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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 31
Object Description
Title |
International standards: The search for a common denominator |
Author |
Weinstein, Edward A. |
Subject |
Accounting -- Standards |
Office/Department |
Touche Ross. New York Office |
Abstract | Illustrations not included in Web version |
Citation |
Tempo, Vol. 25, no. 2 (1979), p. 30-35 |
Date-Issued | 1979 |
Source | Originally published by: Touche Ross, & Co. |
Rights | Copyright and permission to republish held by: Deloitte |
Type | Text |
Format | PDF page image with corrected OCR scanned at 400 dpi |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi Library. Accounting Collection |
Date-Digitally Created | 2010 |
Language | eng |
Identifier | Tempo_1979_Autumn-p30-35e |