Article Analysis, European Accounting

"How U.S. and European Accounting Practices Differ" appeared in 1986 and identifies differences among four European nations and the United States with regard to accounting standards and practices. Based on these differences, the authors call for more rapid adoption of international accounting standards. The article is well-written and thoughtfully presented, and the arguments for an international standard take into account both the benefits of such a standard and the difficulty in achieving it. However, the article's age makes some of the information outdated, and the lack of information on Japan, China or the Soviet Union limits its use as a survey of accounting practices.

In the United States, accounting practices are governed by the Federal Accounting Standards Board (FASB), and professional accounts are certified by the Certified Public Accountant (CPA) exam. Although the article was written in 1986, it has relevance today, perhaps even more relevance than when it was written. In the intervening years, multinational corporations and companies which are doing business in the international arena have increased. In addition, the revolution in communications and computer technologies since the mid-1980s has increased the demand for international capital investment, and trading in international stocks has increased during this time as well. Because of this heightened interest in investment opportunities on the international level, co

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ng professionals, one would understand a call for international standardization since it would be the professional accountants who are in a position to bring about changes in accounting practices. However, since the audience is apparently nonaccounting oriented, the call for standardization is intended to bring pressure to bear on the Securities and Exchange Commission (SEC) and other government agencies in order to force a change to accounting practices from outside, rather than inside, the accounting profession. Such a move is likely to encounter much stronger resistance than if the idea came from within the accounting profession (Rich, 1995, p. 51). Strengths and Weaknesses The strengths of this article are its organization, its presentation and language, and its recommendation. The organization of the article is such that the reader comes to expect the authors to address specific issues in each of the four countries examined. These issues include how financial statements are prepared and what guides their preparation, the differences in educational and other professional requirements for accountants, how price adjustments are handled in each of the countries, how inflation is treated, and the overall level of government

Category: Business - A