Sir Bryan Carsberg
Globalisation, the global village, and similar terms are suffering from overuse nowdays. They are used when the writer wants to signify the importance for a business of having operations in many countries, or for regulators of reaching agreement on the international harmonisation of regulations. But they are often used without sufficient thought. And they provoke the reaction that for many businesses, profitability still rests mainly on the domestic market; or that it is important to reserve national sovereignty in regulatory affairs.
A thoughtful approach to assessing the desirability of international harmonisation recognises that the costs and benefits vary from case to case. Those of us how have English as their mother tongue probably fee fortunate that English is becoming a widely-used second language throughout the world. But, even if it were feasible, we would stop short of seeking agreement that English or some other common language should replace the 6,800 or so languages currently in use. We would recognise that language is an indispensable vehicle for culture and teat the elimination of different languages would entail enormous losses in literature and other expressions of culture.
What about the harmonisation of taxation and social security systems? Businesses would experience considerable benefits in planning, systems costs, training and so on from harmonisation. But this case shows us another disadvantage of harmonisation. Taxation and social security systems have powerful influences in economic efficiency. Different systems have different effects. The ability to compare the working of different approaches in different countries enables counties to make improvements to their systems Countries are in competition and the competition forces them to adopt efficient systems through the operation of kind of market force. Agreement on a unifies system of taxation would be like the establishment of a cartel and would deprive us of the benefits of competition among countries
The case for harmonisation in accounting standards is a particularly strong one. Accounting has relatively low cultural value. Competition among different accounting approaches, while not without merit, probably is better left to optional extras in reporting rather than the basic reporting systems; and the potential cost savings and other benefits are very great.
Furthermore, we are now firmly on track to achieve agreement on global accounting standards. Earlier this year, the International Accounting Standards Committee (IASC) obtained the endorsement of IOSCO (the International Organisation of Securities Commissions) for use of its standards for cross-border listings, with the important support of the US Securities and Exchange Commission. It has also agreed a restructuring that will secure the independence of its decision-makers and convert it into a unique international organisation. And it has obtained the agreement of the key national standards-setters and securities regulators in the leading countries to work with it to achieve convergence of accounting standards. Similar developments are to be expected in auditing and to be hoped for in regulatory enforcement in financial reporting.
The accounting profession really is becoming global. But perhaps that term is better avoided. Perhaps we should raise our sights and look for universal accounting standards.
Sir Bryan Carsberg is formerly IASC Secretary General. This article has been reprinted from the Accountancy Magazine with the kind permission of the author.