Study On International Convergence Of Accounting Standards Implementation Mechanism

As an international business language, accounting information plays a very important role in promoting the global trade and capital markets. With the increasing frequency of international economic exchanges and capital flows, global uniformity of high-quality accounting information has become an objective demand. Given that, the international convergence of accounting standards has become a trend as well as a common practice among different countries. Till January 2015, there are 114 countries worldwide that require IFRS for all or most domestic publicly accountable entities, and 14 countries that permit or require IFRS for at least some (but not all or most) domestic publicly accountable entities. However, the convergence of accounting standards does not necessarily result in globaly comparable high-quality accounting information. Since the convergence of International Financial Aaccounting Standards (IFAS) has been widely accepted, the convergence of implementation mechanism is considered to be the core of the next stage. This paper proposes an analytical framework of international convergence of the accounting standards implementation mechanism. Based on the analysis of the necessity, the paths, the obstacles and the practice of international convergence of the accounting standards implementation mechanism, this paper concluded that in order to achieve the goal of global uniformity of high-quality accounting information, the implementation mechanism of accounting standards should be internationally converged. Based on the conclusion, this paper explores what paths of international convergence should be reasonably chosen, and proposes suggestions on the improvement of China’s implementation mechanism of accounting standards.Major content of this paper are presented as follows:Firstly, economic globalization asks for the worldwide uniformity of high-quality accounting information, which should be realized on the international convergence of implementation mechanism, since the international convergence of accounting standards itself is ongoing. Firstly, this paper takes accounting standards as public good, and a contract between economic entities, and then provides a model of accounting standards implementation mechanism based on contracting theory. This paper argues that accounting standard are incomplete contracts whose execution is the process to honor the contract between the managers and the investors through delivering enterprises’ accounting information. Therefore, similar to all the incomplete contracts, the implementation process of accounting standards should follow step-by-step phases as indicated: self-performance, third-party private performance, and public compulsive performance. In this process, institutional environment will guide and restrain both contracting parties and the stakeholders, thus influence the formation and operation of the implementation mechanism.Secondly, this paper provides a framework to analyze the international convergence of the implementation mechanism of accounting standards, which includes researches on its connotation and denotation, the necessity, the obstacles, and the paths towards international convergence.Thirdly, a comparative analysis is performed by taking four countries including US, UK, Germany and Japan into consideration, where implementation mechanism and institutional environment are different. The analysis indicates that the three phases of accounting standards implementation mechanism are established in these four countries but with different emphases. Differences in the institutional environment have led to different contrcting parties and different content of the contract, which lead to differences in accounting standards implementation mechanism. However, in the context of globalization, the traditional accounting standards implementation mechanisms are changing, including audit rotation and the internal control of enterprises, which reflects the requirement of the international convergence of accounting standards implementation mechanism.Fourthly, this paper analyzes the changes of accounting standards implementation mechanism globally. Firstly, this paper introduces the BPT index which measrues contry difference in implementation of accounting standards. Then based on the questionnaire released by IFAC (International Federation of Accountants), this paper statistically analyzed the accounting standards implementation in 51 countries covered by BPT index. The results evidence that some measures, mainly in the phase of third-party private performance, have been widely adopted in majority countries, which support the conclusion that international convergence of accounting standards implementation mechanism has emerged in practice. Changes in institutional environment, demands for high-quality and globally comparable accounting information, and the promotion from international organization are the major contributors for these practice.Fifthly, based on the theoretical analysis of international convergence of accounting standards implementation mechanisms, the paper also performed analysis on China’s situation. In the past decade, the change of China’s accounting standards implementation mechanism has manifested some signs of convergence. At the same time, China also made a contribution for the international convergence, for example, China’s emphasis on the statutory responsibilities of the management. This paper concludes that since the international convergence of accounting standards implementation mechanism is the direction, China should actively involves in the scheme’s formation, safeguard the national interests during the convergence process, and make contributions based on its own practice.The paper gives priority to normative research, combined with case study and comparative study. The innovation of this article is mainly manifested as follows: firstly, this paper innovatively constructed a model of accounting standards implementation mechanism based on contracting theory, which provides basis for more comprehensive and in-depth researches on its connotation and denotation. Secondly, this paper constructs a framework to analyze the international convergence of accounting standards implementation mechanism, which builds a logical relationship between the formation of the accounting standards implementation mechanism and different institution environment, including culture, rule by law, capital market, and corporate governance. This framework provides a clue for further research on the international convergence of accounting standards implementation mechanism. Thirdly, According to the framework, this paper performs a comparison of the implementation mechanism between some representative countries both horizontally and vertically, and explores the consistence between the institutional environment and the implementation mechanism. Fourthly, this paper introduces the BPT index which measrues contry difference in implementation of accounting standards. Combined with BPT index and IFAC questionnaire, this paper concludes that international convergence is the direction of accounting standards implementation mechanism. Fifthly, this paper provides conclusions on the reasonable paths for the international convergence of accounting standards implementation mechanism, as well as suggestions for China on standpoints to embrace the international convergence, and measures to improve the efficency of accounting standards implementation mechanism under the new circumstances.