSION AND RECOMMENDATION
The development of international accounting standards is a chequered one in the sense that there has never been a time where there is a form of consensus agreement in matters relating to accounting standards especially at the international level. The debate on how to set a high quality single set of accounting which is the main objective of IASB will continue if the problem is not tackled from the grassroots.
It is glaring from the various obstacles encountered by accounting standard setters that strong opposing views are not yet ready to come to a compromise. So, it will be right if educators take it upon themselves to teach the younger generations how to let go of certain holds so as to achieve better result. Selfishness and personal interest should not be the basis of politicking. That way, all the efforts put into