Technological innovations have catapulted the financial district into a global market. Globalization is having a major impact on the way companies do business. Businesses have a responsibility not only to be privy to information about consumers in their own backyard, but also to understand the consumer culture and economic, political and legal structures of other countries. Due to the impact of globalization on companies, the expectations of prospective business students and their education have changed. Accounting students in particular are affected by the changes that globalization has impacted the market. These students, particularly during their undergraduate years, are challenged to understand not only the rules and regulations of GAAP (Generally Accepted Accounting Principles) but also the standards set forth by IFRS (International Financial Reporting Standards). Within accounting, the focus was on external reporting, which includes the preparation of annual financial statements and the audit. However, due to the ever-changing world of the global market, prospective accountants must have perspectives that influence both external and internal reporting. The market will continue to change due to the rapid flow of information, making globalization an important factor in accounting education.
Companies in the United States have largely adopted GAAP, which is a guide to how companies must prepare financial information in order to prepare reports. GAAP has come in handy in recent years because it simplifies the way businesses in the US communicate with each other. However, in the global environment, GAAP is proving to be a burden for most companies. Overseas, they have adopted IFRS, which is another guide to preparing financial information that helps foreign companies communicate with each other. Most countries use IFRS as the basis for how business transactions are conducted. Since most of the world uses IFRS as a standard, this leaves the US with the arduous task of having to incorporate two different principles for conducting business. In Bruce Pounder’s article “How Globalization is Affecting US Accountants,” Pounder states that “US accountants will be at a significant disadvantage compared to the many foreign accounting professionals who are already proficient in international accounting standards and are therefore much better placed to handle the rapidly growing.” to seize career opportunities in China, India and other emerging countries” (Pounder, 2007, p. 3). He further predicts that the skills and knowledge of US accountants will become obsolete as GAAP becomes more overshadowed by IFRS. Therefore, the IFRS have been more integrated into the accounting curriculum for education. Students must understand not only GAAP but also IFRS and the changes that occur when working with both. Incorporating IFRS into the learning process prepares students to later take the CPA exam, which was recently updated to include information about IFRS in the Financial Accounting and Reporting (FAR) section. Students will be better equipped with skills and information that will make them more marketable and efficient in the globalized business environment.
In the US economy, a thriving financial sector is usually backed by a strong public accounting and accounting firm. Therefore, the focus in recent years has been to ensure that accountants compile excellent information on a company’s assets, liabilities, equity, investments, etc. However, due to globalization, external accounting practices are not as valued when internal practices are not involved. Internal practices are important because they shape the way companies reach their customers in the foreign market. Authors Paul Danos and Richard L. Measelle explained in their article Globalization of the Business Environment: Implications for Accounting Profession and Business Education that “In a competitive global marketplace, the in-house accountant must be sensitive to what is driving costs, products and services he/she must work with production and marketing staff to streamline all cost accounting processes” (Danos, 1990, p. 79). The tasks of the internal accountant are becoming increasingly important for the success of companies. For a company looking to expand overseas, cost accounting is used to accurately develop product pricing information, location of manufacturing facilities, selection of suppliers, etc. Because of these factors, internal accountants must deal with cross-border regulations, tax treatments, and currency conversion costs. When it comes to public accounting, auditors need to be well versed in global accounting standards because “the world’s economies are becoming increasingly interdependent…” (Needles, 2010, p. 602), according to Belverd E. Needles Jr., author of the article “Accounting Education: The Impact of Globalization”. The author goes on to promote global standards for accountants because it strengthens their practices just by having to be familiar with these regulations. In order to be familiar with the global market, accounting students are recommended to take courses specifically designed to analyze different cultures, languages and political factors affecting society.
Globalization has influenced many changes that have taken place in both the accounting profession and education. Students are now confronted with problems that arise in the global market and how to solve them. These students are expected not only to understand all the math and jargon of the business world, but also to have a good grasp of the foreign consumer culture and regulations associated with each country. With these skills implemented, students will be able to excel in the new business world.
Danos, P. & Measelle, R.L. (1990). Globalization of the business environment: implications for the accounting profession and business education. Human resource management, 29(1), 77-84
Needles, BE (2010). Accounting Education: The Impact of Globalization. Accounting Education, 19(6), 601-605. doi: 10.1080/09639284.2010.501578
Pounder, B. (2007). How globalization is affecting US accountants. Montvale: Institute for Accountants.