Mexico and Turkey
Discussion: A critical Assessment of the factors that might explain the accounting differences and the choice of international harmonization methods in your chosen countries, such as culture, legal system, providers of finance and equity markets, tax systems, etc. Although the accounting differences might become less dramatic due to the move to IFRS in your chosen countries, these factors might still be relevant because international differences may survive in the form of IFRS implementation, such as different interpretations of IFRS or different choices of options.
Introduction.
International harmonization refers to the process of standardizing laws and regulations to facilitate growth, fairness, and efficiency to act and participate in a globalized economy. In accounting, the process of harmonization is aimed at enhancing compatibility of all practices in the accounting section through the formulation of regulations on the extent to which differences can occur. Standards which have been harmonized should have the ability to enhance financial information compatibility across nations since they lack logical conflicts. Globally, through harmonization accountants aim at minimizing the existing differences and shortening the gap that exists between the different accounting streams practices.
IFRS in Turkey.
The development of accounting systems and practices is proving its developments economically, and in Turkey, this has led a change from tax and state-oriented towards international harmonization. The culture of accounting which was previously for taxation was changed to accounting for decision making. This change was influenced by the expansion of the business sector brought about by the EU integration process and demands for mandatory registration to IFRS by companies (Balsari, & Varan, 373). In Turkey, the absence of professional guidance in accounting, the culture of protecting the interests of the state, and central management of economic development were the cause of the previous accounting for taxation system. Accounting regulations were previously based on protecting Treasury interests. The tax law introduced in 1949 which included measures of economic assets Assessment, was in such a way that the financial statements were only prepared for the taxation. The law had much of its influence on the German system, but in the 1960s, Turkey’s political and economic ties with the United States brought about a shift in its accounting sector. In the later years, there were numerous changes in accounting laws, and in 2012, a new commercial code was established which was in support of fair competition, transparency, principles of corporate governance, and accounting standards. In regards to liabilities-taxes, the intragroup profits with deferred taxes are determined by the referring to the framework in the IFRS system. In Turkey, the IFRS demand different financial statements are used when that measuring investments in subsidiaries and associates.
Mexican FRS.
Mexico, on the other hand, makes use of the inflation-adjusted model. The Accounting Principles Commission of the Mexican Institute of Public Accountants provides is responsible for providing accounting principles and practices statements. The companies in Mexico are expected to keep a record of the inflation effects on accounting records. Previously, Mexico had its accounting standards but through known as NIF (Normas de Informacion Financiera). The onset of foreign investments, Mexico shifted to the implementation of FRS where this transition has positively impacted on its economies especially in regards to decision-making and information. This means that users of financial information, regulators, and analysis have a clear option when making financial decisions. Mexico is now in a position to be in sync with the rest of the world regarding the financial and accounting language. The Mexican FRS is silent regarding deferred taxes on intragroup profits. However, when it comes to equity methods, the FRS demands that analysis is made to determine the presence of any notable influence in Special Purpose Entities (Steinbach, & Tang, 37).
Conclusion.
In conclusion, according to (Karapınar, Ayıkoğlu, & Bayırlı, 9), harmonization in accounting standards has Helped in the development of capital markets, reduction of audit costs, reduction in data collection costs, and a rise in audit efficiency.
References.
Balsari, C.K. and Varan, S., 2014. IFRS implementation and studies in Turkey. Accounting and Management Information Systems, 13(2), p.373.
Karapınar, A., Ayıkoğlu, F. Z., & Bayırlı, R. (2007, March). Convergence and Harmonization with international financial reporting standards: a perspective of Turkey. In The Balkan Countries’1. International Conference on Accounting and Auditing (pp. 8-9).
Steinbach, K.D. and Tang, R.Y., 2014. IFRS convergence: learning from Mexico, Brazil, and Argentina. Journal of Corporate Accounting & Finance, 25(3), pp.31-41.
