AKUNTANSI INTERNASIONAL

CHAPTER VII: INTERNATIONAL ACCOUNTING HARMONIZATION

ASEP SURYADI

20208200

4EB11

1. Harmonization and standardization of differences in accounting standards applicable

Harmonization of accounting standards

Meaning of the harmonization of accounting standards

The term harmonization as opposed to standardization has the meaning of reconciliation on a variety of different angles. The term is meant to be a practical approach and reconcile rather than standardization, especially if it means standardization procedures owned by one country should be applied by all other countries. Harmonization becomes an important part to produce better communication on information that can be interpreted and understood internationally.

The definition of harmonization is considered more realistic and more likely to be accepted rather than standardization. Each country has a set of rules, philosophies, and goals of each at the national level, aimed at the protection or control of national resources.

Benefits of harmonization

There are various benefits of harmonization. First, for many countries, yet there is a codification of accounting and auditing standards are adequate. Internationally recognized standards will not only reduce the cost of preparing for these countries but also enables them to immediately become part of mainstream accounting standards internationally.

Second, the growing internationalization of the world economy and the increasing interdependence of countries in the core with international trade and investment flows is the main argument of the existence of some form of accounting and auditing standards applicable internationally.

Third, the need of companies to obtain capital from outside, given the insufficiency of the amount of profit in the hold to fund projects and foreign loans are available, has increased the need for harmonization.

Harmonization versus Standardization

Globalization also carries the implication that things that were once considered the authority and responsibility of each country is no longer possible are not affected by the international community. Similarly, financial reporting and accounting standards.

One of the qualitative characteristics of accounting information is to be compared (comparability), including international accounting information also must be compared as it is important in the world of international trade and investment. In the event wanted to obtain full comparability is broadly applicable internationally, required standardization of international accounting standards. On the other hand, the existence of certain factors in a country still needed to make the national accounting standards applicable in the country. It can be seen in the comparison view of financial accounting standards in Indonesia and the United States in advance. In the Indonesia Financial Accounting Standards Accounting for Cooperatives which are not necessarily required in the United States. Based on this, the less likely and less feasible to create a complete international accounting standards and

Comprehensive Concept is more popular than standardization to bridge the wide variety of accounting standards in different countries is the concept of harmonization. Harmonization of accounting standards is defined as minimizing the differences in accounting standards in various countries (Iqbal, 1997:35).

Harmonization can also be interpreted as a group of countries that agree on an accounting standard that is similar, but requires the implementation does not follow the standard should be disclosed and reconciled with mutually agreed standards. Institutions that are active in the business harmonization of accounting standards, these include the IASC (International Accounting Standard Committee), the United Nations and the OECD (Organization for Economic Cooperation and Development). Some of those who benefit from the harmonization of these are multinational companies, international accounting firms, trade organizations, as well as the IOSCO (International Organization of Securities Commissions).

2. Pros and cons of international harmonization of accounting standards

Until the present time, western countries are still heavily promoting the need for harmonization of international accounting standards. The main purpose of these efforts is to improve the comparability (comparability) of financial reporting, especially for multinational companies operating in various parts of the world. Not surprisingly, the western side to form a body called the International Accounting Standards Committee (IASC), which has now changed its name to International Accounting Standard Board (IASB). The agency is in charge of producing international accounting standards (International Financial Reporting Standards-IFRS).

The main reason the presentation of financial statements that meet the standards for the survival of the company itself in the future, both in terms of internal and external users. Public recognition will comprehensiveness and transparency of financial statements of a publicly-listed companies increase the pressure of the business sector to provide financial statements in accordance with the standards.

Other reasons to make it easier for investors who want to make their investment activities in other countries, which require the financial statements of international standard in order to know the state of the company.

Although the IASB has no power to require all countries to prepare financial statements under International Financial Reporting Standards, to date the agency can be said to be very influential in the process of harmonization. This is not surprising because the capitalist countries, especially the United States played an important role in producing these standards. In other words, harmonization is the harmonization of international accounting standards are based on Anglo-Saxon accounting model, without notice and consider the system of accounting, environmental, economic, social and cultural rights of other countries (Hoarier 1995). Hoarier further said that the resulting standard is dominated by the accounting concepts practiced in the USA. In other words what are now American hegemonic efforts in the preparation of financial statements by the international accounting standards?

Although the IASB accounting standards resulting discuss the guidelines are less detailed and limited scope when compared with the USA version of the accounting standard (Statement of Financial Accounting Standards), IFRS remains based on the concept and the same accounting approach. As a result, the possibility of much conflict with the IFRS financial reporting purposes and the social environment, economy and culture of other countries, especially those that have different characteristics with the capitalist state. More specifically, the standards produced a lot of conflict with Islamic values. This is due to the economic concepts underlying the capitalist Western world accounting standard setting is much different from the concept of Islamic economics.

The resulting accounting a standard of Anglo-Saxon model of accounting that recognizes adopts the time value of money, which produces the concept of interest. Meanwhile, Islam explicitly reject the use of the time value of money in carrying out economic activities. This is because the concept is synonymous with usury, and usury is clearly prohibited in Islam. Riba is prohibited in Islam because it shows the injustice of usury. Capra (1994) mentions that the injustice arises because the distribution of profits based on a fixed amount, can damage the price mechanism and led to the allocation of economic resources that lead to the accumulation of capital is concentrated in a particular group of people.

Prohibition against usury has its own implications for the harmonization of international accounting standards. So far the standards of internationally accepted accounting always consider the interest factor, which is clearly prohibited in Islam (Hamid et al., 1993). Examples of the resulting IASB accounting standards (IASC) is accounting for the lease / lease (IAS 17), Accounting for Pension Funds (IAS 19 and IAS 26), and Cost Accounting Capitalization of Borrowing (IAS 23). The standard is essentially the same as the accounting standards issued by the Financial Accounting Standards American Board (FASB), such as pension fund accounting standards (SFAS 87 and 88), Long-Term Debt Amortization (Accounting Principles Board, APB 12), Interest on Receivables and Payables (APB 21), Leasing (SFAS 12), Restructure Debt (SFAS 15), Reporting Debt Retirement (SFAS 88) and the repayment of debt (APB 26).

Another issue to consider is the issue relating to the valuation of the assets. In the Anglo-Saxon accounting, valuation of an asset, especially inventories and securities are generally based on the concept of conservatism. This concept recognizes income or loss or reduction of assets despite the decline has not been realized. In contrast, the concept is to delay recognition of revenues or increase in value of assets to income or an increase in the value of these assets are actually realized. The consequences of this concept are the use of the method of inventory valuation and short-term securities based on the lower of cost and market value (lower of cost or market). Meanwhile, for the purposes of calculating zakat, which is one of the purposes of reporting based on the teachings of Islamic, assess both types of assets are based on net realizable value or net realizable value (Gambling and Karim 1991). Thus it is clear that Islam does not recognize the concept of the lowest value between cost and market prices, such as those used in capitalist accounting.

The third problem is the application of the concept of sustainability (going concern). Use of this concept possible use historical cost valuation of assets based on the measurement to demonstrate objectivity. On the basis of historical cost, the value of assets on a particular date (the date of the balance sheet) will be equal to the value of assets on the date the asset was first acquired. The main reason the application of the concept of going concern are: (1) to allow for the classification of assets and liabilities into current and noncurrent group, (2) allows for the matching (matching) between revenue and costs.

From the standpoint of Islam, both of them may be questionable and irrelevant (Gambling and Karim 1991). In Islam, the classification of assets into current and noncurrent basically meant to determine the amount of wealth that will be used in determining the amount of zakat. Current assets are expected to be consumed, or sold to generate cash in the period of time in which the charity will be imposed on such property. While non-current assets, will remain detained or kept in the period beyond the period of zakat (Abdel-Magid 1981). On the basis of this, financial statements must be able to present information about the assets, which can be used as the basis for the imposition of zakat. Thus the zakat assessments will determine the method of valuation of assets. Appropriate method to assess the assets relevant to the purposes of calculating the net realizable value is the alms or assessment methods suggested by Chambers (1966) that is continuously contemporary accounting (COCOA).

On the basis of the method Cocoa assets should be assessed according to market value at balance sheet date. So each asset must be assessed individually, separate from the company's overall wealth. Consequently, in the context of Islam there is no recognition of assets such as goodwill, because goodwill can not see his form and shape can not be individually assessed separately from the company's overall value.

Another thing that is contrary to the teachings of Islam is the use of the concept of economic substance over legal form. Anglo-Saxon accounting model clearly separates the economic substance of a transaction with the legal status of the transaction. On the basis of this concept, if a transaction has economic substance of the terms of the criteria as an element of financial statements (because they meet the definition, can be measured and recognized in the financial statements), the transaction can be recognized in the financial statements even though not legally recognized. The classic example is a machine that was hired by the company through a capital lease contract. If the economic substance meets the criteria as an asset (as stipulated in the standard), then the machine can be recognized as leased property the tenant and reported on the balance sheet as a tenant property. However, from the juridical aspect of the machine remain the property owners rather than renters. This concept, clearly contrary to the concept of ownership in Islam (Karim 1995).

On the basis of different points of view above, it is quite reasonable to say that the accounting should be developed in accordance with the environmental conditions in which the accounting will be practiced. Accounting practices of the capitalist, obviously not everything can be practiced in an environment that Islam breathes because the concept is clearly different and many are contradictory.

3. The meaning of reconciliation and mutual recognition (reciprocal) of accounting standard differences

Two other approaches are proposed as a possible solution is used to solve problems related to the content of cross-border financial statements: (1) reconciliation, and (2) mutual recognition (which is also referred to as "feedback" / reciprocity). Through reconciliation, a foreign firm can prepare financial statements using accounting standards country of origin, but must provide reconciliation between the accounting measures (such as net income and stock stockholder) in the country of origin and in countries where the financial statements report. To example, the Commission U.S. Capital markets (SEC). Recognition occurs when the parties together outside the home country regulator of financial accept reporting foreign companies which are based on the principles of country of origin. For example, the London Stock Exchange accepts financial statements based on GAAP reporting AS for made?? By foreign companies.

In line with the trading capital of the harmonization be important to the problems associated with the content to the content of cross-border financial reporting. Approach done by way of reconciliation and mutual recognition. With a complete harmonization of financial reporting based on different principles.

4. Identification of organizations that promote harmony and have an important role in setting international accounting standards

Overview of International Organizations that Promote Major Accounting Harmonization

Six organizations have become a major player in the determination of the international accounting standards and in promoting international harmonization of accounting:

1. International Accounting Standards Board (IASB)

2. Commission of the European Union (EU)

3. International Organization of the Capital Market Commission (IOSCO)

4. International Federation of Accountants (IFAC)

5. Intergovernmental Working Group of Experts on the United Nations International Standards of Accounting and Reporting (International Standards of Accounting and Reporting - Isar), part of the United Nations Conference in Trade and Development (United Nations Conference on Trade and Development - UNCTAD).

6. Accounting Standards Working Group in the Organization of Economic Cooperation and Development (OECD Working Group).

International Accounting Standards Board

International Accounting Standards Board (IASB), formerly the IASC, the standards-making body that is independent of the private sector which was founded in 1973 by professional accounting organizations in nine countries and restructured in 2001 (reorganization of the IASC to make in an umbrella organization that down of out 41 Standard International Accounting (IAS) and a Framework for the Preparation and Presentation of Financial Statements. objective the IASB are:

1. To develop in the public interest, a set of global accounting standards are of high quality, understandable and can be applied which requires high quality information, transparent, and comparable in the financial statements and other financial reporting to help participants in capital markets and other users in making certain decisions.

2. To encourage the use and application of these standards are hard. IASB do his job). Before the restructuring, the IASC issued 41 International Accounting Standards (IAS) and a Framework for the Preparation and Presentation of Financial Statements. IASB objectives are:

a. To develop in the public interest, a set of global accounting standards are of high quality, understandable and can be applied which requires high quality information, transparent, and comparable in the financial statements and other financial reporting to help participants in capital markets and other users in making certain decisions.

b. To encourage the use and application of these standards are strict.

c. To bring the convergence of national accounting standards and International Accounting Standards and International Financial Reporting Standards in the direction of high-quality solutions.

The core standards of IASC and IOSCO Agreement

IASB (and formerly IASC) has sought to develop accounting standards that will be received by the securities regulatory bodies around the world. IOSCO Technical his approval to the plan as follows:

Council (IASC) has developed a work plan approved by the Technical Committee which, if successfully completed will result in IAS comprising a comprehensive set of core standards. The completion of this comprehensive standard that is acceptable to the Technical Committee (IOSCO) allows approval of the Technical Committee for the use of IAS in the need to raise capital and cross-border listing of shares across global markets. IOSCO approved IAS 7, Statement of Cash Flows, and has given an indication to the IASC that 14 of the International Accounting Standards that exist now do not require additional improvements, provided that other standards are successfully completed.

Structure of the IASB's New

IASB Council established a Working Group on Strategies (Strategy Working Party, SWP), which considers how should the strategy and structure of the IASC after completing the program of work of this standard. Which supports the proposed new structure that essentially are: (1) The IASC will be established as an independent organization, (2) the organization will consist of two main bodies, the Trust and the Council, and the Permanent Committee on Interpretation (now known as International Financial Reporting Interpretation Committee) and the Standards Advisory Council, and (3) the trust will appoint board members, conduct surveillance and gather the necessary funds, while the board has sole responsibility for setting accounting standards. Restructured IASB met for the first time in April 2001. IASB, after reorganization, will include the following entities.

1. Guardian Agency. IASB has 19 trustees: six from North America, six from Europe, four from the Asia / Pacific, and three from other regions (depending on the determination of the overall geographical balance).

2. Council IASB. Council to establish and improve standards of financial accounting and reporting efforts. Responsibilities include "meet the responsibility for all IASB technical issues including the preparation and publication of the International Accounting Standards, International Financial Reporting Standards and Draft Standards ... and final approval of the interpretations issued by the Financial Reporting Interpretation Committee", and approve project proposals and methods and procedures for developing standards. The goal is to build partnerships with national bodies because everything works together to achieve convergence of accounting standards around the world.

3. Standards Advisory Council. Standards Advisory Board, appointed by the Trustees, consisting of "thirty or more members, who have professional backgrounds and different geographical, appointed for a three-year renewable".

4. International Financial Reporting Interpretation Committee (IFRIC). IFRIC comprises 12 members appointed by the trust. IFRIC interpret "the application of International Accounting Standards and International Financial Reporting Standards in the context of the IASB Framework," issued a draft interpretation and evaluate the comments above and obtain board approval for the final interpretation.

Recognition and support for the IASB

International Financial Reporting Standards have now widely accepted throughout the world. For example, the standards (1) is used by many countries as a basic national accounting terms, (2) is used as an international benchmark in most major industrial countries and emerging market countries to make his own standards, (3) is received by many stock exchanges and regulatory bodies that allow foreign or domestic companies to submit financial statements prepared under IFRS, and (4) is recognized by the European Commission and other supranational bodies.

5. EU's new approach and relate it to the integration of European financial markets

European Union (EU)

One goal is to achieve the integration of EU financial markets of Europe. To achieve this goal, the EC has introduced a directive and take a huge initiative to achieve a single market for:

• Acquisition of capital within the EU;

• Creating a common legal framework for securities and derivatives markets are integrated;

• Achieve a single set of accounting standards for companies whose shares are listed.

Directive Fourth, Seventh and Eighth

Fourth EU directive, issued in 1978, is a set of accounting rules in the most extensive and comprehensive framework.

Seventh directive, issued in 1983, addresses issues consolidated financial statements.

Eighth Directive, issued in 1984, discussed various aspects of professional qualifications that are authorized to carry out the audit as required by law (mandatory audit).

Is the EU harmonization efforts have so far?

Fourth and Seventh Directives have a dramatic effect on the financial reporting across the EU, namely bringing the accounting in all EU member states to stage a good uniformity and relatively adequate. This directive will harmonize the presentation of profit and loss (income statement) and balance sheet and increase the minimum additional information in the record, specifically the influence of tax rules on disclosure of the reported results.

New Approach to EU and European Financial Market Integration

Commission announced that the EU needs to move precisely in order to provide a clear signal that companies are trying to do the recording in the United States and other world markets will still be able to survive in the EU accounting framework. EC also stressed that the EU strengthens its commitment to the international standard-setting process, which offers the most efficient and quick solutions to problems faced by companies operating on an international scale.

In 2000, the EC adopted a new financial reporting strategy. The interesting thing about this strategy is the proposed rule that all EU companies listed in regulated markets, including banks, insurance companies and SME (small and medium sized enterprises), prepare accounts according to IFRS consolidation.