Question

Distinguish between hormonization and convergence

Answer 1

HEYAA FOLK,



The Differences Between Harmonization & Convergence of GAAP
by Cam Merritt
Share on Facebook
Businesses in the United States prepare their financial statements in accordance with generally accepted accounting principles, or GAAP. Businesses in more than 100 other countries use a different set of rules, called International Financial Reporting Standards, or IFRS. Long-running efforts to bring these two sets of rules into alignment have been referred to as both "harmonization" and "convergence." The difference lies in the extent of the alignment being pursued.



Different Standards
GAAP and IFRS have a great deal in common, but major areas of difference remain. These areas include, among other things, inventory valuation methods; processes for valuing and impairing (writing down) assets; accounting for research and development costs; and depreciation rules. In an era when investment regularly crosses national boundaries, the major standards-setting bodies -- the U.S. Financial Accounting Standards Board and the International Accounting Standards Board -- want to bring the two systems into line with each other so the same rules apply to all companies, of all sizes, anywhere in the world.

Harmonization
According to the Financial Accounting Standards Board, efforts to bring together U.S. and international accounting rules began in the 1950s, as the world economy was emerging from the shadow of World War II. These first efforts were based on the idea of harmonization -- minimizing the differences between accounting standards. With harmonization as the focus, there would continue to be GAAP in the U.S. and IFRS elsewhere, and there would still be areas of disagreement between them. The goal of harmonization was just to make those areas as minor as possible.

Convergence
In the 1990s, the focus shifted from harmonization to convergence. In convergence, the ultimate goal is for GAAP and IFRS to come together in a single set of standards that would apply everywhere. There would no longer be a distinct GAAP or IFRS. However, convergence doesn't just involve GAAP. Several other major economies do not follow IFRS, including Japan and China. International convergence efforts are intended to bring those countries into the same set of international standards as well..



Hope it helps you!!!!

Answer 2

Harmonization and Convergence

Explanation:

• Harmonization alludes to the procedure which focuses on the disposal of contrasts between existing bookkeeping standards
• Convergence implies working with other standard-setting bodies to build up another or changed standard that will add to the advancement of a single lot of bookkeeping models around the world
• A combination in some structure has been occurring for a very long while, and endeavors today incorporate undertakings that expect to lessen the contrasts between bookkeeping principles