The ethics of

international accounting:
Harmonization and
terrorism
Objectives
Conceptual Framework
INTERNATIONAL ACCOUNTING, DIVERSITY AND THE
PROFESSION’S RESPONSE
International Accounting Systems And Differences
• Accounting systems differ across the world.

• Cultural characteristics also influence the nature of

accounting systems - the extent to which a certain
society may be more or less conservative in nature or
more or less trans parent, for example (Gray 1988).
INTERNATIONAL ACCOUNTING, DIVERSITY AND THE
PROFESSION’S RESPONSE
• Diversity in accounting practices causes major
problems for investors and companies alike.

• Accounting diversity also causes problems for

corporations (Choi and Levich 1991), creating
operational problems for both capital market
and capital investment decisions.
INTERNATIONAL ACCOUNTING, DIVERSITY AND THE
PROFESSION’S RESPONSE
• Differences in accounting practices make it
difficult to establish the reliability and capability
of potential licensees and it also complicates the
management information systems required to
monitor contract performance. And finally, it
also has implications for foreign direct
investment (FDI), creating difficulties in
assessing the financial position of potential
takeover targets, and interpreting the financial
statements of foreign competitors.
The profession’s response: the IASC
• International Accounting Standards Board
(IASB), formerly known as International
Accounting Standards Committee (IASC).
• Established in 1973.
• Attempts to facilitate international consultation
on accounting divergence with a view to
promoting the convergence of national
standards.
The profession’s response: the IASC
The IASC state that their object is:

“To formulate and publish in the public interest

accounting standards to be observed in the
presentation of financial statements and to
promote their worldwide acceptance and
observance.”
The profession’s response: the IASC
• Harmonization allows comparisons to be made
between companies, it enables investors to hold
shares in companies in many different countries,
thus significantly expanding the range of
investment opportunities.

• It reduces costs for companies and increases the

pool of potential capital investment
opportunities and the ease with which they can
be exploited.
The profession’s response: the IASC
• However, it is claimed that harmonization also
benefits countries because it results in a set of
readily available, internationally recognized
accounting standards. As there would be no
requirement for national standard-setting
bodies, these standards would be available at
minimum expense.