THE PURPOSE OF ATTEMPTS TO DEVELOP CLASSIFICATION SYSTEMS IN INTERNATIONAL ACCOUNTING
The increasing globalization of economic activity has demonstrated a need for coherence in accounting standards. The efforts to develop such coherence, referred to most often as either convergence or harmonization, are led by the International Accounting Standards Board (IASB) based in London. The IASB, however, meets strong opposition from both business and professional accounting interests representing a wide diversity of countries.
The strongest opposition, however, comes from highly developed economies where business, professional, and governmental interests contend variously that a single set of international accounting standards would (a) compromise industrial productivity (Berlau 32); (b) fail to cover activities addressed in national accounting standards (Pacter 67); or (c) compromise national sovereign rights (Maiello 166). Opposition also comes from less developed economies, however, with contentions that international standards do not recognize unique conditions in their countries and that the costs of implementing the international standards are too great (Palau 359).
Nevertheless, strong arguments favor a convergence in international accounting standards, and there has been progress in that direction (Ostling 19). Differences in the generally accepted accounting practices (GAAP) applied in different economies create potentially serious threats to companies that operate globally. Thus, the higher level of commonality of GAAP and general financial reporting practices the lower the accounting-related risk to global companies and investors. The IASC is the principal organization that is developing international accounting standards, and it is through the IASC that proponents of the international acceptance of the body of IAS pursue the implementation of these standards globally (Quinn 45).
One approach to the enhancement...