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"Accounting is as old as money itself". Chanakya in his Arthashastra emphasized on
the existence and the need of proper accounting and auditing. However, modern system
of accounting owes its origin to Pacioli who lived in Italy in the
18th century. In those early days, business transactions were not so complex due to the existence of small and
easily manageable organizations, which were managed by the proprietor himself.
"Accounting to be useful on an integral basis for economic development must be convenient
and practiced in a broad context. It must encompass the private and public
enterprises (financial and management) and government and national accounting, these
branches of accounting refers to accounting information system." Accounting standards
have been and are being formulated at different levels. At the international penal,
the accounting standards are set up by the International Accounting Standards Board.
For different countries, the accounting standards are formulated by duly recognized
and constituted authority keeping in mind: the objective of harmonizing the
national accounting standards, and the legal provisions of accounting practices and other
factors relating to that particular country. According to AICPA-1 (1973), "Accounting
standards may be regarded as a principal which has been logically derived from the objective
of accounting, which has been awarded the stamp of authority with the intention
of producing guidelines for formulation of accounting practices comparable with
the objective". In this paper, an attempt has been made to exhibit the disclosure
practices in India by Indian companies by dividing them into three levels as per the Institute
of Chartered Accountants in India (ICAI) norms and further a questionnaire survey
has been conducted to reach a conclusion that up to what extent Indian companies
are complying with the Indian as well as international accounting standards.
Does accounting have an international dimension? Epstein and Mirza (2001)
consider accounting "as a tool to aid in measuring economic activity". The function of
accounting is to provide information about economic entities that are important for
economic decisions (Kam, 1990). Accounting is referred to as the language of business
(Mueller, 1991). But which language does accounting speak? When talking about the language
of accounting, one can conclude that it must speak an international language. We
must therefore, ask how much has accounting succeeded in establishing itself as
an international language.
The technical advancements and the transmission of information, people, goods
and services have brought the world closer. Growth in international trade and capital
flows have triggered a rising economic integration. Because of these developments there
has been an international harmonizing effect upon many customs, practices and
institutions. In business life it has led, among other things, to a desire to harmonize accounting
standards. International businesses are no longer confronted with only accounting problems,
which end at domestic borders. When companies cross borders, they confront with new
cultures, challenging new laws and different political systems. Besides that international
companies must deal with different accounting standards abroad. For example, in Germany,
companies use the German standard (Handelsgesetzbuch). In America, companies have to use the
US Generally Accepted Accounting Principles (US GAAP). Another problem concerning
the variety of accounting rules is that, all financial statements or accounting standards are
not accepted in all stock exchanges. Companies, which would like to be listed, for
example, at the New York Stock Exchange (NYSE), have to prepare in addition to their
national financial statement a financial statement in accordance with the US GAAP. In addition
to their national financial statement they can as well prepare a reconciliation. This
means that main variables, for example, net income have to be computed in accordance with
the rules of the US GAAP. Such practices mean extra costs for the companies, which
influence the competition for capital. For investors, it implies confusion about which
accounting standards are right and which result is more credible. |
