Since the time of the dot com boom in the early 2000s the world has not been the same. From that moment on, the rapid growth of technology has changed that way people all across the world interact with each other. The recent and modern day technology that has allowed companies to easily run and interact with other companies that are in the same state, country, or just about anywhere in the world. This in return, opened up the idea of rapid globalization in the modern world. Before we take a look into how globalization has affected how the business and accounting end of international business has changed, let us get a better idea of what globalization is. Globalization refers to the tendency of international trade, investment, information technology and outsourced manufacturing to weave the economies of diverse countries together. That is a very technical definition, in everyday terms globalization can be defined as the process of bringing interconnecting the world.
When we take that information and look at the world economic factors, we can see how globalization can be tied to international markets. The idea of doing business all over the world is directly related to the accounting profession. The reason I say this is because if you are running a business in America, Europe, Saudi Arabia, or Africa the practice of counting, organizing, and spending of money takes places all over the world. With that being said, there are several different organization all over the world that have to regulate how a company’s money is reported. So, for example if you have an American based company with a factory in Europe when you come to do the year end reporting do you use GAAP or IFRS. GAAP stands for generally accepted accounting principles and is the primary standard in America, while IFRS (International Financial Reporting Standards) is the main standard in Europe. This brings us back to the questioned asked, what accounting principles should be acknowledge as the primary one?
There are currently a few suggestions being proposed by respected accounting principle makers that would make this conversation go away and the act of international business reporting become easier for both parties. One of the bigger theories going around in the global economy is to combine all accounting regulations into one code. You would have to go through the accounting principles of the countries all around the world and pick and choose the best of the best that everyone can agree on and from there make a universal accounting standard. It would benefit the world due to the simple fact that in order for an act like this to happen every country in the world would now be familiar with the laws and regulations of the other countries worldwide. The next suggestion would be for America to start to shift away from GAAP and towards IFRS. The benefit from this would be that up and coming accountants study GAAP in order to pass the CPA exam. They learn the ins and outs of GAAP just to get into the real world and have half that knowledge go to waste because they now have to learn IFRS. It would allow a universal knowledge of accounting principles. It would allow for accountants all over the world to be able to adjust at a better pace to any new regulations or updates in the accounting profession.
With all of this being said and how interconnected the world has become in the past two decades alone, it is not a far assumptions to say that the world will just continue to become more and more interconnected. The only way we continue to become more interconnected is due to the increase in technology and there is no sign of that slowing down. This could potentially lead to more and more global companies being created and conducting business at a global level. It only makes sense that with globalization and technology changing the world the accounting profession changes as well. Change could be good, and it could benefit accountants all over the world to have one unified accounting system in order to make the business aspects of global trade and investment work as a better and more efficient rate.