International accounting standards

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International Accounting & Finance Assignment
Critically evaluate to what extent past research into the classification of accounting systems has become irrelevant because of international harmonization efforts.

During the recent decades, in our societies, we have observed a new trend towards the liberalization of markets .International business has become easier. Countries are now more opento foreign investments because barriers to trade have been dramatically reduced. For example, the capital markets are more interconnected; multinational companies get listed on worldwide stock exchange and also seek to invest in the countries where the competitive advantage is the highest... This phenomenon, called globalization, has an impact on all types of market and especially on the financialmarket. Therefore, when a multinational company possesses assets in different countries, it has to report its financial statement to the country it is settled in. In other words, it has to comply with the rules and regulations related to the national accounting system. By accounting system, we integrate the financial rules and regulations but also the actual accounting practices used in acountry. Each country possesses its own accounting system influenced by different sources of factors such as the legal system, the taxation or even the culture…
Therefore, research have been carried out during the 20th century to classify the countries to have a better understanding of the differences of accounting systems and also distinguish what they might have in common. Countries, now, seek toharmonize the accounting systems to facilitate financial reporting for companies, help investors to make efficient decisions… However, international harmonization efforts can be broken down into three views: harmonization of accounting standards, of enforcements and finally of voluntary disclosure. Thus, a question needs to be raised. We have to evaluate to what extent past research into theclassification of accounting system has become irrelevant because of international harmonization efforts. In other words, we have to determine if accounting classification is still useful nowadays.
We will first focus on briefly reviewing the past research on accounting classification and how it leads to international harmonization efforts. Then we will evaluate the relevance the classificationresearches by presenting the limits of harmonization and then we will highlight the fact that the harmonization process in not completed yet.
First of all, it is relevant to give a brief definition of classification. Indeed, classifying means categorizing according to similarities and differences. Roberts et al. (2005) state that “a good classification should provide a simple way of describing andanalyzing complex phenomena” (2005, 198). When the researchers started to classify the accounting systems, they wanted to create a ‘picture’ of the world so as to have a better view of which countries were close in terms of accounting practices, regulations. However, these groupings only depended on the criteria chosen to separate them. Overall, the classes defined by the different researchers werevery close but some came up with very diverse classifications.
Many attempts have been implemented to classify accounting systems. Those can be broken down into three periods of time. Baker and Barbu (2007) distinguish three main categories. The first one was covered in the period 1965 to 1973 where the first researches have been carried out. Rossignol and Walliser (2007) analyze the work ofMueller (1967), the first pioneer. He decided to ground its researches on “the purpose of accounting in market economies” (2007, 30). During this first period, Rossignol and Walliser (2007) show that the concerns were only about accounting uniformity but also about comparing accounting practices in different countries . They add also that, for the researchers, understanding the differences in...