INTERNATIONAL ACCOUNTING HARMONIZATION

INTERNATIONAL ACCOUNTING HARMONIZATION

1. Harmonisasi understand and standardize the accounting standards applicable in
Harmonization of accounting standards

Meaning of the harmonization of accounting standards

The term harmonization as opposed to standardization have the meaning of a reconciliation on a variety of different angles. The term is meant to be a practical approach and reconcile rather than standardization, especially if it means standardization procedures owned by one country should be applied by all other countries. Harmonization  an important part to produce better communication on an information that can be interpreted and understood internationally.
The definition of harmonization is considered more realistic and more likely to be accepted rather than standardization. Each country has a set of rules, philosophies, and goals of each at the national level, aimed at the protection or control of national resources.

Benefits of harmonization

There are various benefits of harmonization. First, for many countries, yet there is a codification of accounting and auditing standards are adequate. Internationally recognized standards will not only reduce the cost of preparing for these countries but also enables them to immediately become part of mainstream accounting standards internationally.
Second, the growing internationalization of the world economy and the increasing interdependence of countries in the  with international trade and investment flows is the main argument of the existence of some form of accounting and auditing standards applicable internationally.

Third, the need of companies to obtain capital from outside, given the insufficiency of the amount of profit in the hold to fund projects and foreign loans are available, has increased the need for harmonization.

Harmonization versus Standardization

Globalization also carries the implication that things that were once considered the authority and responsibility of each country is no longer possible is not affected by the international community. Similarly, financial reporting and accounting standards.
One of the qualitative characteristics of accounting information is to be compared (comparability), including international accounting information also must be compared as it is important in the world of international trade and investment. In the event wanted to obtain full comparability is broadly applicable internationally, required standardization of international accounting standards. On the other hand, the existence of certain factors in a country still needed to make the national accounting standards applicable in the country. It can be seen in the comparison view of financial accounting standards in Indonesia and the United States in advance. In the Indonesia Financial Accounting Standards Accounting for Cooperatives which are not necessarily required in the United States. Based on this, the less likely and less feasible to create a complete international accounting standards and
comprehensive. Concept is more popular than standardization to bridge the wide variety of accounting standards in different countries is the concept of harmonization. Harmonization of accounting standards is defined as minimizing the differences in accounting standards in various countries (Iqbal, 1997:35).

Harmonization can also be interpreted as a group of countries that agree on an accounting standard that is similar, but requires the implementation does not follow the standard should be disclosed and reconciled with mutually agreed standards. Institutions that are active in the business harmonization of accounting standards, these include the IASC (International Accounting Standard Committee), the United Nations and the OECD (Organization for Economic Cooperation and Development). Some of those who benefit from the harmonization of these are multinational companies, international accounting firms, trade organizations, as well as the IOSCO (International Organization of Securities Commissions).
Harmonizing Objectives

1. The parent company's strategy to do more expansion by setting up subsidiaries in various other countries.

2. If harmonization is created, the creation of an understanding of the presentation of information the parent or subsidiary companies or vice versa.

3. Does not require a complicated process

4. Information bias would not occur

Harmonization of accounting include:

1. Harmonization of accounting standards relating to the reporting and assessment reports
2. Harmonization of corporate disclosures made public on the stock associated with the securities offering and listing on stock exchanges

3. Harmonization of auditing standards

Factors Affecting the Accounting System

Like the business world in general, and its accounting practices in corporate financial disclosure in different countries  various factors. Radebaugh and Gray (1997:47) mentions at least fourteen factors that affect the company's accounting system. Those factors are the nature of corporate ownership, business activities, funding sources and capital markets, tax system, the existence and importance of the accounting profession, accounting education and research, political systems, social climate, economic growth and development rates, inflation, regulatory systems regulations, and accounting rules. More details, Radebaugh and Gray describes the relationship between the factors mentioned above with the following corporate accounting system.

a. Nature of corporate ownership

The need for disclosure of information and greater public accountability to be found on the company-owned public companies compared with the family firm.

b. Business activities

The accounting system is influenced by the type of business activity, such as agribusiness which is different from manufacturing, or a different small companies with multinational companies.
c. Sources of funding

The need for disclosure of information and greater public accountability to be found in companies that get funding from external shareholders as compared to the company with funding from banks or from the fund family.

d. Tax system

Countries like France and Germany using the company's financial statements as a basis for determining income tax debt, while countries like the United States and Britain to use financial statements have been adjusted by the tax code as a basis for determining the tax debt and delivered separately to the financial statements to shareholders

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2. Explaining the pros and cons of international harmonization of accounting standards

1. Definition of Fair Value

a. Fair value (fair value) is a number that can be used as the basis for the exchange of assets or settlement of obligations between the parties understood (knowledgeable) and willing to trade fair (arm's length transaction). (SFAS No. 10).

b. The fair value of an asset is the amount of assets at the which That Could be bought or sold in a current transaction Between willing parties, other than in a liquidation. On the other side of the balance sheet, the fair value of a liability is the amount at the which That Could be Incurred or liability settled in a current transaction Between willing parties, other than in a liquidation. If available, a quoted market price in an active market is the best evidence of fair value and should be used as the basis for the measurement. If a quoted market price is not available, preparers should the make an estimate of fair value using the best information available in the circumstances. In many circumstances, quoted market prices are unavailable. As a result, Difficulties occur when making estimates of fair value. (GAAP).

PRO AND CONS harmonization

Concept is more popular than the standardization of accounting standards in various countries is the concept of harmonization. Harmonization of accounting standards is defined as minimizing the differences in accounting standards in various countries (Iqbal, 1997:35). Harmonization can also be interpreted as a group of countries that agree on an accounting standard that is similar, but requires the implementation does not follow the standard should be disclosed and reconciled with mutually agreed standards. Institutions that are active in the business harmonization of accounting standards, these include the IASC (International Accounting Standard Committee), the United Nations and the OECD (Organization for Economic Cooperation and Development). Some of those who benefit from the harmonization of these are multinational companies, international accounting firms, trade organizations, as well as the IOSCO (International Organization of Securities Commissions).
IASC was founded in 1973 and consists of member organizations from ten countries accounting profession. In 1999, IASC membership consists of 134 professional accounting organizations from 104 countries, including Indonesia. IASC goals are (1) formulate and publish accounting standards with respect to financial reporting and promote it to be widely accepted around the world, and (2) work for the development and harmonization of accounting standards and procedures with respect to financial reporting. Some countries such as Singapore, Zimbabwe and Kuwait instead adopt International Accounting Standards as the accounting standards of their country.

At 1994 noted that IAS is based on Accounting Development Strategy 1994-2000 Indonesian Institute of Accountants, and has decided to carry out important matters as follows:
A. Support of the harmonization program initiated by the International Accounting Standards Committee (IASC) to harmonize the Indonesian Accounting Principles with International Accounting Standards.

2. Impose a "Framework for the Preparation and Presentation of Financial Statements" which organized the IASC as the basic framework of the preparation and presentation of financial information in Indonesia. This basic framework is an essential reference for constituent entity financial statements and the auditor in finding a solution to an issue that has not been expressly provided in the existing financial accounting standards. But it should be understood that the basic framework is not a financial accounting standards.

3. To avoid misunderstandings that often occur and that the names correspond to the meaning, it was agreed to change the designation Indonesian Accounting Principles (PAI) with Indonesia Accounting Standards (IFRSs)

4. Accordingly, the series of the Indonesian Accounting Principles Statement (Statement PAI) PAI issued by the Committee to change a new financial accounting standard, the change to Statement of Financial Accounting Standard (SFAS). While the interpretation of the Indonesian Accounting Principles (IPAI) issued to explain something that is considered necessary for the financial accounting standards that have been there, transformed into the Financial Accounting Standards Interpretation (INSAK).

Today the harmonization of accounting is a challenging and controversial issues relating to the creation of accounting standards and market regulations in a professional manner. The discussions are done today focuses on the experiences of North America, Britain and mainland Europe (Hergarty 1997, Zarzeski 1996, Bayless et el, 1996). International accounting discourse was characterized by a major trend in support arguments about the importance of the harmonization program.

Supports the view that international harmonization is harmonization (even standardized) has many advantages. The advantage of harmonization is the number of international comparability of financial information.

3. Understanding the meaning of reconciliation and mutual recognition (reciprocal) of accounting standard differences

Two other approaches are proposed as a possible solution is used to solve problems related to the content of cross-border financial statements: (1) reconciliation, and (2) mutual recognition (which is also referred to as  / reciprocity). Through reconciliation, foreign companies can set  using home country accounting standards, but should  between accounting measures (such as net income and stock ) in the country of origin and in countries where the financial statements . Example, the Capital Market Commission United States (SEC). Recognition occurs when the parties together outside the home country regulator of financial  foreign companies which are based on the principles of state. Example, the London Stock Exchange accept financial statements based on GAAP reporting  made by foreign companies.

4. Identify organizations that promote the harmonization and has an important role in setting international accounting standards

The benefits of International Standards

At the International Congress of Accountants 12th in Mexico City in October 1982, John N, Turner, former Finance Minister, Minister of Justice and Attorney General of Canada, and the first chairman of the IMF Interim Committee, said the benefits of "standards that have universally applicable power ":

The biggest advantage that would flow from harmonization is international comparability of financial information. Power-such appeals will eliminate misunderstandings that exist nowreliability of financial reporting, financial statements "foreign" and would eliminate one of the most important barriers to international investment flows. The second advantage of harmonization is saving time and money are now required to consolidate financial information from different when more than one report is required to conform to the laws or practices of third is a trend for the harmonization of accounting standards around the world to be appointed to the highest level and to be consistent with economic conditions, social and local laws.

International Standards

Internationalization of accounting standards is also facing various. Fante Irving academics criticized the international accounting standard setting as a solution that is too simple for such a complex problem. He argues that accounting as a social science is inseparable with the flexibility, making it relatively easy to be adapted. Fante identifies three barriers to international accounting standardization among developed countries:

1. Differences in national background and tradition of the rear

2. Different needs of different economic environments

3. Standardization challenges to national sovereignty

OVERVIEW OF INTERNATIONAL ORGANIZATIONS THAT PROMOTE MAJOR ACCOUNTING HARMONIZATION

Six organizations have become a major player in the determination of the international accounting standards and in promoting international harmonization of accounting:
1. International Accounting Standards Board (IASB)

2. Eropa Union Commission (EU)

3. International Organization of the Capital Market Commission (IOSCO)

4. International Federation of Accountants (IFAC)

5. Intergovernmental Working Group of Experts of the United Nations on International Standards of Accounting and  (International Standard Accounting and Reporting-Isar), part of the union conference - the nation in trade and development (United Nations Conference on Trade and Development - UNCTAD)

6. Working Group on the Accounting standards Organization of Economic Cooperation and Development (OECD Working Group)

 INTERNATIONAL ACCOUNTING STANDARDS BOARD

International Accounting Standards Board (IASB), formerly IASC is a private sector standard-making bodies are independent, which was founded in 1973 by professional accounting organizations in nine countries, and in the restructuring in 2001. IASB objectives are:
1. To develop in the public interest, a set of global accounting standards are of high quality, can be understood and can be applied which require high quality information, transparent, and comparable in the financial statements and other financial reporting to help participants in capital markets and other users to help participants in capital markets and other users in making certain decisions.

2. To encourage the use and application of these standards are strictly

3. To bring the convergence of national accounting standards and international accounting standards and international financial reporting standards toward high quality solutions

5. Describe a new approach to the European Union and relate it to the European financial market integration

One goal is to achieve the integration of EU financial markets of Europe. To achieve this goal, the EC has introduced a directive and take a huge initiative to achieve a single market.
Acquisition of capital within the EU;

1. Create a common legal framework for securities and derivatives markets are integrated
2. Achieve a single set of accounting standards for companies whose shares are listed.
Fourth EU directive, issued in 1978, is a set of accounting rules in the most extensive and comprehensive framework. Seventh directive, issued in 1983, addresses issues of financial statements. Eighth, issued in 1984, discussed various aspects of professional qualifications that are authorized to carry out the audit as required by law (mandatory audit). Fourth and Seventh Directives have an influence dramatic over financial reporting across the EU, namely bringing the accounting in all EU member states to stage a good uniformity and relatively adequate. This directive will harmonize the presentation of profit and loss (income statement) and balance sheet and increase the minimum additional information in the record, specifically the influence of tax rules on disclosure of the reported results.

New Approach to EU and European Financial Market Integration

Commission announced that the EU needs to move precisely in order to provide a clear signal that companies are trying to do the recording in the United States and other world markets will still be able to survive in the EU accounting framework. EC also stressed that the EU strengthens its commitment to the international standard-setting process, which offers the most efficient and quick solutions to problems faced by companies operating in the scale . In 2000, the EC adopted a new financial reporting strategy. The interesting thing about this strategy is the proposed rule that all EU companies listed in regulated markets, including banks, insurance companies and SME (small and medium sized enterprises), prepare accounts according to IFRS.