Globalization & Accounting in the US

As we begin 2018, globalization in the business field of accounting becomes more prominent than ever. The differences between GAAP and IFRS have shrunk over the years and are predicted to continue to shrink. As noted by “Mihaela-Cristina Onica” in her article, Harmonization and Convergence – Coordinates of Accounting Globalization, “financial markets, for all countries of the world, are becoming much more integrated.” We see an increasingly common practice for companies to take their business outside of the US in recent years. GAAP no longer holds the power that it used to in the international accounting community.

There are several reasons private companies may choose to use IFRS instead of GAAP. One reason is that IFRS is based on broad principles while GAAP is complex and can sometimes be extremely costly for companies to comply with its standards. Another reason IFRS is beneficial is that it allows companies to be more readily prepared for changes in the business environment. Companies also choose IFRS for the ability to compare their activity to other international companies as many US companies have business outside the US.

Accounting students seeking to get their CPA should consider these shifts toward globalization in the accounting environment. AICPA President and CEO Barry Melanco when speaking of globalization said, “the ability of CPAs to operate across borders will no longer refer just to state boundaries but to international borders as well.” The various sections of the CPA are continuously changing year to year; adding new sections while discarding others. I predict future additions to the CPA will reflect accounting law shifts from GAAP to IFRS as the market continues to globalize. Students who readily prepare for these changes will be more desirable additions to a firm. That's because, as mentioned earlier, many firms are expanding their business outside the US.

Globalization is defined as "the process by which businesses or other organizations develop international influence or start operating on an international scale." Globalization is important because US companies need to be ready to efficiently compete with the increasing global market. Accounting majors should consider these topics during their studies as they will likely affect their futures.