Assignment, which was based on the Christopher Nobes article. In your submission you speculated on a classification of accounting systems that might come into being 10 years into the future. You specified what factors motivated your particular classification.
Assume that harmonization of accounting standards became a reality. Consider how your classification would change. Based on what you have learned since your Week 02 assignment and the assumption that harmonization now exists, update your accounting classification, and resubmit.
In addition, include a 2-3 paragraph essay that discusses which side of the harmonization issue that you support. Make sure that you support your position with research.
Accounting Systems
Reasons which led to differences in the accounting systems
The main reasons which lead to the differences globally according to Nobes are divided into two that are: the classifications of countries according to the accounting environment or systems. This is whereby different countries have different accounting systems and this will lead to the difference and also a country can have one or more types of systems where companies with publicly traded securities have a different system and small private companies use a different system. In some countries they have rules in that they indicate that most of the companies use same system for example, in U.K they have Companies Act 1985 and the accounting standards which apply to all the companies while in some countries like US the accounting systems are obligatory to small minority of companies which are only registered with Securities and Exchange Commission. Secondly, where countries lack clarity on what to examine or classify in that there are two terms which are commonly used and this are ‘accounting' which means the financial reporting and ‘system' which deals with regulatory agencies. In financial accounting, which sometimes are similar to the practices in companies but at times there might exist companies which may move away from those rules and make their own decisions outside those rules. In systems, there is an issue on whether to separate the disclosure from measurement practices where Nobes has stood still on measurement practices.
The author tries to explain how different countries differ widely when it comes to accounting systems because they have rules which differ from one country to the other and this brings the whole difference. Because the accounting systems is an important aspect worldwide it entails how organizations, businesses keep track of their financial transactions like incomes, expenses and this is why the author have to take a look at it widely. He has also discuss about the financing systems in different countries which assist other countries to know how other countries manage their finances so that they can weigh if it will can be applicable in their own countries or not. He has taken into account that it can be of advantage when there is convergence of global financial systems rather than each country having its own. Also, in accounting systems it always manages several things which include the inflows in the company, the creation of a nice invoice that help in the growth of business because it will create confidence to customers, keeps track of all the liabilities.
When it comes to classification of accounting systems it helps in the comparison of national accounting regulations and practices of different countries so that there will exist grouping of countries thus, it provides elements that distinguish country's accounting systems. This is an important aspect because it is there to provide information to people who make decisions concerning the economy like the investors, government agencies, tax authorities and others. There are two different approaches which Nobes came up with that include: extrinsic (deductive) and intrinsic (inductive). In deductive approach, it is based on identification of relevant environmental factors (legal systems, tax systems, culture) and the inductive approach deals with classifying basing on the analysis of the accounting practices. In the coming future most of the countries will focus on the long term approach which will lead to more income and profits which will be beneficial to the global economy. The two approaches can be taken into account because it will apply to the economy of a country and most countries must adopt them and come up with rules which will regulate so that some of the organizations may not take advantage.