The idea of globalization is something that has been coming around for a while. For those who do not understand what globalization is, it can be defined as “a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.” As you can see by the definition, the process of globalization interacts with international trade and investment. The one thing that is constant with trade and investment is that at some point you receive something for your investment or trade.
This is where the profession of accounting comes into play. Accounting can be defined as, “is the systematic and comprehensive recording of financial transactions pertaining to a business, and it also refers to the process of summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities.” Accounting is a key component to any business structure anywhere in the world. This brings us to how the two are connected to each other. International trade and investments bring up certain situations that cause a change to how we are used to being accountants. The areas we will look at are how globalization affects the change in going away from US orientated GAAP principles. As well as, how globalization now forces accounting firms in America to become familiar with accounting rules from other countries and the threats that the accounting profession face.
For many years, every American firm has been following the same updated guidelines known as Generally Accepted Accounting Principles or GAAP. The guidelines for GAAP have been rapidly changing over the years. When we look at what may happen to with GAAP we can look towards IFAC or International Federation of Accountants. The idea of globalization is spreading more and more every single day and it is affecting our daily lives more than we can imagine. The International Federation of Accountants have been working since its foundation in 1977 to create and international set of standards and practices for accounts around the world. The result of the International Federation of Accountants bringing together an international set of rules and regulation will then allow an easier transition with the globalization process.
With America having the chance to move away from GAAP and the IFAC not having a set rules and regulations yet, it forces the firms of America to become more common with foreign policy. In the past, it was almost a guarantee that you would only have to become familiar with the tax rules and regulation of the country that you planned to work in. In today’s world that guarantee is not as solid as it was in the past. The economy of the world is changing more drastically each and every day. The multinational businesses around the world are making global economies becoming more and more interconnected. Globalization is a big part of the how the world’s economy is becoming more connected. This brings us to our new issue regarding how in today’s world an accountant must be familiar with tax regulations from around the world. For example, if a bank has an office in the United States as well as in China and offer bonds to both places. If an accountant is doing taxes for a client who lives in American and China who have bought the same bond from the bank, each tax form and regulation may be different depending on which country you live in.
As much as globalization can cause for smoother transition between accounting firms throughout the world, there are threats that we as accountants face. If you are an accountant for the Securities and Exchange Commission (SEC) you face problems with the idea of changing systems throughout the world. With change, comes confusion and with confusion comes the opportunity for someone to take advantage of something they shouldn’t be. They face the fact that people in this world will always look to beat the system and someone out there will try their very best to do it. Another threat that accountants face is the idea that many of the accountants who are not familiar with international regulations will end up unemployed. Globalization caused a very heavy strain on accountants who have been employed in America for a long time and now have to learn a brand new set of rules and regulations. At the same time it puts a lot on the plate of a young and upcoming accountant who is trying to make it in this hectic business world.
All in all the idea of globalization is one that not only accountants but the world can’t avoid. The technology today is amazing and is making the world more and more connected every single day. Accounting is a pivotal part of every business operation around the world and just like everything else it will change with the process of globalization.