Globalization Vs. U.S. Accounting
Globalization has been rattling the business world with constant updates and new standards. With these rapid changes, the job of accountants gets increasingly harder. Staying on top of the effects of globalization is the only way U.S. accountants can constantly adapt and keep the ball rolling. Generally Accepted Accounting Principles (GAAP) have been losing popularity in these changing times as well as being irrelevant in upcoming international businesses.
GAAP has been the framework for all accounting firms and accountants throughout the world to keep all international businesses operating under a single set of principles. These principles have always been designed to keep the interests of everyone in mind. The president of International Federation of Accountants once said, “We firmly believe that it is in the public interest to have a single set of international standards, of the highest quality, set in the public interest by an international expert body which transparently consults with, and recognizes the legitimate interests of, the international community” (How Globalization is Affecting U.S. Accountants). Using one set of rules for everyone to follow either nationally or domestic has been the most efficient and effective method for accounting over the past decades and now globalization is threatening that. Most recently in 2006, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) released a memorandum that contains a new structure for the convergence of U.S. and international accounting standards. This memorandum was a direct branch of a former convergence memorandum known as the “Norwalk Agreement”. This occurred in 2002 and outlined how important it is for both international and U.S. standards to converge to one. Converging would mean some standards would have to adapt or accept to international change. For example, any non-U.S. company that files their financial statements through the International Financial Reporting Standards (IFRS) would no longer have to convert these statements to follow U.S. GAAP. This makes it harder for U.S. companies to read and convert the information from these statements into the standards that they all know and follow daily. As time continues and international standards continue to change and become more relevant throughout, GAAP will continue to diminish in importance, whether it be for U.S. firms or international firms that also use GAAP. Because GAAP is becoming less and less relevant, U.S. accountants will be at a major disadvantage compared to accountants worldwide who have been learning and adapting to the more relevant international standards. This will put them at the top of this list to jump into the new and ever-growing economies that are rapidly taking over. This is worrisome for all businesses in the U.S. already and for all the students learning to become accountants, having a disadvantage before they even begin working.
Globalization has been looked at positively over the past years with many pros such as the global economy rapidly increasing and smaller economies on the rise. However, there are many bad things that come with it, specifically here for U.S. accountants and firms. GAAP has been the world’s largest set of standards for accountants worldwide but have recently and quickly diminishing, this is a direct result of globalization because international standards have been changing so rapidly from the incredible speed of globalization, thus making GAAP adapt to these new international standards. International standards have been taking over in the recent years and is causing GAAP to become irrelevant and causing a major disadvantage to U.S. accountants.
Maurya, Raj. “GAAP and IFRS: The Effects of Globalization.” Fundamentals of Accounting, Raj Maurya, 22 July 2017, www.fundamentalsofaccounting.org/gaap-and-ifrs-the-effects-of-globalization/.
Pounder, Bruce. “How Globalization Is Affecting U.S. Accountants.” www.accountingweb.com/sites/default/files/How_Globalization_is_Affecting_US_Accountants--by_Bruce_Pounder_of_CPEanywhere.pdf.
“The Effect of Globalization on Accounting Programs.” Vista College, 13 Nov. 2017, www.vistacollege.edu/blog/careers/the-effect-of-globalization-on-accounting-programs/.