Cooper, K., International Convergence Of Accounting Standards: The Case Of The Australian Foreign Currency Standard, School of Accounting & Finance, University of Wollongong, Working Paper 4, 1996.
For some time, there has been a push towards the harmonisation of accounting standards throughout the world. Given international trade in corporate securities and the growth of multinational companies, the harmonisation of accounting standards is clearly desirable. However, as this paper shows, full harmonisation is unlikely to be achieved. The reason for this is that accounting standards are not merely technical rules. They have economic consequences and, thereby, have political implications for both the preparers and users of financial statements. The fact that economic conditions vary from country to country, means that accounting methods that are acceptable in one country may not be acceptable in another. Standard setters must be attuned to prevailing economic conditions in their own country or they are likely to face resistance to the standards that are set. This paper outlines the problems faced by Australian accounting standard setters in the development of the foreign currency translation standard. The focus of the paper is the debate over the treatment of translation gains and losses on monetary items. It shows that harmonisation of accounting standards may be compromised when one country faces a different economic climate to others.