What is the harmonization of accounting policies? What body or organization is responsible for the harmonization of accounting policies?
The harmonization of accounting policies is a movement in process to ensure there are a set of rules, policies, standards, and procedures in the professional accounting discipline that are conducive to globalization and international business cooperation. Essentially, it is an effort to ensure that those who prepare financial information/statements, and such, are operating from the same perspective and measuring according to common standards. This is increasingly needed because of globalization.
The body responsible for working on the initiative of the harmonization of accounting policies is the International Accounting Standards Board (IASB) based in the United Kingdom (UK). This organization formerly went by the name the International Accounting Standards Committee (IASC). The Financial Accounting Standards Board (FASB) in the U.S is also a standard setting entity within the accounting discipline. The FASB is responsible for establishing Generally Accepted Accounting Principles (GAAP) in the U.S.
Accounting standards are different in different countries. Standardization of policies in accounting is important so that stakeholders who rely on financial information can accurately compare and analyze information from different international sources. In essence, standardization helps stakeholders compare apples with apples, not apples with hot dogs so-to-speak when it comes to financial statements.
With business organizations increasingly multi-national, standardization of accounting policies ensures proper analysis of companies and their subsidiaries. Measuring a business's performance against others on the international stage, who are in the same industry, is easier when all have adapted the same accounting policies. In other words, they are speaking the same "financial language."