A number of companies seeking to raise capital in markets outside the country of origin and the investors who seek to diversify their investments internationally face increasing problems as a result of national differences in terms of accounting, disclosure, and audit.
Sometimes people use the term harmonization and standardization as if both have the same meaning. However, contrary to the harmonization, standardization generally means the determination of a group of rigid rules and narrow and may even be the application of a single standard or rule in any situation. Standardization does not accommodate the differences between countries, and therefore more difficult to implementation internationally. Harmonization is much more flexible and open, do not use one size fits all approach, but to accommodate some of the differences and have experienced great progress internationally in recent years.
Differences Of Harmonization And International Accounting Standard
Harmonization :
1.      The process to improve the compatibility accounting practices to determine the limits of how much these practices may vary
2.      Not using a one size fits all
3.      But accommodates be some agreement and has experienced great progress internationally in recent years.
4       Harmonization much more flexible and opened.
Standardization :
1       Determination of a group of rigid rules and narrow
2       Application of a single standard or rule in any situation
3       Standards do not accommodate the differences between countries.
4       More difficult for the international implementation.
Pro And Contra Of International Accounting Standards Harmonization
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 requires 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 (Hoarau 1995). Hoarau further said that the resulting standard is dominated by the accounting concepts practiced in the USA. In other words what is 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 standards 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), Restrukturization 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 is 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 Islam-Islam 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 may 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 remains 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 breath because the concept is clearly different and many are contradictory.
Reconciliation And Mutual Recognition Differences In Accounting Standard
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 reciprocity). Through reconciliation, foreign companies can set         financial statement report using home country accounting standards, but should to serve reconciliation between accounting measures (such as net income and stockholder) in the country of origin and in countries where the financial statements report. For example, the Capital Market Commission United States (SEC). Recognition occurs when the parties together outside the home country regulator of financial get report foreign companies which are based on the principles of state. For example, the London Stock Exchange accept financial statements based on GAAP reporting made by foreign companies. The line trading capital then 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.
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.      Komite 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, part of the United Nations Conference on trade and Development
6.      Accounting Standards working group within the Organization of Economic cooperation and Development.
International Forum on Accountancy Development (IFAD) held its first meeting in 1999. Its main goal is to build the capacity of accounting and auditing in developing countries.
Also important is the International Federation of Stock Exchanges (FIBV), a trade organization for securities and derivatives markets are organized around the world. FIBV encourage professional development of financial markets business. FIBV goal is to harmonize standards for judge business processes (including financial reporting and disclosure) in cross-border securities trading, including cross-border public offerings.
International Accounting Standard Boards IASB objectives are :
1.       To develop in the public interest, a set of global accounting standards are of high quality, can learn and can be applied which requires high-quality flow of information, and can be compared in the financial statements and other financial reporting to help participants in capital markets and other users in making economic decisions.
2.      to encourage the use and application of these standards are strict stnadar
3.     to bring the convergence of national accounting standards and International Accounting Standards and International Financial Reporting Standards in the direction of high-quality solutions.
International Accounting Standards
International Financial Reporting Standards (English: International Financial Reporting Standards (IFRS) is the standard basis, Understanding and Framework (1989) which was adapted by the International Accounting Standards Board (English: International Accounting Standards Board (IASB). A number of standards established as part of IFRS are known by the name of the former International Accounting Standards (IAS). IAS issued between 1973 and 2001 by the International Accounting Standards Committee (English: International Accounting Standards Committee (IASC). On 1 April 2001, the new IASB took over responsibility for preparing use of IASC International Accounting Standards. During the first meeting, the new agency is adapting IAS and SIC that already exist. IASB continues to develop standards and naming the new standards as IFRS.
New Approach To The EU In The EU In European Money Market Integration
a.            Development Cooperation RI – EU
Development cooperation RI – The EU is one of the main pillars of bilateral relations between Indonesia – the EU. The development of relations between Indonesia – the EU is also reflected in the focus of development cooperation RI – EU that is recipient driven and tailored to the national development program of Indonesia. The EU underlined the need to build a new relationship more closely with Indonesia through increased development cooperation program that supports the process of democracy, good governance, sustainable economic and social development and poverty erodes. Good relations RI – is reflected in EU development cooperation set out in the Country Strategy Paper (CSP), which contains a joint strategy to support national development. CSP in 2002-2006 aimed to strengthen democracy and improve good governance through support to economic development, social and environmental. CSP 2002-2006 National Indicative Program set out in (NIP) which consists of two annual cooperation program. In the NIP 2005-2006, there are three priorities: education cooperation, law enforcement and security, economic cooperation in particular the management of public funding, with a value of 72 million Euro project. As a follow-up to the end of the CSP program during the period 2002-2006, the EU has adopted the CSP program period of 2007-2013 which focuses on the education sector, trade and investment, as well as law enforcement and good governance. For Indonesia, the EU is still an important market and one of the main sources of foreign investment in Indonesia. Bilateral trade in 2008 reached USD 28.20 billion and continues to show an increasing trend from year to year.
The EU is Indonesia’s export market potential. The EU is the main markets for Indonesia’s largest after the United States and Japan. Indonesia’s exports to the EU in 2008 stood at 15.45 billion U.S. dollars, while imports from the EU Indonesia in 2008, stood at U.S. $ 10.5 billion U.S. dollars. Development of bilateral relations between Indonesia and the EU are not apart of the dynamics of developments that occurred in the European Union (EU) and Indonesia. UE has succeed to as a solid regional grouping, continues to carry out consolidation through a process of integration in political and economic fields in order to achieve his ambition to unite all countries in Europe under the EU umbrella. Similarly, Indonesia’s democracy, a stable and recognized by the international community as an important partner in the region, both of which are important actors that continue approached each other to strengthen partnerships in order to be better able to respond to global challenges. The linkage between the issues and interests of Indonesia and the EU have created a common agenda to strengthen the bilateral cooperative relations of mutual benefit.
b.                  European Union (European Union – EU)
One goal is to achieve the integration of EU financial markets of Europe :
1       To achieve this goal, the EC has introduced a directive and take a huge initiative to achieve a single markek.
2       Acquisition of capital within the EU.
3       Creating a common legal framework for securities and derivatives markets are integrated.
4       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). 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 konsolidation.

About Yohanes Novrianto Simangunsong

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