- Business and Employment
Globalization Accounting ACC303
By: Jeffrey Cordon
This paper will talk about globalization accounting, while focusing on global accounting standards as well as the economic impact it has in today’s world. The paper will talk about several global accounting and accounting standards such as IFRS (International Financial Reporting Standard), GAAP (Generally Accepted Accounting Principles), SEC (Securities and Exchange Commission), etc. and discuss how they are affecting global accounting and the economy. The paper will also discuss how global accounting will affect U.S. Accountants in today’s world.
Keywords: Globalization, GAAP, Accounting, Standards
“As globalization continues to impose new personal and professional challenges on U.S. accountants, it also presents new career opportunities for those who embrace the continuous, accelerating change that characterizes globalization. U.S. accountants who recognize the opportunities and prepare to take advantage of them have little to fear from globalization. In contrast, accountants who are in denial about globalization's inevitable effects face a very different future” (How Globalization is Affecting U.S. Accountants). Historically, U.S. GAAP has been known as being the highest-quality set of financial accounting and reporting standards in the world. The problem with GAAP despite it being a well-known standard was that it was not accepted worldwide. The reason it was not accepted worldwide is because GAAP was slow to evolve and become a better set of standards as the business world has become more complex and globalized (How Globalization is Affecting U.S. Accountants). Due to GAAP, not being used as a universal standard, the International Accounting Standards Board (IASB) is what is required or is scheduled to be required to be used for publicly-traded companies in most countries (How Globalization is Affecting U.S. Accountants).
“While there are many similarities between international standards and U.S. GAAP, significant differences do exist, and today, U.S. standards are not automatically presumed to be "better." This situation has affected the process by which both U.S. and international standards are developed and maintained, and has already resulted in changes to both U.S. and international standards” (How Globalization is Affecting U.S. Accountants). Along with the International Accounting Standards Board, most countries follow the International Financial Reporting Standards (IFRSs). The International Financial Reporting Standards was created by the International Accounting Standards Board. Sir David Tweedie, the International Accounting Standards Board Chairman, stated that the International Financial Reporting Standards is now being used by 100 countries throughout the world (How Globalization is Affecting U.S. Accountants). Sir David Tweedie as stated that within the next five years he expected that the accounting standards for major countries and their economy such as Canada, China, India, and Japan to begin using IFRSs, while the differences between IASB and GAAP are being eliminated (How Globalization is Affecting U.S. Accountants).
“The International Financial Reporting Standards is a single set of accounting and financial reporting standards developed by the International Accounting Standards Board. They are intended for global use by entities in all types of economies – from developing countries to emerging markets to well-established industrialized nations” (The Globalization of Accounting and Auditing Standards). The purpose of having the IFRS used throughout the world is so that financial statement users are given consistent and comparable information across borders (The Globalization of Accounting and Auditing Standards). Now after discussing about the International Accounting Standards Board and the International Financial Reporting Standards, I am going to talk about how these standards can be used with SEC.
Currently, only non-us private issuers may prepare financial statements using International Financial Reporting Standards for SEC Filings (The Globalization of Accounting and Auditing Standards). Over the past five years, there has been a great amount of discussion about whether or not some publicly traded companies/entities in the United States may use IFRS (The Globalization of Accounting and Auditing Standards). The SEC Chair Mary Jo White stated that deciding on whether or not to further incorporate IFRS in the United States financial reporting system has also been one of her priorities (The Globalization of Accounting and Auditing Standards). Finally, for the SEC it’s been stated that for the foreseeable future the International Financial Reporting Standards will not be allowed for domestic issuers in the United States. The SEC also stated despite IFRS not being allowed, domestic issuers, voluntarily, can provide International Financial Reporting Standards information to supplement their GAAP, General Accepted Accounting Principles, financial statements (The Globalization of Accounting and Auditing Standards).
Finally, in this paper the last topic that will be discussed is the globalization effect on the economy/accounting. “In the future, we should see more movement towards greater transparency and universality in the taxation rules. We would not be surprised if within this decade, we see the introduction of universal tax system. We have to note that we are not advocating a tax system with equal across the board tax rate. This in itself could be disastrous as many countries have different needs and therefore different requirements for funding social programs. However, we are arguing that the rules should be common and each country should only be allowed to tweak its rates in order to meet its fiscal needs. This tax system would help a common set of taxation rules that need to be followed by each country. The only flexibility that each country should have is in the establishment of the appropriate tax rates” (Scholastic Views on International Accounting). As stated above, the power of globalization is turning accounting into a more digital work field and as it progresses and becomes a more important matter, the idea of a universal tax system is possible. Every country already has a tax system into place and most of the rules are very common. However, we would need to compile all of these rules from each country and ensure that these rules are consistent across borders to create a universal tax system (Scholastic Views on International Accounting).
In conclusion, throughout this paper many topics have been discussed revolving globalization and accounting. The paper began discussing GAAP and how this standard has been changing due to globalization. Afterwards the paper discussed the IASB and the IFRSs and how the SEC wants to use these standards in the United States but as the foreseeable future states, the United States is far from using these standards. Finally, in this paper the idea of universal tax system has been discussed, and at the rate of how globalization is changing, and how one day the world may use this method to allow countries to exchange financial data while having consistent and reliable information.
Parker, Alison, and Cheryl Hartfield. “The Globalization of Accounting and Auditing Standards.” Accounting Today, 1 Dec. 2016, www.accountingtoday.com/news/the-globalization-of-accounting-and-auditing-standards.
Petkov, R. "Scholastic Views on International Accounting within the Lenses of the Global Medium." Trakia Journal of Sciences, vol. 10, no. 4, Dec. 2012, pp. 20-27. EBSCOhost, proxy-wcupa.klnpa.org/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=84515609&site=ehost-live&scope=site.
Pounder, Bruce. “How Globalization is Affecting U.S. Accountants .” Accounting Web, 2006, www.accountingweb.com/sites/default/files/How_Globalization_is_Affecting_US_Accountants--by_Bruce_Pounder_of_CPEanywhere.pdf.