International Acoounting theory - Essay Example

The process of cutting down disparities among national accounting regulations, also referred to as the process of harmonization, has undoubtedly made steps forward since profound work began on it as freshly as 1967. Taking into account the dissimilarities that are present between the accounting goals of nations at various levels of progress and with various legal structures, possibly the astonishing thing is that any development at all has been accomplished in such short notice (McCarthy 2003).

There are several theoretical assumptions of categorizing countries when taking into account their accounting requirements. One apparent difference is between the democracies and the authoritarian administrations that govern a great portion of the world. This difference does not match up efficiently to a partition between free enterprise and centrally regulated economies, because there are democracies such in the case of India with a considerable section of the economy in the control of state-owned and state-regulated enterprises, and there are those countries which are communist such as Hungary and Yugoslavia that leave capacity for a number of free enterprise (Solomons 1986).

The relevance of this difference for financial accounting depends in the contribution of private investors as well as the capital market. They will commonly be much more relevant in free enterprise economies, and financial accounting will function in the same way more important role in the allocation and distribution of scarce resources (ibid, 53). Another evident difference is between the industrialized nations of North America, Europe, Australia and Japan and developing nations of Asia and Africa.

Once again, the distinction is one of scale rather than of type. Every country is developing or retrogressing, and accounting has its task to fulfil in that growth in all of them. Majority