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Accounting harmonization is not a new phenomenon among
accounting professionals. Since 1973 when The International Accounting
Standards Board (IASB) was established, harmonization of international
accounting standards has been underway for many countries around the
world. The basic premise for harmonization had been to create
uniformity of standards and practices so that countries may trade
freely, account for trade without having to incur costs in conversion
standards. For this reason, many countries around the world, situated
in proximity tend to harmonize accounting standards so as to maintain
similar accounting procedures and reportage. For example the European
Union and the North American group along with the Australian etc. In
the recent years, ASEAN countries have been debilitating the issue of
harmonizing accounting practices. However, as expects like Lambert and
Hopkins (1997) predict the issue of transparency, fair accounting
practices as well as professional judgments fairly differ from those of
the standards set by the IASB that tantamount to Anglo-American system.
To adopt the IASB and harmonizing national or international accounting
systems would not be holistically possible. Although, the author is of
the opinion that harmonization for uniformity is possible, under hand
practices would take a long time to be eradicated.
Discussion
In their thesis on Accounting Harmonization in ASEAN, Ira
Yuta Chairas and Wirawan Radianto (2001) are of the opinion that
harmonization and standardizations are two different concepts.
Harmonization tends towards process uniformity but it does not mean
that the standard practice within the country is replaced by
international standards. Standardization on the other hand is veering
towards standard practices that are acceptable by almost all. For this
reason, most countries are keen on harmonization instead of
standardization. Yet it must be noted that standardization is
imperative for setting benchmarks for measurements and reportage,
especially among multinational companies that not only deal with host
and home countries but also with other local governments where the
branch is based. Trade unions, board of directors, investors,
government and the trade associations for example all requires standard
reporting of financial statements. Differences would result in wrong
interpretation and consequently wrong decisions pertaining to
investment and management. Hence any change in the accounting practice
and principals should consider these issues in mind.
Apart from that businesses are influenced by local cultures. In
Asian countries especially financial information among the common
people as well as among the corporate leaders are categorized by
secrecy, non-transparency, dishonesty and unfair practices. As a result
most of the companies are known for their corruption, in collaboration
with government officials. In such an environment harmonization of
accounting practices and principals would be difficult since the people
responsible for accounting reportage are the ones who resist change.
Yet despite this fact, one of the resolutions that could reverse their
practice is through standardization. Before harmonization, ASEAN
authorities should set standards in their countries so that the
professionals become fluent with the new practice. Once this is set, it
is possible for companies to regulate their accounting practices
through increased transparency as well as fair trade practices.
Setting up of a standard in the country for accounting purpose would
only be difficult should the government be unwilling to incorporate new
laws and regulations (Gupta 1992). This is possible because revising or
changing of accounting practice means change in the systematic
accounting procedures followed by companies. Especially, for account
professionals they must be trained and taught how to report each items
in the financial statements etc. However, the advantage for setting up
such standards is long term and therefore would benefit both the
companies and the authority in the long run. For example multinational
companies are forced to adopt local and national accounting practices
otherwise most branches are already following the international
accounting practices for the purpose of harmonizing trade in different
currencies and to avoid confusions. ASEAN countries, by adopting the
international standards would be able to avoid this confusion and
thereby achieve smooth trade flow in the international market where
foreign exchange through multinational companies is concerned.
Thus, countries like China, Japan, South Korea, Taiwan,
Thailand and Vietnam though may not have adequate accounting systems to
consolidate and standardize, however once they adopt the new standards
they would be able to harmonize into the new international standards.
Adoption of international and coordination of international standards
would allow the countries to enhance transparency and fair trade
practice through standardization. This would benefit them in the long
term as these countries are developing and attracting investors from
developed countries whose first concern is transparency and just
financial practices. Accounting harmonization is only a step towards
the right direction for regional cooperation.
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