Mutual Recognition versus Reconciliation

There are two approaches to dealing with accounting and reporting differences. In mutual recognition, a foreign registrant need only provide information prepared according to the GAAPs of the home country. In reconciliation to the local GAAPs, a foreign registrant reconciles its home-country financial statement with the local GAAPs), and recasting financial statements in terms of local GAAPs.

F. Efforts toward global convergence in accounting standards

Forces encouraging the harmonization of national accounting standards include: investors, global integration of capital markets, the need for MNEs to raise foreign capital, regional political and economic harmonization, MNEs’ desire to reduce their accounting and reporting costs, and convergence efforts of standard-setting bodies such as the International Accounting Standards Committee (IASC) which issued a set of International Accounting Standards (IAS).

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