Should The U.S. Be Worried About The Globalization Of Accounting?
The globalization of accounting can be very beneficial but also very dangerous for many people. It will make an overall understanding and certain system for everyone to follow on a global scale, that way every one should be reporting the same way. But it’s dangerous because if everyone is adapting to the new IFRS then GAAP may be no more and the USA has always followed the rules of GAAP, religiously.
One of the great social processes in the history of humanity is the globalization. Globalization has become apart of everyday life in our age, almost everything and anything is seeming to become globalized. This may be because it is easier for everyone to follow one unique system rather than have several different types which is hard to compare one to the other. The roots of the globalization are in the illuminists works like David Ricardo and Adam Smith “:The reaches of the nations” going forward through the Karl Marx opera until our ages. Why appear as very present the globalization in our ages is because it has become an economical need for our society, especially for the companies which want to go international or work international. The accounting receive, due to this fact, an order from the companies which needed to go on other markets for capital to supply an international accounting system which will allowed all the external users to relay on the financial statements presented by this system. This process of globalization in general and the imposing of an international accounting system on the other side are emphasizing some considerations related to the need on going global on one side and to the obvious cultural differences between the countries from other side.
Accounting standard-setters around the world generally believe that it is in the public interest to develop and maintain a universal set of high-quality standards for financial accounting and reporting. As Graham Ward, President of the International Federation of Accountants (IFAC), states, “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.” 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.
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. Consequently, it became possible for alternative standards to emerge and assume a level of importance that is likely to surpass that traditionally accorded to U.S. GAAP.
Specifically, compliance with the International Financial Reporting Standards IFRS’ promulgated by the International Accounting Standards Board (IASB) is now, or is scheduled to be required of publicly-traded companies in most countries. While there are many similarities between international standards and U.S. GAAP, significant differences do exist, and today, U.S. standards are not automatically presumed to be “better.” This situation has affected the process by which both U.S. and international standards are developed and maintained, and has already resulted in changes to both U.S. and international standards.
According to IASB Chairman Sir David Tweedie, “IFRS’ are now used by 100 countries throughout the world. Within the next five years we expect the accounting standards of major economies such as those of Japan, Canada, China and India to converge with IFRS’ while at the same time the differences between international standards and U.S. GAAP are being eliminated.”
Some may think outsourcing to different countries as the same thing as globalization. Where some industries seem to be taking-off and thriving in the outsourcing age, some industries are feeling the reverse effects and are even considering coming back to the United States. Industries such as IT, software, and telecommunications will continue to thrive off of cheap internet in these developing countries, whereas the manufacturing industry need to thrive off things such as natural resources but will continue to struggle due to the high energy costs. Not to mention, shipping their finished products from one side of the globe to another is not a cheap task. With the process of globalization, outsourcing has become a global spectacle that is here to stay. Recognizing this reality, governments should take measures to prevent needless outsourcing of certain jobs to prevent developed countries employees to have their jobs “stolen” by creating a sophisticated infrastructure designed to help new industries and offset any jobs lost. Outsourcing could mean the loss of jobs for many people which could affect their living style and family dramatically. Everyone needs to prepare to adapt to these globalization processes.