ARTICLE ANALYSIS

Article Analysis

Article Analysis

The main objective of the seventh directive is to integrate the accounting practices of consolidated companies. It is very important that consolidated reports have to be prepared according to a standardized system in the way it can be ensures that reports will be comparable. The directive states the scope of companies that should included in consolidation. The consolidated report has to show the true and fair view of the group, as it was one company.

The eighth directive gives advices to the people who are charged with the supervision of financial reports. Auditors are responsible for checking the annual report of a company. This directive states the requirements that auditors have to satisfy, in order to save the respectability and independence of the accounting profession (Rebele Stout and Hassell 2001 167-231). The continental law making is not based on precedents, but they use general rules. These rules are based on written laws. This style of legal control had its effect on accounting controls as well. Another main objective of IFRS is to work out an integrated system of measures in accounting. In several cases it allows alternative ways in accounting, but the committee is intended to reduce these possibilities. An interesting result of the American economic system is that regulation of accounting system in the USA is controlled by professional institutions, committees and not by the state. US GAAP includes the generally accepted accounting principles, methods, rules, accounting regulations that are obligatory in the USA and obligatory for all the companies that quoted on New York Stock Exchange regardless where the company is registered.

In the USA the SEC (Security and Exchange Commission) won't accept IFRS as the official accounting standards, but IFRS will be an alternative way to use in the USA as well. This can be a beginning of the integration process. For the present USA think their system is better than IFRS, and if the world needs the huge capital market of the USA, they have to accept US GAAP as well. This is partly understandable if you have a look at the capitalization of NYSE (New York Stock Exchange) that is $15,000 billion. The two biggest European Stock Exchanges don't even reach the half of the capitalization of NYSE (Williams et.al. 2008 63-97).

On the other hand in Europe they think IFRS is better to use than US GAAP, because IFRS is more safer, and reliable than the its ?American competitor. A significant difference between the two systems is that IFRS states principles and it leaves the decision-making in everyday questions for accountants, while US GAAP consists of very detailed measures.

There is a great demand for a generally accepted system of accounting standards; there are still too high barriers in this field. In the present situation these high barriers make it nearly impossible to work out an integrated system that is accepted by every participant. There are political, traditional and economical barriers as well. It takes time to demolish these barriers, but it worth the time and ...