International standards: The search for a common denominator;

              international standards
the search
fOR a common denominator
by EDWARD A. WEINSTEIN/Partner, New York
The biblical story about the Tower of Babe! attempts to explain the dif-ferences in language that exist among the peoples of the earth. "If this Is what they can do as a beginning," the Lord is quoted, "then nothing that they re-solve to do will be impossible for them. Come, let us go down, and there make such a babbie of their language that they will not understand one an-other's speech."
Accounting, an evolving form of human communication, also differs throughout the world. Perhaps a vin-dictive Cod caused this when a group of accountants, meeting at some an-cient convention, came too close to creating a truly uniform set of ac-counting principles. Of course, that is being facetious; but just as it has been difficult to sell Esperanto to the world, it will be difficult to sell a standardized set of accounting principles.
Indeed, it is my contention I hat at-tempts to harmonize accounting stan-dards will not succeed. Although there may be some success in a broad sense, true harmony will never be achieved at the level of detail which would enable the consolidation of financial state-ments from different countries. An al-ternate approach is possible, however, and how it can work will be the subject of this article.
What are the significant obstacles to achieving a common denominator in international accounting and report-ing? Regrettably, they have been min-imized in the headlong plunge to achieve a Utopian system. Indeed, it is so difficult to surmount these obsta-cles that there are real doubts that we should strive for such a system. The diversity of peoples, languages, cul-tures, political systems, and business practices which exist in the world's societies are a reality upon which such a system would probably founder-if, indeed, it could ever be constructed.
The Differences
That is why constructing such a system would be akin to reconstructing the legendary Tower of Babel. It cannot be done. Not because a deity has pre-vented if, but because fundamental natural differences, which create and sustain the diversity of accounting standards, are beyond our control. These differences are:
Local Laws. Even within the so-called English-speaking world, diver-sity is evident. In most of this world, for example, business operates under some form of the "Companies Act," which was originally formulated in Great Britain. These laws usually re-quire an audit of each legally estab-
lished corporation. Yet, within the United States, which has always been a part of the English-speaking world, the law evolved differently.
Not every corporation in the United States has to be audited. Some pri-vately held corporations are not au-dited at all. Corporations related by ownership lend to be audited Only as part of a controlled group. That simple difference reflects how distinctly we have viewed incorporation. The Com-monwealth countries have tended to view it as a special privilege, subject to government scrutiny. In the United Slates, however, the differences among competing states, plus a lais-sez-faire policy, have prompted a view of incorporation which is almost non-chalant.
Customs and Social Mores. Cus-toms and mores vary from country to country—and understandably so. From these differences have evolved a vari-ety of business practices and account-ing standards. For example, in Japan a sale is not considered to be consum-mated just because legal title has passed. Japanese companies book-keep a sale when the product is shipped, but it is understood that the transaction is not complete until the customer is satisfied with the product.
Even if the product matches the
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