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How Globalization Affects Current and Future U.S. Accountants
How Globalization Affects Current and Future U.S Accountants
Globalization is defined as the process by which businesses and other organizations develop international influence or start operating on an international scale. U.S accountants are greatly affected by the differences in standards used by U.S. and the rest of the world. Many believe it is in the best interest to have a universal set of high-quality standards for accounting. “The key assumption is that universal acceptance of a single set of high-quality standards would make the world's capital markets more efficient by enhancing the consistency and comparability of financial statements. Greater efficiency in the world's capital markets would in turn lower the costs of capital for businesses, and lower capital costs would encourage economic growth on a global scale.” (Pounder). “Historically, U.S. GAAP has been regarded as being the highest-quality set of financial accounting and reporting standards in the world. But its acceptance is far from universal, and its standards have been slow to evolve and improve as the business world has become increasingly complex and globalized” (Pounder). While United States continues to use GAAP, most countries use International Financial Reporting Standards (IFRS). This puts U.S. Accountants and Accounting students at a great disadvantage. This leaves them having to
incorporate two different principles in order to do business. As a result of this, U.S. accountants are at a disadvantage to those foreign accounts who are already knowledgeable of IFRS who are then better qualified for rapidly growing career opportunities in China, India, and other evolving economies (Pounder). Learning both sets of standards is not an easy task as most current accountants are used to GAAP since that is what they have been practicing. It would also be in a future accountants best interest to learn both sets of standards before applying for jobs whether they want to work globally or not because that is what is going to be preferred.
The second affect globalization has on accounting is the change in primary focus from external reporting to both external and internal. “In the U.S. economy, a thriving financial sector is usually supported by a strong public accounting and auditing firms. Therefore, the focus over recent years has been to ensure that accountants excel at compiling information involving a company’s assets, liabilities, equity, investments, etc” ("The Effects of Globalization on Both Accounting Profession and Education" 2017). Due to globalization external practices are not as respected if not paired with internal. Internal practices are key to business because it is what shapes the way they communicate and reach customers in the foreign market. “The responsibilities of the internal accountant are becoming more critical to the success of businesses. For a business wanting to expand into foreign territory, cost accounting is used to accurately develop product price information, location of manufacturing facilities, picking suppliers, etc” ("The Effects of Globalization on Both Accounting Profession and Education" 2017). Internal accountants have to be familiar with many regulations, currency conversion costs, and tax treatments overseas. With more and more businesses expanding and striving to go global there is more of a demand for accountants with skills with internal practices or even better, external and internal. Globalization shifted the primary focus in accounting which is a pretty big deal.
In reaction to all the changes in accounting due to globalization, the education for accounting students has drastically changed. The change with the shift away from GAAP greatly affect the education of accountants. Currently GAAP is the primary focus in accounting classrooms because that is what is most widely used. The guidelines are rapidly changing which is going to require a change in the education in what is currently being taught. Previously, accounting students would feel confident with only being familiar with the tax code of the area in which they would be working in, but now are required to be familiar with more taxation systems in order to compete in their field. Another key factor is that accounting students can expect that there may be a lot more freelancing in the market rather than being employed by a particular company. With globalization certain areas of accounting are being outsourced to places where labor is more inexpensive. It is becoming more and more popular to be sent to other countries for work which would require students to further their education to meet the needs to work overseas including all regulations and laws, language and culture, and business practices ("The Effect of Globalization on Accounting Programs" 2017).
Globalization has a huge impact on U.S Accountants and U.S Accounting students. One would think that it has little effect when really it has a huge influence. The standards U.S. Accountants and students have learned and practiced are now being rapidly changed. The primary focus has been shifted from external reporting to a combination of external and internal. As a result of globalization and all these changes accounting programs and education has to be altered in order to prepare students and future accountants for what is to come due to globalization. It is not as simple as just doing business in another country. There is a lot you must know, be able to practice, and be aware of when it comes to the affects on accounting with globalization.
Pounder, Bruce. "How Globalization Is Affecting U.S. Accountants." Strategic Finance, vol. 88, no. 7, Jan. 2007, pp. 41-45. EBSCOhost, proxy- wcupa.klnpa.org/login?url=http://search.ebscohost.com/login.aspx?direct=true&d b=a9h&AN=23572488&site=ehost-live&scope=site.
“The Effect of Globalization on Accounting Programs.” Vista College, 13 Nov. 2017, www.vistacollege.edu/blog/careers/the-effect-of-globalization-on-accounting-programs/.
“The Effects of Globalization on Both Accounting Profession and Education.” JOSIC, 23 Apr. 2017, www.josic.com/the-effects-of- globalization-on-both-accounting-profession-and- education.