ACCOUNTING

Accounting

Accounting

INTRODUCTION

The business community has admitted that the accounting is “the language of business”. They are using the accounting to communicate the existence and the evolution of the financial situation and also of the performance for the economical entities.

DISCUSSION

Financial information is a form of a language. And if the language of financial information is to be putted to use, so that investment and credit decisions can more readily be taken, it should not only be intelligible, it should also be comparable. Due to the fact that many companies follow the globalization process, so they go global the accounting needed to follow this process and to present financial situations using an unique accounting procedures which can be understand by the entire business community. Due to the fact that this process is following global trends, and the globalization is first of all a political process the starting point in creation of an unique accounting system needed to pass a difficult process where the main accounting systems will litigate to impose their accounting policies and practices. (Belkaoui 1994) These new environmental factors of the global economy, the international monetary system, the Multinational Corporation and foreign direct investment create an environment in which business transactions, their conduct, measurement and disclosure, takes new and distinctive form that call for a specific accounting sub discipline or the harmonization of accounting practices.

Despite of the difficult process as Anderson said (1993) “ a set of international accounting standards will allowed new horizons of evolution due to the fact that comparative analysis of the rates of returns established based on the balance sheets and profit and loss account between the companies being in competition become relevant”. The comparison, as the basic form of economical judgment can be realized, only if the premises are accomplished: the basis of comparison are made using the same production methodology, or in other words, the accounting system is unique for all the companies involved in the analysis. In order to accomplish this target the accounting profession proposed to the business environment to solutions: the American solution GAAP or the European solution (British solution to be read) IAS/IFRS. Foreign subsidiaries of U.S. multinationals use U.S. GAAP. Many foreign companies, attracted to international capital markets, have either adopted U.S. GAAP or reconcile their financial information with SEC requirements. However, IFRS is rapidly gaining acceptance as 70 countries around the world already use it. The European Commission (EC), which is the EU's permanent civil service, announced in June 2002 that all listed companies will be required to prepare consolidated financial statements in accordance with IFRS adopted by the EC from 1 January 2005.

This will apply to almost 7000 listed companies in the EU. One way to get a single set of international accounting standards would be by the conjunction of the governments and securities regulators mandating that the only accounting system which is allowd to be ued to be either U.S. GAAP or IFRS (but not both) be ...