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Globalization in Modern Day Accounting
The process of globalization has affected the entire world, in just about every aspect imaginable. Whether it be the way in which we trade, communicate, or travel; globalization has played a huge part. The same can be said about the world of accounting. While some aspects of globalization have been regarded as negative, the improvements in the accounting world due to globalization would definitely be considered positive.
With the process of globalization, the world of business has become more and more complex. This, in turn, has made the job of an accountant more and more complex. Companies buy, ship, and import goods from all around the world now, and it is an accountant’s job to maintain good records and keep the company afloat. With so much international business taking place, it is imperative that different accountants and firms perform their jobs in the same way regardless of where they operate. In 2002, the Financial Accounting Standards Board (FASB), who set the accounting standards in the United States, and the International Accounting Standards Board (IASB), who set the international accounting standards, came together to implement rules so that both standards would be on par with each other. Prior to this meeting, both the US and International policies never coincided with each other and made it extremely difficult to have any sort of congruence between the two. This helped the position of an accountant to become a truly worldwide profession.
One of the most common ways that companies all across the globe are preparing their financial statements is through the Generally Accepted Accounting Principles (GAAP). These are a strict set of guidelines for companies to follow when preparing their statements so that everyone across the world can look at it and understand what is going on. Examples of major countries that adhere to these principles are Canada, France, Germany, and the US. Countries might have their own variations to the principles to fit their nations’ needs, but for the most part they are similar.
When a company doesn’t have a transparent way of handling their records, it makes it very difficult for other companies to do business with them. Companies might be afraid to do business with them because it might be shady, or they just might realize that a company without strict guidelines might not be the most reliable partner to have in business. An example where there was a lack of strict guidelines and processes was the collapse of the Asian economy from 1997 to 1998. The economy broke down due somewhat to a poor accounting system throughout the area, and the effects were huge. Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, South Korea, and Taiwan all took huge hits on their economy during this time. Now this may not have all been avoided if they had better accounting systems set up, but it definitely could have been handled better if they did.
Another huge effect that globalization is having on the world of accounting is the opportunities that accountants are seeing. Not only is there a huge need for accountants at home in the US, and will continue to be, but there’s an ever increasing need for accountants worldwide. The position of an accountant is always at high demand, and the new roles for accountants in multinational companies and international auditing is only increasing that demand.
Globalization has played a huge part in modernizing the accounting world. It has improved efficiency and made accountants even more important in the business world. While there are still important steps that need to be taken to get a single, definitive guideline for procedures in accounting set up throughout the world, it is definitely on the right track. The most important thing for global accounting is establishing a set of high quality standards that are universal, and globalization and integration is a key way of making that a reality.