Article Analysis, European Accounting

Article Analysis, European Accounting

“How U.S. and European Accounting Practices Differ” appeared in 1986 and identifies differences among four European nations and the United States with regard to accounting standards and practices. Based on these differences, the authors call for more rapid adoption of international accounting standards. The article is well-written and thoughtfully presented, and the arguments for an international standard take into account both the benefits of such a standard and the difficulty in achieving it. However, the article’s age makes some of the information outdated, and the lack of information on Japan, China or the Soviet Union limits its use as a survey of accounting practices.

In the United States, accounting practices are governed by the Federal Accounting Standards Board (FASB), and professional accounts are certified by the Certified Public Accountant (CPA) exam. Although the article was written in 1986, it has relevance today, perhaps even more relevance than when it was written. In the intervening years, multinational corporations and companies which are doing business in the international arena have increased. In addition, the revolution in communications and computer technologies since the mid-1980s has increased the demand for international capital investment, and trading in international stocks has increased during this time as well. Because of this heightened interest in investment opportunities on the international level, companies and private investors are interested in the financial statements of companies around the world, and they rely on accountants in each country to provide accurate and understandable information (Anderson, 1993, p. 52).

In addition, managers in multinational companies require that they be able to report the financial condition of their business in a way which is clear to the various stakeholders in that organization. Shareholders, who can be based anywhere in the world, certainly represent…

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