A Study on the International Conflict Resolution Approach with Respect to International Financial Reporting Standards

Abstract

There are many differences in accounting treatment that exist among nations. Some examples of the differences across nations are differences in the financial statements included in an annual report and differences in the format used to present individual financial statements. Diversification in accounting has become an obstacle as the world economy is globalized. The globalization of the world economy is represented by growth and spread of multinational operations, cross-border mergers and acquisitions, and internationalization of capital markets. To eliminate these obstacles with accounting diversity, harmonization of accounting treatment has been advocated by many international organizations led by the IASC. Harmonization allows different countries to have different standards as long as the standards do not conflict with respect to the filings of cross-border financial statements. However, there are many arguments against harmonization efforts. Some argued that international standards setting was too simple a solution for a complex problem, and that international standards could not be flexible enough to handle differences in national background, traditions, and economic and accounting environments. Others argued that international standards setting is essentially a tactic of the large multinational corporations and international accounting service firms. Since the restructuring of IASC into the International Accounting Standards Board(IASB) in 2001, many countries including EU nations has adopted the International Financial Reporting Standards(IFRSs) as their national accounting standard. At present, more than 100 countries including EU member countries have adopted and implemented IFRSs. In addition, Korea, the U.S., Japan, and many other non-EU countries are scheduled or expected to adopt and implement the IFRSs in the near future. The international conflicts with respect to setting a single international accounting standard(or standardization) among nations, especially between EU member countries and non-EU countries led by the U.S., have been resolved in more than 30 years. The conflict resolution process has been made steady advance from the stage of diversification to adoption through harmonization and convergence. The major forces for the historical accomplishment are the efforts made by international regional organizations led by the IASB and the support by each nation’s intention to have a single set of international accounting standard.