ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Effects of Globalization in Accounting

Updated on October 30, 2017

Globalization effects on Accounting Industry

Globalization in trade refers to the transformation of business where a company of a country is connected or collaborated with another one operating many firms in different countries. This concept is an ever-changing and growing aspect of business around the world. Globalization has both positive and negative effects for the accounting industry. The differences between GAAP and IFRS cause many issues for accountants, thus we need a harmonization of standards. However, globalization has also lead to extreme growth in the accounting industry. Offering room for more jobs, ease of business transactions, and increased communication around the globe. It is continuing to be an increasingly important trend over the past couple decades.

Up until recently, GAAP (generally accepted accounting principles) have been the guidelines for the accounting industry. However, recently this has been changing. These changing laws and regulations has made it especially difficult for students and those new to the industry. This meshing in the business world means that accountants will also need to understand the culture and the business of other countries. Accountants who are familiar with global regulations are in high demand. In addition, fraud within the industry is spurring a demand for fraud examiners and forensic accountants. When a business practices globally, it may complicate the process even more.

In addition to working towards a harmonization of standards, tax is an issue as well. A realistic approach would be expecting a universal tax system but with differing rates to meet different nations’ needs. Many agree that globalization can and does in fact increase the level of inequality globally. These areas cannot compete at the same level as the already developed and growing countries. However, the rapid growth in information technology and industrialization has helped these developing nations in Asia. Globalization has also had effects on rural areas. In the earlier 2000s these areas have grown economically. The debt is relatively low, and thus they have become more competitive on the business front. The rural regions are typically in “early stages of development” and this makes them more attractive to investors. In turn this will support things like employment, debt relief, and profit. However, it can also be argued that this type of industrialization can hinder the cultures of the area, creating a more urban-like atmosphere.

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) worked to converge in 2002. This lead to the issuance of the “Norwalk Agreement” which was the first formal step to intertwine the two organizations. In addition, the use of “Extensible Business Reporting Language (XBRL) is the electronic language of communication and financial data.” This can make it much easier to work globally in the accounting field. Between 2008 and 2011, India and Canada made efforts to adopt the IFRS system in hopes of easing international business. It has been analyzed that globalization can be indirect results of market changes. Dating back to 2012, when the economic meltdown occurred, the wealth was redistributed thus would have positive effects in the accounting world.

Globalization is an important part of our economy today, and the United States’ “FASB has agreed to work with the Canadian Accounting Standards Board to harmonize business combinations.” In addition, the Auditing Standards Board has also made moves towards working with the International Practices Committee. An indicator of the incline in globalization is the decline in home bias, especially between 2005 and 2006. Home bias is “the tendency for domestic savings to be invested predominantly at home”. The increase in communication on a global scale has had a positive impact on the world, increasing our problem-solving options and expanding cultures into the business sector.

Overall, globalization has many positive and negative effects on the accounting industry. Depending on which point of view, and which area of the world, it can mean many things. We are still today working towards a unified system for financial reporting across the globe. This could offer extreme growth in all areas of business. Some issues have been resolved and some are yet to pop up. These issues can involve financial reporting, tax, communication, and numerous other topics. Globalization and industrialization can help the economy of developing countries by increasing their footprint in the business world and upgrading their technology. On the other hand, such changes may also deteriorate their cultures and the values among them. Globalization in accounting is a hot topic, work in progress, and as the years go by we will see even more drastic changes in the accounting profession regarding globalization.

Works Cited

“Globalization and Accounting.” Analyzr,

“Emerging Issues Impacting Today's Accountants.” Emerging Issues Impacting Today's Accountants - AICPA,

Minnick, Evelyn. “How Does Globalization Impact Accounting Education?” AccountingWEB, 7 Feb. 2016,

“The Effects of Globalization on Both Accounting Profession and Education” Ezine Articles.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)