Accounting Classification and the International Harmonization Debate - Literature review Example

The paper "Pending Accounting Issues Harmonization" is an excellent example of an essay on finance and accounting. These include IRFS and GAAP. International Financial Reporting Standards (IFRS)IFRS has been designed in a way that countries all over the world can report their financial statements in a uniform or a standard format so that there would be a better chance to observe comparability in the financial reporting and interferences of different countries.

It may be called a global business language. IFRS was first referred to as international accounting standards (IAS) (Mirza et al., 2010)Generally Accepted Accounting Principles (GAAP)GAAP are guidelines or a framework set out by the local accounting regulatory bodies in different countries. In the US, FASB issues GAAP, which accountants have to follow in order to generate prepare, and report financial statements of businesses (McEwen, 2009). Harmonization of International Accounting StandardsHarmonizationHarmonization refers to a process in which accounting bodies of different countries aim to reduce the problems emerging from differences in the financial reporting standards.

The purpose of harmonization is to set a high level of comparability in the business world. The difficulties companies face can decrease by removing disparities and differences in reporting of financial records and information and its interpretation (Shil et al., 2009). It is argued by Carmona & Trombetta (2008) that harmonization of international accounting standards may still leave differences in reporting of financial information due to the strategies of different countries depending upon their laws and regulations for their companies.

However, harmonization favors the unification of financial reporting standards to be followed by businesses globally. Challenges of HarmonizationAccording to Wang (2014), there will be an increased positive market reaction when companies would have to report their accounts using international financial reporting standards. It indicates that there is a sense of harmonization with the help of IFRS that supports the ease of transfer of financial information, preparation of financial statements, and comparability of financial data between different countries (Wang, 2014).