Reflective of the perceived advantages of International standardisation, the Australian

goverment was concerned for a number of years about the differencs between Australian
accounting standards and their international counterparts. In response to this concern, from
1995 australia was involved in a process that would harmonise ( but not initially
standardise) Australian accounting standards with accounting standards being released by
the International Accounting Standards Committtee ( the forerunner to yhe IASB). The
harmonisation process required Australian accounting standards to be as compatible as
possible with International Accounting Standards (IAS), but still allowed divergence where
the austalian treatment was considered to be more appropriate than the International
counterpart. A document released in 1997 as part of the australian goverment Corporate Law
Economic Reforn Program (entitled Accounting Standards : Building International
Opportunities for Australian Business) discussed the ratinale for the harmonisation efforts. It
stated (p.15)
There ini no benifit in australian having unique domestic accounting standards which,
because of their unfamiliarity, would not be understood by the rest of the world. Even
if those standards were considered to represent best pratice, Australia would not
necessarily be able to attract capital because foreign corporations and investors would
not be able make sensible assessments, especially on e comparative basis, of the value
of the Australian enterprices. The need for common acounting language to facilitate
investoe evaluation of domestic and foreign corporations and to avoid pontentially
costly accounting convention by foreign listed companies are powerful argument
against the retention of purely domestic financial reporting regimes.
Ball (2006,p.11) identifies a number of other advantages that are often advanced to
support the case for the global standardisation of financial reporting. First, the adoption of
IFRS might be done the premise that the decision will lead to more accurate, comprehensive
and timely financial statement information, relative to the information that would have been
generated from the national accounting standards they replaced.
While there are many perceived advantanges as well as those given above that could
be listed in relation to standardising international accounting, it is obviously very difficult to
quantify such benefit or advantages. As Ball (2006,p.9) states, There is very little empirical
reseacrh or theory that actually provides evidence of the advantages or disadvanteges of
uniform accounting rule nationally or internationally.
Having indentified some of the perceived advantages relating to strandardisation, it is
useful now to consider the main organisation involved in standardising accounting on an
international basis the IASB.
A BRIEF OVERVIEW OF THE IASB AND ITS GLOBALISATION ACTIVITIES
The following describe recent initiatives that have been implemented to standardise
financial accounting on a global basis. A brief description and history of the IASB- the
organisation at the centre of the global standardisation of accounting-is provided, along with
a brief desciption of the standardisation efforts in the European Union and Australia.

In describing the history of the IASB, we perhaps need to go back ovr fifty years and
make reference to a formr president f the Institute of Chartered Accountants of England and
Wales (ICAEW), Henry Benson. Veron (2007,p.10) outlines Bensons influence on
international accounting :
When elected (in 1966), Benson gave a short address to the institutes Council, in
which he mentiond invitations he had received to visit counterparts at the Canadian Institute
of Chartered Accountants and the American Indtitute of Certified Public Accountants. He
then added : a have had the feeling for a lang time that our relations wiht those Instututes
were very friendly but somewhat remote and, with thw Councils approval, i shall see
whether i can perhaps get them on to a more intime basis.
When the IASC wa established in1973 it had the stated objectives of :
Formulating and publishing in the public interest accounitng standards to be observed
in the presentation of financial statements and promoting their worldwide acceptence
and observence; and working generally for the improvement and harmonisation of
regulations, accounting standards snd procedures relating to the presentation of
financial statements (IASC, 1998,p.6)
Inthe late 1990s there were significant changes made to how the IASC conducted its
operations. The IASC Fondation was created and this body, through a group trustees, was
established to supervise the operations of the newly created International Accounting
Standards Board which began operations in 2001. The trusteeds of the IASC Foundation are
responsible for the IASBs governance and oversight, including funding. However, the
trustees are to be involved in any technical matters relating to teh standards. The
responsibility for technical matters associated with accounting stardards rests solely with the
IASB.
According to the IASBs website, the standards Advisory Council (SAC) is a forum
for the International Accounting Standards Board (IASB) to consult a wide range of
respresentatives form user groups, prepares, financial analysts, academics, auditors,
regulators and profesional accounting bodies that are affected by and interested in the IASBs
work. The IASB has fourteen members. Twelve of whom are full time and two of whom are
part time. According to the IASC Foundation constitution, IASB member must :
Comprise a group of people representing, within that group, the best available
combination of technical skill and background experince of relevant international
business and market condition in order to contribute to the development of high
quality, global accounting standards.
The efforts undertaken within Austalia to harmonise or standardise Australian
accounting practice with international pratice are now considered. As indicated earlier, from
the mid-1990s Australia adopted a pulicy of harmonisation.
THE UNITED STATES ROLE IN THE INTERNATIONAL STANDARDISATION OF
FINANCIAL ACCOUNTING

The major event that triggered the adoption of IFRS by more than 100 countries was
the decision taken by the European Union to adopt IFRS as the accounting standards to be
used for preparing the consolidated financial statements of publicy listed companies from
2005. In the Australia, the Financial Reporting council (FRC) followed the lead of the
European Union and in 2002 decided that Australia would adopt IFRS from 2005. Prior to the
adoption of IFRS, these countries used accounting standards that were typically developed on
a domestic basis.
The FASB is a private sector body tht was established to act in the public interest.
While the FASB was establish as an indepedent body, the SEC has the power to overrid the
accounting standards issued by the FASB should it see fit to do so.
Hence, while the FAF considers that teh ultimate adoption of IFRS within the United
States is a sound idea, the adoption should not in its opinion happen for a number of years, to
give enough time for IFRS to be further improved and for the US reporting systems to be
properly prepared for the transition. The FAF made the following suggestion (2007,p.7)
We propose transtioning from U.S.GAAP to IFRS via a two pronged improve and
adopt process.

The first part of the process involves working with the IASB to improve areas where
neither U.S.GAAP nor IFRS is considered to be of sufficiently high quality. The 2006
Memorandum of Understanding indentifies a nunber of those areas, but other areas
such as completing kayaspects of the conceptual framework also should be
consideres. The blueprint would establish a timetable for producing a new common
high-quality standards in each of the improvement areas.
The second part of the process involves the FASB adopting applicable IFSR in all
other areas that are not the subject of improvments program. This will move U.S.
public companies to most of the IASBs standards in an orderly fahsion while
allowing the IASB and FASB to focus their resources on providing significant
improvements in financial reporting
We support the improve and adopt approach for several reasons.

Both existing U.S.GAAP and IFRS require improvement in several major areas. A
cooperative effort between the IASB and the FASB to develop improved standards in
those areas will benefit financial statement users both here and abroad.
This approach results in the adoption of IFRS standards ober several years, which
avoids or minimizes the capacity constraints that might develop in an abrupt
mamdated swicth to IFRS.
This approach allows other infrastructure elements to improve and converge while
IFRS are improved or adopted.
The improve and adopt approach avoids the added cost and complexity to U.S. capital
market participants of deadling with two accounting systems.

DOES THE INTERNATIONAL STANDARDISATION OF ACCOUNTING STANDARDS

NECESSARILY LEAD TO THE INTERNATIONAL STANDARDISATION OF
ACCOUNTING PRACTICE?
The standardisation of accounting standards by a multitude of different countries, with
different enforcement machanisms, different form of capital markets, different cultures and so
forth, might be considered to lead to the standardisation of accounting pratice. The discussion
that follows will show that there are a number of reasons why the standardisation of
accounting standards will not necessarily lead to international standardsdisation in practice.
The study of international differences in accounting will remain an imprortant area of
research despite the ongoing standardisation efforts of the IASB. It will be seen that there are
various reasons why international differences will survive beyond the introduction of IFRS.
DIFFERENCES IN TAXATION SYSTEMS
Nobes (2006,p.235) uses a comparion of differences in taxation systems between
Germany and teh United Kingdom to identify why financial accounting pratices in the two
countries might be systematically different depite both countries adopting IFRS, as he states:
In Germany, companies are required to continue to prepare unconsolidated financial
statements under the conventional rules of the Handelsgesetzbuch (HGB) for
calculations of taxable income and ditributed income. This is irrespective of any use
of IFRS for cansolidated or unconsolidated statements (Haller and Eierle, 2004) in
some areas, the tax-driven accounting choices of the unconsolidated statements might
flow through to consolidated IFRS statements.
DIFFERENCES IN ECONOMIC AND POLITICAL INFLUENCES ON FINANCIAL
REPORTING
There is also an expectation that differences in the economics and political forces
operating within a country will have implications for various decisions and judgements made
throughout the accounting process. As Ball (2006, p.15) states:
The fundamental reason for being sceptical about uniformity of implementation in
practice is that the incentives of preparers (managers) and enforces ( auditors, courts,
regulator, boards, block shareholders, politicans, analysts, rating agenciens, the press)
remain primarily. All accounting accruals involve judgments about future cash flows.
Consequently, there is much leeway in implementing accounting rules. Powerful local
economic and political forces therefore determine how managers, auditors, courts,
regulators and other parties influence the implementation of rules. These forces have
exerted a subtabtial influence on financial reporting pratice historically, and are
unlikely to suddenly cease doing so, IFRS or no IFRS. Achieving uniformity in
accounting standards seems easy in comparison with achieving uniformity in actual
reporting behavior. The latter would require radical change in the underlying
economic and political forces that determine actual behaviour.