INTERNATIONAL HARMONISATION OF
ACCOUNTING STANDARDS AND THE
RHETORIC OF GLOBALISATION
A paper by
* Kellie McCombie, School of Accounting and Finance, University of
Wollongong, Wollongong, NSW Australia 2522, email@example.com, Telephone:
(02) 4221 4003, FAX: (02) 4221 4297.
INTERNATIONAL HARMONISATION OF ACCOUNTING
STANDARDS AND THE RHETORIC OF GLOBALISATION
This paper looks at the growing trend of calls for reform, under the guise of
globalisation. Such calls are/have been made by the current Australian Federal
Government (AFG) in their national policy setting role. What is relevant to this
paper is the AFG’s involvement in accounting standard setting, and their push for
International Harmonisation (IH) of Australian Accounting Standards (AAS),
through full adoption of international accounting standards set by an international
standard setting body. A chronology of Australia’s IH program will be explored,
with particular emphasis on the AFG’s involvement. The intensity of their
involvement will be shown to emerge around times when changes were being made
in the international arena of accounting. In the early parts of the paper, a link to the
view that globalisation is a new phenomenon, will be made regarding IH.
Superficially this view appears to be supported by Australia’s IH. However, with
further exploration, it will be argued that this view is a device of rhetoric used by the
AFG to push their neo-liberal policies, and the hidden agenda of neo-classical
economic rationalism. Such arguments are made through the views of an alternative
position on globalisation, one that acknowledges globalisation as emerging in the
19th century, and one that argues that government involvement in regulation of
financial reporting is deliberate and serves merely to reinforce the interests of capital,
which has little to do with globalisation (Tabb, 1997).
Key words: international harmonisation, accounting standards, globalisation
The international harmonisation [IH] of accounting standards in Australia has been
under way since the 1970’s. Initially in Australia, the idea of undertaking such a
program was introduced by the Australian accounting profession – the Institute of
Chartered Accountants in Australia [ICAA] and CPA Australia [CPA]. Eventually,
with changes to the standard setting structure, the involvement of the Australian
Federal Government [AFG] gave the IH program a mandatory status through
legislation. What we see in the period between 1973 and 2002, is a policy of
comparability, being replaced by a policy of “harmonisation and convergence, [in
turn being] replaced by one of adoption of International Financial Reporting
Standards (IFRS) of the International Accounting Standards Board (IASB) by 1
January 2005” (Parker, 2002, pp.36).
This paper attempts to explore the history of Australia’s IH program, by examining
both ‘official’ documents and less official commentaries. This exploration also
includes a brief outline and discussion of international developments and views
towards harmonising accounting standards (eg, IASC/IASB, IOSCO, EU,
FASB/NYSE/SEC, and UK ASB). This is deemed relevant, as it is at these times
that AFG involvement intensifies – or reveals an explicit position. The AFG
introduced a mandatory policy of IH, and eventually enforced the full adoption of
IFRS. This occurred at a time when the European Union [EU] enforced the same
policy for listed companies and at a time where the Australian Accounting Standards
Board [AASB], the accounting profession, and part of the business community, were
not so willing.
Linked to Australia’s IH is the debate surrounding globalisation. This link will be
revealed by way of two views. One of these positions is made by theorists who
argue that globalisation emerged in the 1970’s. This position can be linked
superficially to the emergence in Australia of an IH program, and the Australian
involvement, from inception, in the International Accounting Standards Committee
[IASC]. This position comes “particularly from the mouths of right-wing advocates
of globalisation, based on the assumption that we are dealing with a wholly new
phenomenon” (Quiggin, 2001, pp. 2).
Another position on globalisation is made by theorists who argue that what we see in
the 1970’s is not a new phenomena but merely an extension of a process that has
been under way since the 19th century. However, this position does not regard
globalisation as a natural progression or inevitable phenomenon. What has emerged
since the 1970’s is the term globalisation. However, the process itself, under the
term internationalisation, emerged much earlier. Thus the conclusion offered by
Quiggin (2001, pp. 11) is that “the term ‘globalisation’ obscures as much as it
clarifies”. What is new about the 1970’s version of globalisation is its tendency to
obscure the hidden agenda of neo-liberalist ideology.
It is noted that it is difficult to separate the debate on globalisation from the neo-
liberalist ideology, however the confusion over the term itself adds another
dimension to the debates. Sheil (2001) discusses the changing meaning of
globalisation, and traces it back to the 16th century use of global as a notion of
totality. Towards the end of the 19th century the dominant meaning of global was
that it meant worldwide, linked possibly to the fact that this “was also the end of the
period of physically discovering and mapping the world” (Sheil, 2001. pp. 5). Sheil
discusses the term also in relation to the period of wars that emerged in the early 20th
In the 1960’s, the term global was used in the form of “global village”, which
became popular to describe “any media subject or cultural phenomenon that did or
conceivably could attract worldwide attention” (Sheil, 2001, pp. 6). Sheil identifies
two aspects of the term global village that contradicts the present meanings of
globalisation. Firstly, the term “did not necessarily contain any economic meanings,
and these have now become central to the concept of globalisation” (Sheil, 2001, pp.
6). Secondly, the “expression conveyed a positive sense of community [which]
contradicts a key present sense of globalisation – as a process of local and general
community destruction” (Sheil, 2001, pp. 6).
The term globalisation, an extension of global, came into frequent use “after the
collapse of the Berlin Wall in 1989” (Sheil, 2001, pp. 7). After this, it was
“genuinely popular after the economic crisis that erupted in Asia in 1997” (Sheil,
2001, pp. 7). Given its current usage, Sheil (2001. pp. 7) concludes that
“globalisation has, nonetheless, remained largely an elite, top-down term”.
Foucault argues that “discourse is not a translation of domination into language but is
itself a power to be seized” (Hooper & Pratt, 1995, pp. 14). One could argue that
defining terms is irrelevant, however, the meanings adopted by the authoritative
speakers, and presented in public policy have a large impact on how we see the issue.
It is argued by Sheil (2001, pp.7) that Australia’s Prime Minister, John Howard,
“feels that he can safely, selectively insist upon his own preferred meaning”.
However, as Sheil (2001, pp. 2) argues, “the official Australian perspective on
globalisation is deeply unsatisfying…the term harbours important issues that go well
beyond the limits of even the governments most expansive policy statements”.
This paper supports the arguments of the alternative view on globalisation, and links
this to the Australian IH program. Such a program is seen as another of the AFG’s
attempts to extend its neo-liberal tendencies, supporting the claim by Sheil (2001, pp.
2) that “the official Australian perspective on globalisation is strikingly narrow”.
Therefore an exploration and critique of Australia’s IH program is undertaken using
the arguments from the debate on globalisation. This is in line with the statement by
Arnold and Sikka (2001, pp.476) that “accounting research on international issues
such as harmonisation, the International Accounting Standards Committee
(IASC)…can potentially contribute evidence to the debate on globalisation”.
Overall, the theme and focus of this paper is to reveal how Australia’s IH program is
based on the rhetoric of globalisation, as defined by a neo-liberal perspective. Given
this, and the critique that abounds on the neo-liberal perspective, one can argue that
such a program is problematic. If we accept a socialist democratic version of
globalisation (alternative view), then one can argue that IH programs, particularly
Australia’s, has negative ramifications for business and the public, more serious than
that offered by neo-liberal supporters (i.e. the inefficient will not survive), and the
Before progressing any further, a definition of rhetoric should be established. The
term rhetoric has been defined in The Pocket Macquarie Dictionary (1984, pp. 776)
as “exaggeration or display in writing or speech”. So one could argue that in written
or spoken policies, being rhetorical is to exaggerate a particular position. For
globalisation it may be the official line on this is one that is exaggerated, or for
display purposes only. The true essence of globalisation is something not revealed in
rhetorical statements. Often statements by neo-liberals, regarding IH of accounting
standards, include exaggerations of the benefits flowing from such a program.
Hooper and Pratt (1995, pp. 11) define rhetoric as a form of persuasive or effective
speech or writing. They see rhetoric as a way of controlling reality, and as being
used to obscure real meaning, even to “promote ambiguity” (pp.11). Hooper and
Pratt refer to the work of Foucault, and claim that “rhetoric [i]s an instrument of
power used to cloth political polemics in scholarly garb, making it difficult to see
where the truth has been shaped and pruned to serve the interests of the prevailing
social and political hegemony” (pp. 12). The arguments put forward for the support
of IH of accounting standards are those which are used to cover the political
persuasions of the neo-liberal government, and the prevailing neo-classical economic
rationalism existing in AFG policies.
Arrington (1990, p. 6) argues that “political factors can become so dominant that the
discourse within a discipline can have virtually no resemblance to the discourse of
the broader academy”. One could argue that this is true of the discourse surrounding
globalisation, in that the discourse is heavily influenced by the neo-liberal
movement, that this discourse becomes dominant, and does not resemble the
discourse of the broader academy interested in globalisation. Arrington, although not
discussing globalisation or IH, implies that rhetoric is used to hide the political
agenda of a particular group (he discusses modernist accountants using positive
theory to hide the neo-liberal politics – or “libertarian economic voodoo”- underlying
the dominant discourse in accounting).
In their work on securities legislation in the US, Merino and Mayper (2001, pp. 502)
argue that politicians will often respond to unorganised groups “by promulgating
regulations rich in rhetorical promises but not expected to result in a reallocation of
tangible resources to the unorganised group”. With regards to the IH program the
AFG placate the concerns of the standard setters, accounting profession, and the
business community, while at the same time not making any real changes that will
effect the powerful position of the Australian Stock Exchange [ASX]. Merino and
Mayper (2001) argued that the regulators (in their case) were trying to maintain the
status quo. They use the term symbolism to mean rhetoric, and argue that this is
used “to still public outrage, without resulting in significant wealth
distributions…often used in party politics as a substitute for realities. The symbolism
is merely propaganda” (pp. 521).
The remainder of the paper is organised into three sections. The first section
provides a brief description of globalisation as defined by a neo-liberal/dominant
perspective. Given this view, a second section discusses the international
harmonisation of accounting standards in Australia, with additional reference to
international developments. This section is organised into two parts, to reveal a pre-
government intervention period of IH, and a period of time where the AFG took an
explicit stance on IH and intervened in the direction of IH, on the stated grounds of
globalisation. A third section will discuss the benefits of IH, as stated in AFG
policy, and supported by others. This section will reveal the similarities that such
benefits have to the official AFG thinking on globalisation, as described by the neo-
liberal version. That is, IH is argued to be an inevitable fact of globalisation, and
there is no alternative. The final section reveals an alternative version of
globalisation, and argues that the IH of accounting standards is based on neo-liberal
ideology, rather than any theoretical understanding of globalisation.
2. A Dominant Globalisation Theory
Quiggin (2001) discusses the debate on globalisation, and refers to the dominant
view that globalisation is seen to be a new phenomenon of the 1970’s.
“The great increase in both the number and value of transactions is
commonly claimed to be the inevitable result of technological change”
(Quiggin, 2001, pp. 5)
Reinforcing this view, Arnold and Sikka (2001, pp. 477) argue that “the dominant
contemporary discourse on globalisation asserts that the globalisation of business is a
radically new phenomenon driven by recent advances in digital technologies”. Such
a claim is also evident in the AFG’s IH policy, which argues that technological
changes have forced them to act. Additionally, this dominant discourse often cites
“huge growth in the volume of global financial trade and the appearance of
international organizations and agreements” (Arnold & Sikka, 2001, pp. 477), as
evidence of globalisation. The following description of IH in Australia may
superficially support this view, where 1973 saw the emergence of policies on IH at
times where international bodies were forming and developing similar policies.
The influence of neo-liberal ideology is an important characteristic of the dominant
discourse on globalisation. The term neo-liberal to describe globalisation, comes
from Falk’s (1999, pp. 129, cited in Orchard, 2001, pp. 4) notion of “globalisation-
from-above”, where “globalisation is proceeding in an ideological atmosphere in
which neo-liberal thinking and priorities go virtually unchallenged”. Under this
view, “national solidarity becomes dysfunctional from the point of view of the
rational economic interests of those who participate in the global economy”
(Dominelli & Hoogvelt, 1996, pp. 195). This argument is revealed further on in the
paper, where setting our own unique standards is argued to be costly; that we are
wasting resources by insisting on domestic accounting standards.
Partly related to the neo-liberal stance on globalisation is the argument that “the state
is powerless to stop these trends” (Tabb, 1997, pp. 28). This is reflected in the AFG
policy of IH when it states that it is incumbent on the government to support the
trends of global competition. In line with a hyper-globalist argument (Arnold and
Sikka, 2001, pp. 477), the AFG policy implies a sense of powerlessness of “nation-
states to regulate capital flows”. However, as will be revealed in the following
section on IH in Australia, the AFG had power, and used that power, to intervene in
the name of serving capitalists.
According to Tabb (1997, pp. 20), globalisation as proposed by the dominant neo-
liberal view, is “seen as a tide sweeping over borders in which technology and
irresistible market forces transform the global system”. In line with this view, there
is no alternative but to support free markets and free trade. It is insisted that there is
no other option (Sheil, 2001, pp. 2). Sheil (2001, pp. 2) argues that the claims of the
AFG are those of “liberal economic theory [where] resources scrapped as a
consequence of competition will be reallocated to other more productive activities”.
This neo-liberal view is then “given a powerful, new, five-syllable name, and
secondly, there is a notable absence of doubt” (Sheil, 2001, pp. 2).
3. The Australian International Harmonisation Project
3.1 Pre-government intervention
Accounting standards in Australia have legal backing through the Corporations Act
(CLERP, 1997) and are binding on members of the accounting profession (ASCPA
& ICAA, 1996). The number of companies that have to apply accounting standards
in preparing financial reports is therefore quite significant, only part of which
includes listed companies. Up until the 1970’s Australian accounting standards were
drafted in a similar fashion to that of UK accounting standards (the influence of the
ICAA), but in terms of content were created for the Australian context. However, an
international influence started to emerge in the 1970’s, with the release of the
accounting profession’s first ‘official’ policy in the form of Statement K3 -
Compatibility of Australian Accounting Standards and International Accounting
Standards Statement of Policy (ASCPA & ICAA, 1993).
This policy statement was released in the same year that Australia became members
of the International Accounting Standard Committee [IASC]. This international
standard setting body “was established in 1973 with the aim of bringing together
parties from throughout the world to develop Accounting Standards that applied
internationally” (Deegan, 1999, pp. 41). It does have representation from major
western nations, such as USA and UK, but these countries did not embark on a
harmonisation project for their accounting standards.
Statement K3 was initially issued in 1973, by the Australian Society of Accountants
and the Institute of Chartered Accountants, and was reissued, in 1979, as APS 3 -
Compatibility of Australian Accounting Standards and International Accounting
Standards. This statement required that the joint professional bodies should consider
the standards that were being produced by IASC, when they were issuing an
Australian Accounting Standard [AAS]. However, the International Accounting
Standard [IAS] had to be agreeable with best practice in Australia (ASCPA & ICAA,
1993). The AAS were to “carry an endorsement detailing compatibility with the
International Accounting Standard” or “reasons for material differences will be given
where appropriate" (ASCPA & ICAA, 1993, p. 11). The standard setting board
would also keep informed about “the activities of overseas accounting standard-
setting bodies, such as those in the United States of America, the United Kingdom,
New Zealand and Canada” (ASCPA & ICAA, 1993, p. 11).
A need to think “globally” was evident in these initial policies, and this reveals a
program of IH was under way in the 1970’s, while other major standard setting
nations were content to keep to a national set of accounting standards. One could
argue that the accounting profession in Australia was quite proactive when it came to
considering IAS for the setting of Australian accounting standards. Parker, a
member of ASCPA, argued that “if you compare us with the US, the UK, Canada,
New Zealand and South Africa, no other major capital market has such an aggressive
harmonisation policy” (Joint Committee on Corporations and Securities, 1998, pp.
CS 27). The program of the 1970’s was less aggressive than that of the 1990’s, as
hinted at by the title of K3 and APS 3, however it revealed an early interest by the
accounting profession to seek international compatibility.
Up until the 1990’s, no further changes were made to the policy of international
compatibility. However, the Australian accounting profession were maintaining a
presence in the activities of the IASC, as one of its “hardcore members who have
been there since inception” (Boymal, cited in Joint Committee on Corporations and
Securities, 1998, pp. CS 71). The AFG also noted this presence and stated that
“Australia is a founding member of the IASC and has been one of the most active
and influential members of its committees since its inception” (CLERP, 1997, p. 20).
It must be noted that Australian standard setting has also been tied to New Zealand
standard setting for some time, through legislation. Specifically, “Section 226(4A)
of the Australian Securities Commission Act 1989 requires that the AASB consult
with its New Zealand counterpart. This reflects the impact of Closer Economic
Relations with New Zealand and the efforts being made to harmonise financial
reporting at an international level” (ASCPA & ICAA, 1994, p. 27). The requirement
is similar with that stated in APS 3. As a result of this legislative connection, and
changes made in New Zealand, Policy Statement 4 Australia – New Zealand