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Review: Several organizations have been involved in the efforts to harmonize accounting

practices either regionally or internationally. The most important players in this efforts

ware European Union (regionally) and the International Accounting Standards Committee

(IASC) (now IASB) (Internationally). He International Organization of Security of

Commissions (IOSCO) and the International Federation of Accountants (IFAC)

contributed significantly to the harmonization efforts at the international level” (Doupnik

and Perera, 2009, page 72)

According to Wolk et al., 2001, development of international trade and capital flows has

increased a rising economic integration. However, that each country has different customs,

different practices while the lack of similar Accounting Standards led among other things to

problems in comparing financial data (Hill, 1999). Hence, international companies, financial

analysts, several international organizations as well as other actors effort to achieve a

harmonization of Accounting Standards. Doupnik and Perera in their book “The most important

players in this efforts ware European Union (regionally) and the International Accounting

Standards Committee (IASC) (now IASB) (Internationally). The International Organization of

Security of Commissions (IOSCO) and the International Federation of Accountants (IFAC)

contributed significantly to the harmonization efforts at the international level” (Doupnik and

Perera, 2009, page 72)

In the study of Susanne Fritz and Christina Lammle about The International

Harmonization Process of Accounting Standards, based on secondary data from textbooks

articles and homepages, they have clarified what is the international harmonization process of

Accounting Standards and how important are some organizations with their efforts to achieve the

harmonization in it. Susanne Fritz and Christina Lammle also quoted many relevant arguments

from relevant academic literatures to illustrate their purpose of this literature. And as concerned

by Doupnik and Perera, 2009, page 72, the most important players in this efforts ware European

Union (regionally) and the International Accounting Standards Committee (IASC) (now IASB)

(Internationally).

Firstly, before clarifying their importance of harmonization, we will argue about

history and objectives of organizations (EU and IASC).

In the section 4.3 of Susanne Fritz and Christina Lammle literature, they introduced some

information about IASC. IASC (The International Accounting Standards Committee) is an

independent private body with the objectives as the uniformity in accounting principles between

enterprises and other organizations to be observed in the presentation financial statements and to

promote their world acceptance and observance. Furthermore, the other purpose is to work

generally for the improvement and harmonization of regulations, accounting standards, and

procedures relating to the presentation of financial statements.

In 1966, the professional bodies of some countries such as Canada, UK and US examines

their differences in accounting practices at the Accountants’ International Study Group (AISG).

In Sydney in 1972, the discussions towards setting to the IASC were held at meetings

arranged in the margins of the Congress in Sydney.

One year later, UK joined the Common Market (later EU). But there is draft Fourth

Directive that had unsatisfied rules for both UK and European subsidiaries (Olson, 1982 page

226). Hence, The ISAC was founded in 1973 including accountancy bodies of nine countries:

Australia, Canada, France, Japan, Mexico, the Netherlands, the United Kingdom with Ireland,

US and West Germany.

Until 1983, IASC includes all members of the International Federation of Accountants

(IFAC) which concentrates on matters as auditing, management accounting, and the International

Congress of Accountants. The membership of IASC was with over 122 accountancy bodies from

91 countries BY January 1998. As operation system, IASC is controlled and operated the Board

including international congress of accountants of all members appointed by IFAC. This Board

comprises 13 countries as Australia, Canada, France, Germany, India, Japan, Malaysia, Mexico,

The Netherland, South Africa, UK, US and Scandinavia. By 1998, IASC launched 34

International Accounting Standards (IAS)

The ISAC operated successfully by the International Accounting Standards Committee

Foundation (IASCF) whose operating arm is the IASB until 2001.

Based on another literature, Susanne Fritz and Christina Lammle also quoted the IASB is

the driving force actor in the International Harmonization of Accounting Standards (Choi et al.,

2002). The IASC Foundation develops, in public interest, world-wide Accounting Standards for

financial statements. (IASB, 2002 a) The compliance with the standards of the IASB is

voluntary, since it has no power to enforce them (Mueller etal., 1991). The work of IASB is

funded by contributions from Accounting firms, private financial institutions, companies, banks

and other organizations (IASC, 2002 a) (Susanne Fritz and Christina Lammle, 2003, page 36).

We can understand that the main objectives of IASB is to develop an International Accounting

Standards set with a high quality and the uniformity of global accounting standards and requiring

transparent and comparable information in the financial statements. To achieve these objectives,

IASB must coordinate with local accounting Standard Organizations for the convergence of

International Accounting Standard. IASB has totally 14 members with operation expenses paid

by International Accounting Committee Foundation (IASC Foundation)

Concerning about European Union, Susanne Fritz and Christina Lammle stated Article 1

of The Treaty of Rome in 1957, the establishment of the European Union began as called

European Economic Community (EEC). The Article 2 of this Treaty also concerned about EU’s

objectives as establishing a common market and progressively approximating the economic

policies of Member States, to promote throughout the Community a harmonious development of

economic activities, a continuous and balanced expansion, an increase in stability, an accelerated

raising of the standard of living and closer relations between the States belonging to it (Article 2,

The Treaty of Rome 1957, page 4). Initially, EU was formed from 6 European countries as

Belgium, Luxembourg, Italy, Germany, France and the Netherlands. By 1995, there are 9

additional countries joining the European Union Austria, Denmark, Finland, Greece, Ireland,

Portugal, Sweden, Spain, and the United Kingdom with the similar characters such as economics

traits, living standards and wealthy industries.

After this literature, based on Susanne Fritz and Christina Lammle’s arguments, we can

summarize the region and scope where each organization operates as followed table

Another concern of this literature of Susanne Fritz and Christina Lammle is the

motives of harmonization Accounting Standards of EU and IASC. In the introduction section

of this literature, Susanne Fritz and Christina Lammle raise their question “Does Accounting

have an international Dimension?” “Which language does Accounting speak?” They answered

by themselves by quoting some literature result of definition, function, language of Accounting.

They point out that Accounting is as “the tool to aid in measuring economic activity” (Eprtein

and Mirza, 2001, page 1). Also the function of Accounting was clarified as the tool “To provide

information about economic entities that are important for economic decisions” (Kam, 1990).

Continually concerning about the language of Accounting, they conclude that “it must be an

international speak”. Their explanation for this argument is by analyzing the background and

reality of international business which no longer ends at domestic borders with the growth in

international trade and capital flows all over the world. With the changes of international

business, they also gave their points as International enterprises are confronted with the problem

that Accounting rules differ around the world, the variety of Accounting rules is that not all

financial statements or Accounting Standards are accepted at all stock exchange (Susanne Fritz

and Christina Lammle, 2003, page 2)