Financial Accounting Theory and Analysis - FARS Research

U.S. Standards needs to focus in order to encourage international harmonization. The mission statement that was adopted in 1973 is required to be updated because of market globalization that has brought a change to the economic environment and the efforts that have been made towards international harmonization.

Bilateral is the first approach to international harmonization where planning is done on accounting harmonization by regulators of two countries. An example of the projected bilateral approach is the disclosure system between Canada and the United States which is currently waiting at the SEC. The Bilateral approach has various advantages the least of all it is easier and faster to apply. Multilateralism is the second approach to harmonization. The European Community (EC) has taken important steps that include accounting and some involvement to smooth the process of flow of capital within states who are members. The EC has national harmonization with the membership in the IASC. Efforts have been made to recognize financial statements and member states prospectuses mutually. International is the third approach, its goal is to expand an organization of accounting standards which are accepted consistently. By working with international organizations all the countries would adapt to similar standards of uniformity.

According to Statement No.130, there is an international model which is moving towards an all inclusive income concept. Standard setters internationally have been paying attention to financial presentation reporting as a response to the guide set by ASB. The UK accounting standard board issued Financial Reporting Standards No. 3 on reporting of financial performance. For the promotion of international harmonization, the board has made efforts by discussing reporting comprehensive income with the International Accounting Standards Committee, the New Zealand Society of Accountants, the Canadian Institute of Chartered Accountants, the Australian Accounting Research Foundation Standard Setters, and the ASB.

The goal to international harmonization and concerns about the comprehensive income items in equity reporting has made it more urgent to work on the project because of its increasing use. The board has financial instruments that are off balance sheet. A Proposal has been made by the board in which fair value measurement and recognition should be done for all derivative instruments. Fair value measurement has raised many questions about the reporting of gains and losses. It is the board's belief that suitability and consistency be maintained with comprehensive income definition, with the inclusion and exclusion of gains and losses from net income.

According to statement No.128, Earnings per share, a draft of statement of principles was issued by the IASC in October 1993 for public to comment. Due to the extensive use of earnings per share in financial statistics, the IASC's goal was to commence as to the presentation and determination of EPS in which global comparisons would be permitted. Even with limitations in EPS data, earnings were determined differently in different national methods. The FASB and the IASC believe that in international financial reporting, a consistent determined denominator will be a significant improvement to accomplish international harmonization of the accounting standards for computing earnings per share. The board pursued its EPS project in conjunction with the IASC. The project focused on EPS calculation denominator in spite of the issues concerning earning purpose. IAS 33 Earnings per Share, was issued by the IASC at the same time as the issuance of this statement. The standard provisions are the same as the statement.

The goal of the project was international harmonization, so the presentation by the FASB in its initial decisions on the income statement and earnings per share to the IASC Steering Committee and the IASC Board in September 1996 was considered a preliminary conclusion. The board finally decided to keep the required presentation dual in the exposure draft. The Boards believes it is necessary to attain international harmonization in all phases with the IASC because the difference is only one of display and not one of a conceptual nature.

International Financial Reporting Standard No.5 was recently issued by The International Accounting Standards Board on Non-current Assets Held for Sale and Discontinued Operations (IFRS 5). The most recent idea of discontinued operation exposure by the international standard setters provided the EITF with a chance to develop harmonization internationally and remove a major issue that was creating a disagreement between international standards and US.