Effects of Globalization on Accounting
Globalization affects multiple aspects of accounting. Globalization is the integration of economies worldwide. It includes international trade, investments, and outsourced manufacturing. The growth of international markets and decline of trade barriers is increasing globalization significantly (Blocher, 2016). Accounting standards, strategies, and education are facing considerable changes. Globalization is affecting the future of GAAP, changing managerial accounting strategies, and creating opportunities and threats for future accountants.
GAAP is rules-based consisting of a complex set of guidelines (Pologeorgis). While IFRS is principles-based, containing objectives of good reporting along with guidance (Pologeorgis). Benefits of adopting IFRS include possible simplification, transparency, and comparability between different countries on accounting and financial reporting. It is believed that a change to IFRS would benefit corporate management. Management would have simpler standards, rules, and practices that are followed by all countries (Pologeorgis). Globalization has increased investment opportunities for investors. For investors, the change to IFRS will increase the ability to compare companies. The switch from GAAP to IFRS will require current accounting professionals to learn the internationally accepted standards. This will take time; however, it will allow for consistency in accounting practices in the future. The adoption of IFRS provides many benefits and is most likely necessary to keep up with the increasing globalization.
GAAP are the rules and standards accounting professionals of the U.S. are familiar with. Many people may be resistant to learning a new system. There also is a belief that IFRS may be lower quality than GAAP due to IFRS being principles-based. In order for companies around the country to be compared, the accounting standards must be of high quality and consistently applied (Norris). Cost and time necessary for companies and their auditors to convert to IFRS is another concern. There will be costs involved for accounting firms and accounting departments to educate and prepare their auditors for the global standards (Accounting Web). While there are concerns regarding the switch from GAAP to IFRS, the switch seems to be inevitable.
Management accountants help organizations succeed with decision making, planning, performance management and more (Blocher, 2016). Management accounting is evolving in order to succeed in an increasing globalized marketplace. Globalization is changing the business environment with growing international markets and trade (Blocher, 2016). These changes have increased competition among businesses. Management accountants must be aware of competition, changing market environments and threats on a global scale. Companies must be more strategic than ever to stand a chance in the highly globalized market. Management accountants understand the benefit and importance working with foreign countries for sales and operating activities (Blocher, 2016).
Current and future accountants are facing opportunities and risks with the uncertain future of GAAP. Accountants whose knowledge is limited to GAAP may face the threat of loss of employment. Some companies may not be willing to pay for the training of current employees and will look to hire new employees. Companies will want accountants with the same talents as foreign competitors. Accountants that have the skills and knowledge beyond US-based financial accounting standards will benefit. Accountants with these skills also have the ability to work in the US or abroad, which allows for more job opportunities. Both current and future accountants have the option to acquire more education to broaden their career opportunities.
US accounting standards, management accounting, and financial accountants must evolve with the increasingly globalized market. If companies, accountants, and investors keep up with changes due to globalization they will have many more opportunities for success. Accountants acquiring more education and implementing competitive strategies will be able to use the increase in globalization to their advantage.
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Pologeorgis, N. (2012, October 16). The Impact Of Combining The U.S. GAAP And IFRS. Retrieved October 06, 2017, from http://www.investopedia.com/articles/economics/12/impact-gaap-ifrs-convergence.asp
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