2.2.4
The Role Of Different Pressure Groups On Accounting Harmonization Among EC
States
Several pressure groups have had great influence on the entire
process of accounting harmonization, both directly and indirectly. Though the
various groups have diverse intentions, it has, however, been assumed that
their main intention is to get information that will help them formulate policy
towards large corporations, such as the multinational firms. It is important to
mention that in identifying the various pressure groups, one sees the benefits
the assumed pressure groups will get from accounting harmonization.
The institutional environment has had a meaningful influence
on the financial environment. The extent of government involvement has been
very high in countries with a tradition of detailed prescriptive legislation.
According to Saudagaran and Diga (2000), legislation plays two important roles
in shaping the institutional environment. Firstly, laws often specify the main
criteria for preparing financial reports, to enhance the true and fair view.
Secondly, legislation delegates responsibility to a government agency empowered
to devise rules it considers appropriate for achieving the objectives of such
legislation. Depending on the regulatory intent, different governmental
agencies may take charge of the formulation of specific financial reporting
requirements; for instance, company registrars for corporate governance aims;
securities regulators for capital market; and taxation authorities for tax
objectives. The information governments require of corporations varies and is
influenced by, among other things, the extent of government planning and
regulation. Governments assume taxation requirements have a significant impact
on accounting and, as such, need to get involved in accounting harmonization in
order to fulfill such requirements. Revenue authorities, for example, have
their work complicated when dealing with companies that have foreign branches
or subsidiaries.
2.2.5
International Quasi-Governmental Bodies
Not only the European Commission has been actively involved in
accounting harmonization; the UN, the OECD and many other international
quasi-governmental bodies have taken part in the quest for uniform reporting.
The history of these inter-quasi-governmental bodies is so long. The UN history
can be traced as far back as 1976 when a group of experts were appointed
through the activities of the commission on transnational basis. Following
consultations with business and trade unions, the OECD issued a set of
«guidelines for multinational enterprises» in 1996. The European
union has been involved in the issue of accounting harmonization since the
middle of the sixties. The first and second directives were concerned with
basic issues such as the publication of accounts, and minimum capital, while
the fourth and seventh directives have been drawn to lay down rules on
preparation and publication of accounts in detail.
2.2.6
Investors, Analyst And The Stock Markets
Investors have access to corporate reports and other public
available information and use them to make investments and other decisions.
Sample decisions may range from buying, selling or holdind investments.
Besides, additional information disclosure (especially information about the
future prospects of multinationals) on a worldwide basis. Investors and
analysts are concerned with the lack of comparability of much of the
information that is currently provided (Radebaugh and Gray, 1992). Individual
private investors may be of the opinion that if differences in reporting are so
large and ill-defined, and reliability of reports is doubtful, direct
investments in foreign shares need to be avoided. Some stock exchanges often go
further and employ accountants to explain differences or certify certain
ambiguous balances before taking a decision.
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