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CHAPTER 3 INTERNATIONAL CONVERGENCE OF FINANCIAL REPORTING Chapter Outline I. Accounting harmonization is a process that reduces alternatives while retaining a high degree of flexibility in accounting practices. A. Harmonization is different from standardization (or uniformity) which implies the elimination of alternatives in accounting practices. B. The objective of accounting harmonization is to have comparable financial statements from companies in different countries. C. Harmonization of regulations ( de jure harmonization) does not necessarily produce harmonization of practices ( de facto Harmonization). II. There are many arguments for international harmonization of accounting standards. The arguments include that it would: A. Make financial statements of companies in different countries more comparable, and hence make it easier for investors to evaluate foreign firms. B. Simplify for MNCs the evaluation of possible foreign takeover targets. C. Reduce the cost for MNCs to consolidate foreign listed companies. D. Make it easier for companies to access foreign capital markets. E. Make it easier for MNCs and international accounting firms to transfer accounting personnel to other countries. F. Raise the quality level of accounting practices internationally. III. There also are several arguments against international harmonization of accounting standards. A. Considering the differences among countries in terms of socio-politico-economic systems, it would be almost impossible to arrive at a set of accounting standards that would satisfy all of the parties involved.
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  • Spring '11
  • A
  • International Financial Reporting Standards, consolidated financial statements, international Accounting standards Board, international Accounting standards

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