Question

why are the industrialized nations of the world moving toward standardization of accounting standards? Is the standardization a good idea? Why or why not?

Answer 1

There has been a lot of work done in the industrialized nations in support of the work to develop a single set of high-quality global accounting standards.i.e steps taken for the standardization of the accounting standards in the industrialized nations.

The industrialized nations of the world have economies that rely on the cross border transactions for their economies to grow and develop and this is increasing continuously and that also leads to an influx of international capital from other countries and investors across the world look for opportunities for diversifying their activities and identifying opportunities for investment in other countries but this came in with a lot of complications as each of the countries followed their own specific sets of accounting standards that are specific to the nation. When these accounting standards specific to the nation are followed then the basis on which the financial statements are prepared are different and therefore taking a descision on the basis of that could go wrong as the same thing might be presented by one country in one way and by another country in another way.

Standardisation of accounting standards is a good idea due to the following reasons:

1. The biggest advantage of a single set of global accounting standards is to bring about an increase in the comparability between organizations of different countries. If the accounting standards differ then comparison becomes extremely complicated as ,Before an investor can compare two potential investments, they must first reconcile the two companies to the same basis of accounting.
2. Moving to a single set of global financial standards would also ease the impediments to the expansion plan of the companies. If companies wish to expand overseas, they need to consider the international costs associated with the compliance procedures, which could lead to the adopting of a completely new set of accounting records to meet the requirements put forth by the statute of the new country. In some cases, this would lead to huge rise in the company's accounting costs. It is due to this that small businesses inspite of earning huge rewards due to their expansion plans overseas , their large rewards are dwarfed by these expansion costs.
3. From a policy-making view point , moving to a single set of global standards puts rule making into the hands of one body.. One set of standards would reduce the differences between different countries and international regulators, and it also reduces the costs.
4. In some countries there is a rule of businesses of that country being required to pay a reporting fees that are contributions towards the funding for the bodies involved in the standard-setting process. These costs have a substantial effect on the small and therefore moving towards a central authoritative body would bring down these costs to a great extent.