“several Organisations Have Been Involved in the Efforts to Harmonise Accounting Practices Either Regionally or Internationally. the Most Important Players in This Effort Were the European Union (regionally) and the International Accounting Standards Co

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open to interpretation. Transparent accounting provides higher quality reporting which more accurately reflects a firm’s economic position, which in turn will result in more calculated investments (IASplus.com, 2017).

3. Motives Behind Accounting Harmonisation

Multinational Enterprises are not only facing accounting problems but also different cultures, laws and political systems in the countries they invested (Fritz and Lammle, 2003). International businesses must use local accounting standards; i.e. A US company must use US GAAP. A motive of harmonisation is to achieve comparability of the financial statements. In 2014, Verizon Communication Inc. (NYSE, NASDAQ: VZ) completed the purchase of 45% stake in Vodafone Group Plc’s (London, NASDAQ: VOD) (Varettoni, 2014). As a result, comparing the financial data was difficult as each company followed a different accounting standard. The difficulty in comparing the statements makes an investors decision harder to buy shares from a company using a different international standard. Therefore, there is need for harmonization of accounting standards to allow comparability (Fritz and Lammle, 2003).

Research found that reporting the same transactions under IASB and US GAAP produces different results (Deegan and Unerman, 2003). The companies are therefore required (by the SEC) to prepare two statements following the two standards. Such practice includes problems since risks are interpreted differently around the globe. Harmonisation could prevent this unfair disadvantage because of differences in their GAAPs.

Another reason pushing for harmonization of standards is that not all accounting standards are accepted by all stock markets. In addition to statements, companies are required to prepare another financial statement in accordance to IFRS to be listed. For instance, they need to change their net income standard of calculation from US GAAP to IFRS. This process is associated with high cost and affects competition among businesses. Differences in accounting standards also confuse investors since they find it difficult to select the most appropriate standard (Fritz and Lammle, 2003).

One of the main motives for creating IASC was the need to obtain common ground when preparing group accounts to serve international capital markets (Whittington, G. 2005). Harmonising such accounting practices allowed companies to prepare statements under one principle, reducing trade barriers allowing access to capital markets.

Increasing global nature of capital markets also triggered a demand for a uniform accounting standard. They say that if businesses operate in various countries, they will have the urge to raise capital from multiple sources. This results in higher competition among the capital markets encouraging a change of attitude by national regulators towards IAS. The strongest capital markets recognise accepting IAS enables more effective competition.

However, harmonization could be viewed negatively regarding comparability and efficiency. For example, because of the complications of IFRS, as opposed to national GAAP, it becomes a process of following a more complex mechanism, but may not necessarily show the full extent of company performance.

As mentioned by Ketz (2004), information will be difficult to obtain from domestic accounting standards. He further states that according to critics of international accounting systems, with various legislation and IFRS’s one standard position, harmonization will be near impossible.

4. Accounting Harmonisation/Convergence Efforts

The process of harmonising and converging accounting practices both regionally and internationally is an ongoing task. Growing efforts by the EU, IASC (Now IASB); and other accounting and regulatory bodies are the driving forces by the programme. The process of harmonising and converging accounting practices has garnered growing establishment since the backing of the IOSCO and IFAC in an ambition to develop accounting practices culminating in high quality, harmonious financial reporting standards applicable for use worldwide.

4.1. Work Done to Harmonise/Converge Accounting Practices

A joint meeting in September 2002 saw the agreement between IASB and a national standard setter, the FASB to collaborate to develop a higher quality, fully compatible financial reporting standards appropriate for use in domestic and cross-border reporting (otherwise known as the international convergence of IFRS and US GAAP) (Schipper, 2005). IFAC president Robert Burning also called for fast harmonisation of accounting standards. He stated convergence and implementation of IAS’s is vital to the rebuilding of the global financial system. IPSAS should drive Governments to focus on making company financial records transparent not only in the private sector (which is moving at a faster pace towards harmonisation and convergence), but in the public sector (CIMA Global, 2009). Robert Burning (IFAC President) (CIMA Global, 2009) held “We are rapidly moving to one world in accounting, auditing and corporate governance. IFAC is expediting the development standards and guidance on key issues so accountants worldwide operate on a level playing field”. A study commissioned by IFAC identified the following challenges, among others, to the adoption and implementation of IFRS and ISA:

• “Developing standards that are capable of translation and establishing processes that facilitate high quality translations of standards to effectively accommodate non-native English speakers;

• Frequency, volume and complexity of changes to the standards; and

• Challenges for small and medium sized entities and accounting firms” (California CPA, 2004).

So, the concern to International harmonisation and convergence is not only bringing various accounting practices into one accounting standard, but to have a standard that is understandable and useable by all nations.

In 1993 (IASC Third Development Phase), the IASC Board and IOSCO agreed on a list of core standards usable in the financial statements of companies involved in cross-border offerings and listings (Appendix A). IOSCO completed a review of the IASC standards in 1994 and through this process, recognised numerous standards requiring improvement before IOSCO would consider the standards for IAS endorsement (Turner, 2000).

A case study carried out by Chamisa (2000) observed the use of IASC standards in developing countries, more specifically Zimbabwe. In Zimbabwe, it is the role of ICAZ to develop accounting standards. ICAZ

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