Question

Discuss 2 advantages of global harmonizing of accounting standards, has there been any recent success with regards to the harmonizing of accounting standards? Provide details 10marks,

Answer 1

Answer:

Advantages of global harmonizing of accounting standards:

1. Growth in International Business:

As international business and investment multiplies,international financial reporting has become more important for communication among businessmen, entrepreneurs, financiers and investors.At the same time, variations are being taken place in audit practices,accounting principles, financial statement presentations, and professional standards. If accounting reports are to become a globally recognized means of communication, action must be taken to harmonies world-wide efforts to meet the international users’ needs.

2. Investors:

A strong case for increased harmonisation can be made from the viewpoint of the users of accounting and financial information mainly the investors who wish to invest outside their own country, that is, both transnational companies investing directly and individual investors wishing to invest part of a portfolio of funds.Without world-wide accounting, and auditing standards, it is difficult, if not impossible, to assess the relative merits of alternative investment opportunities, or to make valid comparisons of the financial performance of companies in different countries.Harmonisation, thus, could lead to improvements in the allocation of financial resources. It would help to avoid confusion and possible misallocation of resources by bringing uniformity in accounting standards and practices.

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