A temporal examination of international accounting harmonization: Firm specific and environmental factors which affect the level and changes in the level of harmony between countries

Accounting systems and acceptable accounting procedures differ among countries. As a result, companies generate reports which may not be comparable and multinational corporations may be required to provide more than one set of financial reports. The expansion of global business activities is one factor which generates a need for similar accounting procedures.;Harmonization occurs when the application of accounting methods used by companies becomes more concentrated on one or a limited number of practices. This study examined harmony and harmonization of accounting practices used by companies over a nine-year period, 1985-1993. The accounting methods used for depreciation, inventory, financial statement cost basis and consolidation were examined for companies from ten countries. The data indicate that harmony of accounting methods exists for depreciation, inventory and consolidation. Evidence of total diversity of practices appeared for financial statement cost basis. Analysis over an extended period of time revealed that changes in the level of harmony occurred for at least one country group within each accounting procedure.;This study also examined variables which might affect a companies' choice between accounting methods. It was hypothesized that variables which proxy for a company's degree of international reporting would be significant in influencing a company's choice of accounting method and increase harmony. Foreign activity was measured as a company's percent of foreign: subsidiaries, stock exchange listings and long term debt.;Logistic regression was used to determine which variables were significant in explaining the method used for inventory and financial statement cost basis. The foreign activity variables were significant in explaining financial statement cost basis choice for a sample of companies from Australia and the United Kingdom.;The I index is a measure of concentration which is used to quantify harmony. It is determined by the frequency of use for each accounting method. Ordinary least squares regression was used to determine if measures of a firm's foreign activity explain the level and changes in the level of harmony, as measured by the I index. The results indicate that some of the country groups and accounting procedures are affected by the foreign activity variables.