Thus, the higher level of commonality of GAAP and general financial reporting practices the lower the accounting-related risk to global companies and investors. The IASC is the principal organization that is developing international accounting standards, and it is through the IASC that proponents of the international acceptance of the body of IAS pursue the implementation of these standards globally (Quinn 45).
One approach to the enhancement of harmonization in accounting practices while attempting to satisfy some of the opposition to harmonization is the development of a classification structure that would introduce higher levels of harmonization among the countries included in a category group within s classification structure than would exist (at least initially) among the various classification categories. Several potential systems for the classification of national accounting practices have been proposed. Among the more prominent of the proposed classification-systems are the following (d'Arcy, 2001):
1. The first of the proposed classification systems would group national accounting systems according to cultural commonalities. The assumption underlying this proposed classification system is that one can differentiate national accounting systems according to a cultural behavior model such as the Hofstede (22-29) model (uncertainty avoidance, power distance, masculine/feminine, and individualism/collectivism). One proposed classification system based on th
2. The second of the proposed classification systems would group national accounting systems according the characteristics of the environment within which the function of accounting takes place legal system, taxation system, capital market structure, and the influence of the accounting profession in the establishment of GAAP (Nobes and Parker Part 1). This classification typically is referred to as the Nobes Micro-Macro Model. One version of a classification based on the Nobes Model is illustrated below on this page.
The IASC has developed 34 International Accounting Standards (IAS) that are currently being applied. Ideally, the issues raised by the globalization of the securities markets would help drive development of international standards for accounting, auditing, and disclosure by issuers. Under such a model, a standard prospectus would be developed that would set forth agreed upon international standards for all blue-chip companies. Similarly, with international standards concerning capital adequacy, customer protection, principles of business conduct and insurance of customer accounts, financial institutions could be freely established on a global basis and covered by international regulations.
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