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There are various reasons for the emergence of the need for the harmonization of accounting standards. There has been an increase in the innovations in regard to business transactions. Moreover, such international organizations as the World Trade Organization are attempting to remove the international trade barriers (Turner, 1983). In addition, there has been a great influence of the global standards of accounting on the accounting standards at the national level. The harmonization of accounting standards is advantageous because it promotes compatibility in the international economy. However, the implementation process tends to be considerably tedious for some organizations.
The Advantages of Harmonization
The harmonization of the standards used in accounting is instrumental in boosting the operation of the entire international economy. First, it is vital for the compatibility of the global financial information (Turner, 1983). Recently, there has been a huge misunderstanding concerning foreign financial statements. In this regard, improving comparability ends these misunderstandings, thus eliminating the major barriers to the international investment flow. Second, the harmonization saves significant amount of time and money that is spent on gathering various financial information from different countries; for instance, when a set of reports is needed to comply with the differing national laws (Turner, 1983). The harmonization of accounting standards also helps in developing and expanding the capital markets as there would not be any variance of the standards and practices of accounting disclosure globally. Furthermore, there would be considerable global improvements in the tendency of the standards of accounting because these standards would be raised to a higher level while taking the legal and social conditions into consideration. As far as the Bible is concerned, individuals are encouraged to engage in the matters that promote mutual understanding and peace, which is reflected in the book of Romans: “let us therefore make every effort to do what leads to peace and to mutual edification” (Rom. 14:17, NIV). In this regard, having a single global accounting language will promote international understanding because it will aid in the global comparison of statements as well as more beneficial and better in general trade agreements.
The Disadvantages of Harmonization
The harmonization of the accounting standards has also negative implications both at the global and national levels. First, too much time is spent implementing the new standards in addition to the high costs that are paid for the methods of implementation (Goeltz, 1991). The reason for such a drawback is the following: accountants around the globe have to be educated in accordance with the new accounting code. Moreover, accounting firms will have to replace the old internal control measures of accounting, hence increase the cost and time of the implementation. In addition, some nations may not be willing to commit to the new global codes of accounting merely because various countries have different economic and political systems (Goeltz, 1991). Furthermore, the impact of the harmonization of the accounting standards may have negative effects on some nations, thus creating difficulties for these countries to comply with the new international accounting standards.
To conclude, the harmonization of accounting standards can have both positive and negative influence in the world. Because of the increasing growth rate of the global economic markets, the harmonization of accounting standards would remove various barriers that exist in the sphere. The harmonization may also promote global understanding, which, in turn, is likely to bring about peace in the world. On the other hand, different nations on the planet have varying political and economic systems as well as the differing codes of accounting. As a result, a significantly bigger amount of time and finances is required for the implementation process as some of these nations may not even support the harmonization of accounting standards.