1

PUBLICAT
VOLUMUL: IMEA 2004. Conference Proceedings
APARITIA: Pardubice / Cehia
ISBN: 80-7194-679-6
ANUL: 2004
The acoouning standards in the globalization process
Razvan Valentin Mustata
Raluca Oana Iosivan
Abstract
In a world where a globalization has become a common part of the language, global
standards and, particularly, existence of the International Financial Reporting Standards are a
necessity. Financial reports are the most fundamental way in which a company communicates
its results and financial conditions to outsiders.
The way in which developing countries respond to the current forces driving
globalization will have a major effect on their accounting and reporting systems, and
development process, generally speaking, in the coming period. The adoption of IFRS will
introduce an almost entirely new basis of reporting for many companies. This might represent
to re-create reporting systems.
With the globalization of the world economy, international convergence of accounting
system is attracting attention in many countries. International convergence of accounting
standards is inevitable as a result of globalization of the world economy and IFRS is an
important achievement of the convergence process.
A phenomenon by the name of globalization
It is being discussed more and more about a phenomenon which manifests worldly,
but with a zonal and local action. Either the treating of this theme are more or less relevant, or
the view points from which the phenomenon is viewed are or they are not the most favorable,
every single time when there is a new occasion the new global phenomenon is brought into
discussion. It has been the situation when the researches regarding the global economy had
focused on the study of this phenomenon, and what it had been found was the fact that it is
about a specific phenomenon of the end of the century and millennium, which has been
amplified once with the evolution and the development of the technology, of the international
trading and of the economy, in general. This phenomenon is named globalization, and the
specialists had tried to circumscribe the globalization with relevance and objectivity as much
as possible.
The laureate of the Nobel Prize for Economy Joseph E. Stiglitz asserted about the
globalization, that principally, it consists of the more powerful integration of the countries and
their population, as an outcome of the significant deflation of transportation and
communication costs and of the freeing of the artificial pikes ahead of the circulation of the
goods, of the services, of the capital, of the acquaintances and (in a less measure) of the
people between the states. (Joseph E. Stiglitz, 2003: 37). Another point of view defines
2
globalization as being the very dynamic process of the development of the interdependence
between national states, as consequence of the amplification and profoundness of the
transnational bindings in larger and more diverse spheres of the economic, political, social,
and cultural life and having as inference the fact that the problems become rather global than
national, requesting, at their time, a solution rather global than national. (I. Bari, 2001: 19)
As any ampleness phenomenon, the globalization hadnt been exempted of hostile
reactions, of disagreements and adverse actions. But the controversies formed by the present,
singularize that not the globalization is the problem of the malfunction often founded after the
manifestation of this process, but the manner in which it had been developed by now. A part
of the problem is represented by the international economic institutions IMF, World Bank,
and W.T.O., that participate at the establishing the rules of the game. These institutions
have taken actions more in the interest of the advanced countries then in the interest of the
country in process of development. In what the evolution of the process of the globalization
concerns by now, the controversies take into consideration, firstly, the implied economical
aspects and the institutions that generate and impose the rules of the economic game.
(Joseph E. Stiglitz, 2003: 329)
The large majority of the positive aspects of globalization are unanimous appreciated,
the controversy appears when the economic aspects of globalization are involved , and of
course the respective international institutes who are imposing the rules.
Being a contested phenomenon, the necessity of the making of a viable choice
becomes obvious. The idea of the existence of an alternative at the process of the
globalization carried on to the apparition, formulation of some possible alternative of
counterattack of the phenomenon. Some specialists in global problems had asserted that the
alternative to the process of globalization, considered to be determined mostly by the United
States, is a diplomatic way of existence of the anti-globalization movements.
Hans-Peter Martin asserted that against the danger of the globalization, the European
states can and have to act together. (P. M. Hans, H. Schumann, 1999: 383) Despite the fact
that we consider that the existence of a firm and direct opposition of Europe against
Americans is not the solution of a success against globalization, due to the unquantifiable
consequences under the economic aspect of such dispute. Nevertheless, we appreciate that the
existence of an alternative to this process as complex as globalization, can have positive
effects, due to the existence of the competition and of the manifestation of the competition
laws. It is true that we have to deal with a debate competition between two phenomena that
manifest in this world and not between two entities of the gender of some companies in
competition in the market. The power in our world is given by the economical force that we
have it. In this sense, European Union would become a new pole of the international power, if
it adopts an alternative attitude to the American world and not as opponent of the latter one. In
this way, United States will decrease its status of global power, but on the other hand,,
together Europe and US can become the only alternative to the Asiatic world, which is in
full moment of devilment, as a consequence of the slow, sure process of transition, but with a
precise target.
On the other hand, the specialists in the area consider that the globalization process is
one with benefic effects that can be observed easily for a medium- and long-term, but in the
same time it is an unavoidable process. In this context, it is recommended: the implications of
the political decisions at international level to be more seriously taken into consideration, and
the interest of all the states of the world, especially of those the undergo change countries and
the poor ones, is taken into consideration and the followed purpose doesnt excuse anymore
the used means. It is recommended that international organizations as International Monetary
Fund and World Bank to re-examine its attitude and conception about world states and
national economies, so that they, IMF and WB modify the present status of the latter ones as
3
laboratories of study, into patients with a sure diagnostic and treatment. Joseph Stiglitz
considers that, without reform, the reaction of protest that has already been triggered will
amplify, and the discontent about the globalization will decrease.
It has to be recognized the reality according to the globalization of the economy had
brought welfares to the countries that they had took advantage of it identifying new markets
of export and draw the external investments. The countries that had the most to earn were
those that assumed their own faith and understood the role that the state can play in the
process of the development, renouncing to the idea that the market is capable to solve itself
the problems. (Joseph E. Stiglitz, 2003: 378) So, we consider the globalization as
representation of the reality and we sustain that every country interested of its own future has
to take into consideration the causes, the manifestation way and the effects of the
multidimensional and complex process, called globalization.
The accountancy, limited just to register economic and accounting facts, had enhanced
its appliance sphere as a result of theological and doctrinaire mutation. Doctrinaire mutation
outlooks to focus the efforts towards the conceiving of fundamental accounting principle and
accounting conventions, the objective of accountancy being defined as the financial
statements that assures an accurate image of the economic act. This mutation comes as a
result of internal and international accounting normalization .
The normalization is an activity that establishes norms, with the final aim of obtaining
documents that comes with some solutions for technical or commercial problems that appears
in economic, scientific, and social relations. (French Decree:1984) The normalization is
supposing the existence of practices to be regularized, through the selection of a common
framework, considered as being the most sufficient, so this is the way to be standard.
Accounting convergence from necessity to reality
Referable to the evolutions that are recorded in the domain of the accounting
regulations, both at national level, and international level, a new concept called convergence
appeared, being used to express the efforts to bring at a common denominator of these
regulations, concept that seeks to take the place of the concept of harmonization used till now.
The concept of harmonization, from accounting perspective, represents a process of
alienation of the accounting rules from different states. (Adela Deaconu, 2003: 118) It can be
asserted that harmonization represents a complex process with major implications, which
manifests in the area of accounting regulations and whose final purpose is the alignment of
the accounting norms existent in different states, and the concept of convergence represents a
process of making suitable the accounting rules. (Adela Deaconu, 2003: 119)
In the conditions of the existence of two concepts that satisfies the same process that
manifests in the accounting domain, it is posed the problem if harmonization, and the
processes that it implies, from a conceptual point of view is stale? Contestants of the process
of harmonization say this process failed because there was no veritable conceptual base, there
was no real motivation to go outside the borders of the country (despite of the fact that
national legislation had been aligned in a large measure, though the practice took only in a
small measure the existent regulations), and on the other hand it had been remarked the
existence of connections too confined with taxation and juridical. The arguments that can be
brought for sustaining the failure of the harmonization can be varied, but it can be brought
examples for sustaining this process too.
From the perspective of the investors existent or potential the accounting
convergence has a special significance because there is the fact that they can understand better
the financial situations of the external partners, and also because of the facilitating the
processes of consolidation of the accounts from the multinational companies.
4
Beyond the interest of investors, the accounting convergence is actually an ample
process that manifests between two enough different worlds, specifically between Americans
and Europeans, between FASB and IASB. The purpose of the process of accounting
convergence is to attend to a common point between the American GAAPs and the
international rules of accounting, represented especially by IFRS. The common point between
these two sets of accounting regulations is actually that stage in which the accounting
convergence had been done. It is a desideratum difficult to reach in the absence of a political
determination manifested from both parts.
Financial Reports the object of the accounting convergence
I.A.S.C. (International Accounting Standard Committee) appeared in London, in
29.06.1973, at the initiative of professional organizations from many important countries,
same as: Australia, Canada, France, Germany, United States of America. This organization
includes 142 national organizations from 103 countries.
The globalization process, so being the uniformisation process determine the
appearance and coexisting of an judicial system (AQUIS) and social, so being the protest of
those big analysts Americans or Europeans found an answer. The first years of it existence the
activity of IASC was considered as an intellectual whim that a manner of supporting the
convergence process.
By the 1995 Notification, the EU Commission started the third phase of the
accounting harmonization process. Already in the eighties, and particularly in the nineties, the
number of the European companies listed at the NYSE who were supposed to prepare their
financial statements according to the US GAAP was growing. Also, the International
Accounting Standards Committee (IASC) reached in 1995 an agreement with the
International Organization of Securities Commissions (IOSCO). According to the agreement,
the organization shall recommend to its members (national commissions) to use IAS in
drafting the financial statements of the listed companies. Significant for the harmonization
(1995) was the relation between the Directives and IAS.
In 1994, the European Accountants' Federation (FEE) studied the differences between
the Directives and IAS. The conclusion was that IAS, with minor exceptions, is consistent
with the EU Directives and may be proposed as a qualified basis for drafting of the financial
statements. The other research of differences between the Directives and IAS was carried out
by the EU Commission in late 1997 Its conclusion (same as that of FEE) was that, all options
taken, there are only minor differences in the consolidation field. IASC then decided to
examine each standard not in harmony with the Directives. The most efficient way of
harmonization of IAS and the Directives, even at minimum, in the area of consolidation
would be through a higher influence of the EU Commission to the IASC Council. That means
also a higher number of votes (of EU members) in the IASC Council. There are at least two
disturbing factors for a higher EU influence in IASC Council, namely: (1) EU is unable to
dictate the IASC Council members and (2) EU members are not a cohesion block, instead
there are significant differences between Great Britain and the continental EU (primarily
Germany and France).
Thus the EU Commission in 1995 adopted the internal document pointing out to the
problems of the international companies' financial reporting. The companies should draft two
sets of financial statements. One should be harmonized with the Directives and the other
should be harmonized with the international financial markets requirements. Between them,
there are sometimes significant differences with positive and negative effects on the financial
markets. One of the best known German global players Daimler Benz in early nineties went
on NYSE listing. For transfer to NYSE, they had to adjust their financial statements to the US
GAAP standards. The adjustment was defeating.
5
So the EU has declared its options in what the convergence process is regarded. When
we speak of the accounting regulations, we should have in mind two sets of business entities
subject to the accounting regulations. They are (1) legal entities listed on the national or
international financial markets and (2) legal entities not listed on the financial markets. Their
accounting is governed by the laws or standards of the accounting profession.
A research in the accounting regulations of developed countries encompassed the EU
countries plus G7 group countries other than EU members.
The research was carried out on the basis of several sources, among which the most
significant are: (1) European Accounting Guide, (2) European Accounting Review and (3)
Statistics of the International Accounting Standards Committee (IASC/IASB).
What IFRS means and represents? The specialists in the domain consider that
financial report represents the fundamental way that a company communicates, to the external
beneficiaries, its results and its own financial conditions. (Shuping F., 2002: 3).
In a larger acceptation, the external beneficiaries are represented by the assembly of
the entities interested of the information regarding a certain company, both the existent ones,
and the potential ones. Beneficiaries of the accounting information can be considered a
complex of users formed of: the present and potential investors, the hired personnel, the
financial creditors, the producers and other commercial creditors, the clients, govern and its
institutions and, not at last, the public. (IASB, 2001)
In the context of the financial situations, it has been often spoken about the purpose
that these have it and in this sense the existent acceptances are varied. The International
Standards of Accounting present the purpose of the financial situations as being represented
by the providing of the information regarding the financial position, the performances and the
changing of the financial position of the corporation, which are useful to a large sphere of
users, in the endorsement of the decisions of investments or management. According to IASB
the presentation and the communication of a lot of sets of financial situations are taken into
consideration, according to the specific international necessities of each category of users and
beneficiaries of the information.
The financial situations have the purpose of accounting about the transaction realized
by the administration of the corporation, including the accounting about the manner in which
this one used the resources put at disposition. In this context, it has to be said that the
responsibility regarding the elaboration and the presentation of the financial situations are in
the duty of the administration council or in the duty of other equivalent members of
management.
The acceptance of IFRS or the accounting convergence represents today a global
phenomenon, which beyond its economical advantages produces an apparent climate of
peace. (www.pwcglobal.com: 02.05.2004) For the simple reason that states from the world,
from different continents, some of them, declared political and economical rivals, wishes the
realization of this desideratum. From the companies perspective, the acceptance of the IFRS
represents a great challenge, a test that will be gained only by those who are capable to adapt
under way, by those who prepared this changing early. Those companies that have already
started the processes of training for the acceptance of the IFRS had observed that such change
implies much more than a consolidation of the financial situations. Such change implies both
the financial capital, and especially the human capital.
Many companies which started the process of accepting the IFRS had remarked that
these standards help them to have access on the international market of capital, and also to
reduce their costs. Communication in a single international language facilitates the increasing
of the possibility of financing. In the conditions of a more and more competitive international
market, the international standards of financial reporting permit to the investors to produce a
comparison between the performances of different companies, on the international level. On
6
the other hand, the companies that can not be capable to reach the level where they can be
compared with the others competitors, from self-interests, or from interests that related to the
national regulations, will be disadvantaged and as consequence, their capacity of drawing the
capital and of producing value is decreased. (www.pwcglobal.com: 04.05.2004)
Globalization, convergence, reporting standards
Globalization can be a feature of the welfare and has the possibility to bring richness
to everybody, especially to the rich people. But, the manner in which the globalization process
develops, including the international trading agreement that had such an important role in the
elimination of those borders and politics imposed to the undergo change countries in this
process, has to be radically rethought. The adepts of globalization consider that globalization
means progress, and, as consequence, the undergo change countries have to accept it if they
want to progress and to fight successfully against the poverty. Beyond the economical and
political implications, globalization has contributed to the increasing of peoples health, and
also to the intensification of the struggle held by the civil society for democracy and social
justice. (Joseph E. Stiglitz, 2003: 10).
We can assert that the accounting convergence process is imminent and can be
considered as a result of the globalization phenomenon of the global economy. The
international financial reporting standards (IFRS) can be classified as being of an important
realization in the domain of the accounting regulations. The convergence of these standards
has to be considered as an important forward step to a world that feels the shock provoked by
the misfortune and bankruptcy of some multinational companies. There has to be elaborated
realistic plans for the success of the convergence, taking into consideration the fact of the
observance of the clear and real effects of this process might take more than a financial year.
An important role in all this process it will be played by the people, those who are called to
implement the international accounting regulations at national level, and especially in own
company. For this reason it is important that a company to beneficiate of people who fully
understands what they have to do and who really can contribute to the success of this
changing. The key of these changing is the simplicity if the standards are clear and precise,
the life of those who will implement the standards will be easier. (www.pwcglobal.com,
10.05.2004)
This tour de force of the global situation, in witch the implementation of IFRS is
regarded makes us turn to the Australian continent, were until 2005 all the big companies
have to have adopted the IFRS.
The US SEC consulted a few years ago on what change it should make to its
registration requirements in relation to IFRS. No indication has been given of any proposed
relief from the reconciliation and with the recent arrival of a new chairman and chief
accountant it is likely o be some time before any specific policy proposals will appear.
However, recent speeches from the chairman are more hopeful and it is expected that the
issue will be reviewed again in 2005. It is expected that the reconciliation requirement will be
removed as soon as possible, but this will depend upon progress made on the further
development of accounting standards and the development of an effective enforcement system
in Europe, and elsewhere.
There can be shown significant differences between IFRS and US GAAP at present.
This is and particularly in the areas of: impairment, discounting of provisions, and some
business combination issues such as the recognition of in-process research and development
and other intangibles. The IASB and the FASB have both set out to reduce these differences
where possible, consistent with improving the quality of financial statements. Thus the
differences will become less significant over the next few years.
7
Literature
[1] Alexander, D., Archer, S.,: Miller European Accounting Guide. Aspen
Law&Business. Gaihtersburg. 2001.
[2] Bari, I.: Globalizare si probleme globale. Editura Economica. Bucuresti. 2001.
[3] Boden, R., Baskaran, A.: Globalization and the commodification of science. Ed.
RAW Rhodes. London. 2000.
[4] Deaconu, A.: Impactul convergenei contabile asupra reglementrilor i practicilor
naionale- Contabilitatea mileniului III. Editura Sincron. Cluj Napoca. 2003.
[5] Martin, H. P., Schumann, H.: Capcana globalizarii. Editura Economica. Bucuresti.
1999.
[6] Oprean, I.: Bazele contabilitii agenilor economici din Romnia. Editura
Intelcredo. Deva. 2001.
[7] Shuping, F.: Strengthen Co-operation to promote International Convergence of
Accounting Standards. Hong Kong. 2002.
[8] Stiglitz, J. E.: Globalizarea. Sperante si deziluzii. Editura Economica. Bucuresti.
2003.
[9] United Nation Economic and Social Council: The realization of economic, social
and cultural rights: Globalization and its impact on the full enjoyment of human rights.
2000.
[10] http://www.pwcglobal.com
Raluca Oana Iosivan
Razvan Valentin Mustata
T. Mihali Street, No. 58-60
400591 Cluj Napoca
Romania
riosivan@econ.ubbcluj.ro
rmustata@econ.ubbcluj.ro