The culture, history and characteristics of accounting difficulties have shaped the variety of accounting practices in different countries. Since the Internet was commercialized in 1995, information is now accessible with a click of a button. Because of this rapid transfer of information, different cultures and lifestyles have become more similar and connected with each day. Additionally, because of the developed countries creating new businesses in various markets across the world, a standardized accounting system has become much more important than before.
In 1973, when the International Accounting Standards Committee (IASC) was formed, accounting bodies representing the global markets were selected to be a part of this committee. The United States was also selected to be a part of this committee. One of the main objectives of this new committee was the harmonization of the global accounting standards. The focus of the main objective is to reduce the degree of variation in the accounting practices (Basoglu 2009). Since the formation of the IASC and the International Accounting Standards Board (IASB) in 2001, nearly 70 countries have adopted the International Financial Reporting Standards (IFRS). Additionally, roughly 23 countries have either mandated IFRS or allowed some of the companies to voluntarily adopt IFRS. However, as of 2007, at least 40 countries continue to require domestically developed accounting standards over IFRS, and this list includes some large economies like Brazil, Canada, China, Japan, India, and the United States (Ramanna 2009). Since the 1930’s, the U.S. Securities and Exchange Commission (SEC) has been moving towards implementing IFRS but it has not yet occurred. In July 2012, when the Final Report on Work Plan for Global Accounting Standards was released, the result (not implementing the standards) focused on the potential issues, rather than recommendations and solutions for a unified future. Therefore, to date, the United State has not applied the IFRS to its accounting practices.
In Eurasia (the combined continental landmass of Europe and Asia), the unification of these countries is derived from their similarity in geographical location. Their common history allows them to adapt to new-shared regulations more easily. The United States, as a country located on a different continent which is physically distant from Europe and Asia, was isolated from the interaction with the other countries. This means that the United States could not take advantage of interacting with other countries the same way that say, the countries of the European Union interact with each other.
In Eurasia, the people in each country have the same history and this brings about similar ideas and beliefs. Therefore, mandating the integration of new rules and regulations in many countries is feasible. However, the United States community consists of assorted immigration and building its own unique system was needed. It would be very difficult to apply general laws which might be accepted by someone but not other people. That is why this country developed and grew its own unique culture from the ground up.
Furthermore, the economic growth in European countries varies from one to another as expected. The effort of creating a union that aims to maintain common policies and systems of law in Europe has not apparently reached its potential. But the economic system created in the United States has run and produced the most important asset, knowledge and information, resulting in one of the world’s largest economies despite the current recession.
The United States will not be able to adopt IFRS for many years to come. It needs to protect its capital market and economic power. Changing the current accounting standards, thus the economic system, poses a greater risk for this country. Today, the communication between countries and the information they have makes everything possible. If desired, it would be possible to institute a international accounting system in the United States, thus working towards a mutual aim.
Ramanna, Karthik. Harvast BusinessSchool. Why do countries adopt International Financial Reporting Standards?. 2009.
http://www.hbs.edu/faculty/Publication Files/09-102.pdf >
Basoglu, Besalet. Manhattan College. International Accounting Standards and Selected Middle East Stock Exchanges. 2009.
www.luc.edu/orgs/meea/volume4/Basoglu Revised.doc >