International Accounting Harmonisation - A Comparison of Spain, Sweden and Austria

Despite the effects of governments, through the European Union (EU), and the accounting profession, through the International Accounting Standards Committee (IASC), substantial variations in accounting rules and practice continue to arise between different European Countries. These variations give rise to both financing and compliance costs for European multinationals. In this paper we report on our discussions with leading accountants in Spain, Sweden, and Austria on the implementation of the EU 4^th and 7^th Company Law Directives on accounting harmonisation in their countries.

Specifically we:

1. Briefly survey the relevance of international accounting harmonisation for European business, and the work of two bodies, the EU and IASC, pursuing this objective:

2. Compare the rules of the government and the accounting profession in accounting regulation in each of the three countries.

3. Analyse the response of each country for the requirement of accounts to give a ‘true and fair view’ that lies at the heart of the EU 4th directive on accounting harmonisation.

4. Consider how each country has adapted the traditional tax-accounting link with the light of EU harmonisation.

Multi-national business has two main reasons to seek international accounting harmonisation:

1. The problems of analysing accounts from different countries increase finance costs in international capital markets. Choi and Levich (1990, 1991) report on a study of international investors. In response to the question 'Does accounting diversity affect your capital market decisions', 9 replied yes, and 7, no.

2. The cost of an accounting system in a multinational is increased both by the cost of designing, and running different accounting systems in different countries, and the cost of adjusting accounts from different countries to the accounting system of the country of the holding company for consolidation purposes. Cecchini (1988) reports on a survey of European multinational companies showing that different national accounting systems caused between 10% and 30% of the total accounting costs.

Both these factors hold back the ideal of building a comprehensive and effective free market in Europe. A third point of interest to the European Union (EU) is to avoid any individual member state setting low standards of accounting disclosure so as to attract registration of companies attached to secrecy, at the expense of other EU members. Other parties with a particular interest in achieving international accounting harmonisation are:

1 “The Big 6” leading international accounting firms, who can achieve substantial savings on costs of recruitment, training and staff development.

2. Developing countries, who by adopting internationally agreed accounting standards save the cost of devising these at the national level.

There is substantial evidence of international diversity in accounting regulation and practice at both the European level (see for example Simmonds & Azieres, 1989) and the International level (see for examples Radebaugh and Gray, 1993, The Economist 1992)

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