Financial Accounting and Reporting

Question: Describe about harmonization against convergence, merits and demerits of harmonization, adoption of IFRS in EU and conceptual framework for financial reporting. Answer: Introduction The main aim of assignment is to examine the financial reporting standards based upon IFRS and European Union. In this particular study, explanation on harmonization and convergence gives detailed understanding on important attributes dealing in various areas. This attributes includes cultural values, ethical consideration (Alfredson et al. 2012). International Harmonization mainly brings out the essential globalization aspects on capital markets. It involves enhancing potential investors for future business activities. It mainly assesses regulatory bodies and maintaining extreme level of quality analysis in the near future. This comparison helps in predicting the consistency and efficiency pattern from financial statements. The next section of the study explains the adoption of IFRS in European Union. It helps in viewing at the transparency level for measuring increased level of comparability analysis in and around countries. Introducing IFRS accounting standards helps in ascertaini ng the financial position of European countries (Wang 2014). Harmonization against Convergence Definition of Harmonization Harmonization is the process for increased compatibility over the accounting practices on setting limits. These standards are free and concerned with logical conflict for improving the level of compatibility (Fayza 2011). It requires essential financial information from various countries in and around the world. This particular accounting standard mainly supports theory on essential harmonization aspects in accordance with IFRS. Harmonization is one of the popular accounting standards for solving the current issues for overcoming the obstacles faced in the near future. Harmonization is a continuous process that accepts Generally Accepted Accounting Principles for future analysis purpose. It ascertains alignment in accordance with best international accounting principles for the same. This particular accounting standard relates with convergence of concepts on GAAP and IFRS. International harmonization acquires creation of globalization factors in capital markets (Dyckman, Magee and Pf eiffer 2011). It enhances ability for potential investors in decision-making process. Useful information ensures asymmetric reflective analysis for assessment of lower cost of capital. This particular accounting standard requires essential research on harmonization techniques that are qualitative in nature. It is important to understand the fact that qualitative research involves advantages and implications over the standard setters for future analysis purpose (Gomez and Ganuza 2011). Harmonization of accounting standards involves realization of comparable financial statements and presentation in detailed format. It involves recognized multinational corporations for setting efficient rules as well as analyzing the financial statements for final decision-making process. Definition of Convergence Convergence mainly involves the process for harmonizing the accounting standards in the most appropriate form. It assesses affiliation from recognized international financial reporting for generating final course of action (Williams 2012). Convergence mainly focuses on high quality assurance in accordance with financial reporting standards. It is important to understand the fact that high quality international accounting standards helps in correcting domestic and cross-border financial analysis. It is important to understand the fact that convergence principles complies of sets of accounting standards for future analysis purpose. It mainly attains professional and academic literature for adopting in IFRS accounting standards for the same. Possible convergence policies tend in achieving required sets of objectives and enhancement of high quality information in an overall manner. Distinction between Harmonization and Convergence Harmonization is the process that helps in increasing the level of capacity especially on accounting practices (Perry 2011). On the contrary, convergence is the process that recognizes harmonizing of accounting standards. Harmonization of accounting standards gives proper blending and combined ways for practices in production of synergistic results. On the other hand, convergence refers to set of accounting standards that mainly provides conceptual ideas. It ensures high level of compatibility from the financial statements (Yano and Honryo 2011). Harmonization of accounting standard provides International Harmonization of accounting processes in bringing out different systems altogether. On the contrary, convergence belongs to particular accounting standard revolves low barriers in free movement among experienced accountants especially in business for jurisdiction (Nobes 2011). Harmonization is the process on reporting standards for proper facilitation on globalization especially in the capital markets. On the other hand, Convergence mainly allows different companies in ensuring lower cost of capital and reflects in the financial statements. Merits and Demerits of Harmonization Merits One of the advantages of harmonizing accounting standards helps entire world economy. It mainly deals with high level of investment decision for globalized economic growth. Harmonization of accounting standards access full accounting information for interpreting risk investment decisions to the concerned experts in the most appropriate form This particular process includes wide usage of tools in relation with financial analysis statement for making the comparative analysis (Deegan and Unerman 2011). It helps in providing essential financial information for same kind of business activities in the near future. One of the advantages of harmonization is the credit stock exchanges. It is noticed that countries possess relative scarce resources for advantageous international accounting standards (Leung 2011). It helps companies for investing in resources for creating regulatory measures for setting the national agencies in an overall manner. Harmonization in International accounting standards mainly reveals reduced cost for association in recognized Multinational Corporation. Demerits This particular accounting standard faces various limitations in culture role for developmental national accounting standards. Harmonization of international accounting standards actually possesses excessive compliance issues. It affects threats to the nationalism for other countries as well (Previts, Walton and Wolnizer 2011). One of the major issues for harmonization includes major underdeveloped countries in superior economies in the most appropriate way. One of the criticisms regarding harmonization of international accounting standards involves greater flexibility. It involves dealing with dilemmas for recognized nations. Adoption of IFRS in EU In accordance with European Union, various accounting regimes revolve adoption of IFRS for the same. Adopting the IFRS process refers directly as endorsement. European Union involves adopting international accounting standards especially in the year 2005 (Needles and Powers 2012). Adopting IFRS in European Union affected large campaign association for attaining various global financial reporting standards in an overall manner. It is understandable that EFRAG reveals the required consideration for various endorsements attributes for future analysis purpose. It mainly helps in encountering positive economic effects for European Union. European Commission consultation mainly affects IFRS in final adoption of IFRS international accounting standards (Scott 2011). Addition to that, adopting IFRS accounting standards revolves around other countries in risk assessment for high level of investment in the most appropriate way. Endorsement Process in European Union Adoption process is mainly carried out by European Union in final endorsement process. In response with commission, it is evident in understanding the fact that Board outlines main functions performed by International Accounting Standards Board (Wahlen et al. 2011). It is important to consider the fact that IFRS comparison possesses difficulty for wide regulatory changes in an effective way. It includes academic research profiles and feedback from experienced members in relation with stakeholders. It is essential to view at the financial reporting standards for ensuring insurance accounting policies in the near future (Deegan and Unerman 2011). As far as International Accounting Standards is concerned, it resolves the complexity issues for disclosing projects for future analysis purpose. Adopting IFRS in European Union indicates figures in the consolidated financial statements for recognized companies. These regulations are shown in the securities markets for proper trading of investment attributes in an effective manner. European Union adopts IFRS especially in financial reporting standards for various consolidated financial statements figures of business organization (Alfredson et al. 2012). Most of the European countries focus on debt and equ ity securities traded especially in the European markets. International Accounting Standards revolves certain undergoing changes in the regulatory markets. Member State influences as well as proposes the potential investors for comparison purpose in creditor protection orientation. Securities Exchange in European countries relates directly with the regulatory exchanges in the most appropriate way (Bloomfield et al. 2015). Adopting IFRS in financial reporting and taxation ways helps in solving various drawbacks in the most appropriate form. Drawbacks of Adopting IFRS in European Union One of the drawbacks in adopting IFRS standards is huge compliance costs. It reduces the ability in contrasting with major companys performance in and around countries (Fayza 2011). International recognition engages in popular convergence programs with operational functions in US. Conceptual Framework for Financial Reporting Conceptual Framework helps in describing the main objectives and concepts on accounting financial reports for future analysis purpose. This particular framework is a tool that ensures: Assistance with Board of Development in IFRS Standards for the various concepts for high level of consistency Preparing various developmental procedures especially on the accounting policies in accordance with IFRS International Accounting Standards Interpretation of important Standards and making the necessary changes for the same It is important to understand the fact that conceptual framework ascertain various financial reporting analysis for further analysis for particular business organization (Gomez and Ganuza 2011). It involves building various popular conceptual frameworks that serve the purpose in filling the gaps from respective aspects in the most appropriate form. Qualitative characteristics Qualitative characteristics involve the qualitative aspects from the above conceptual framework satisfying the major characteristics in an overall manner. This particular characteristic mainly provides required financial information for the same (Leung 2011). It is noted that fundamental qualitative characteristics assess various relevant information on verifiability, timeliness and comparability. Fundamental Qualitative characteristics help in providing essential financial information for users in the decision-making process. It helps in predicting values on conceptual framework insisting on materiality component for future business activities (Mackenzie 2011). International Accounting Board focuses on material specified aspects in covering the main issues for future analysis purpose. Faithful representation helps in bringing various reliability attributes for assessing the economic characteristics on neutrality in an overall manner. Conceptual framework involves various limitations that give rise to intrinsic uncertainties and estimations (Nobes 2011). Attributes in Qualitative characteristics Some of the Qualitative characteristics are as follows: Time factor- One of the qualitative characteristics is the timeliness factors that focus on rendering information on timely manner. It requires enough time for final decision-making process by the financial analyst of particular business organization (Perry 2011). It involves competent decision makers for viewing at the level of competency and control over the decisions undertaken on timely manner. Verify - One of the qualitative characteristics involves checking on the verifiability attributes for future analysis purpose. It focuses and provides well-informed financial information for attainment of faithful representation in an overall manner (Previts, Walton and Wolnizer 2011). Understandability- One of the qualitative characteristics involves ascertainment of understand ability attributes and providing essential information in user understandable form. The main aim of financial analyst is to interpret the financial reports in the particular business organization (Scott 2011). Addition to that, misleading information will affect the smooth functioning of business enterprise. It will lead to unfinished preparation of related financial reports for future business analysis. It is advisable to reduce and prohibit usage of misleading information that is understandable by the users. Proper information gathers examining financial reports analysis in understanding the concepts for economic activities in an overall manner. Comparison- One of the qualitative characteristics includes comparability attributes and generates reliable information for practical aspects. It assesses various cost information concerning business entities for regulatory bodies for future analysis purpose. Comparability ensures viewing at particular similarities and differences in accordance with financial reports on recognized business organization. Accounting Relevance Accounting Relevance helps in providing financial information to the potential users in financial decision-making process. FASB committees using financial reporting that provide enough relevance to the users in an overall manner. Accounting Reliability Accounting Reliability renders financial information for checking on the reliability attributes for future business activities. It refers enough trustworthiness of various financial statements for smooth functioning of business enterprise. FASB commits with reliability issues present in financial statement of business organization. Accounting Consistency Accounting consistency helps in providing accounting information to the end users. It will help in giving guidance on comparing with financial statements. Changed accounting treatment includes accounts receivable and it is difficult to compare balances in current year. Accounting consistency refers to various principles of companies by using accounting methods. These methods help in recording similar transactions over time. Conclusion At the end of the study, it is revealed that financial accounting reports provide essential financial information for future analysis purpose. First task comprises of two main concepts on Harmonization and Convergence based upon International Accounting Standards. On critical analysis, harmonization proves to be better accounting standards when comparing with convergence. Convergence fails to address the issues on aspects like cultural, ethical and economical attributes. It involves the regulatory requirements addressed in the financial reporting standards. 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