Innovations in technology have catapulted the financial district into a global marketplace. Globalization has had a great influence on the way companies do business. Companies are not only responsible for protecting the privacy of information involving consumers in their own backyard, but also for understanding consumer culture, as well as the economic, political, and legal structures that exist in other countries. Due to the influence that globalization has had on business, it has changed the expectations that are required of incoming business students and their education. More specifically, accounting students are affected by the changes that globalization has influenced in the marketplace. These students are most particularly challenged throughout their undergraduate years in understanding not only GAAP (Generally Accepted Accounting Principles) rules and regulations, but also the standards set by IFRS (International Financial Reporting Standards). Within the sphere of accounting, the main focus has been on external reporting involving the preparation of financial statements and auditing. However, due to the ever-changing world of the global marketplace, future accountants are required to possess perspectives that influence both external and internal reporting. The market will continue to change due to the rapid travel of information, making globalization an important factor in accounting education.
Companies in the United States have largely adopted GAAP, which is guidance on how companies must construct financial information to produce statements. GAAP has been useful in recent years because it makes it easier for businesses in the US to communicate with each other. However, in the global environment, GAAP proves to be a burden for most companies. Overseas, they have adopted IFRS, which is another guide to producing 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 is using IFRS as the standard, it leaves the US with the tedious task of having to incorporate two different principles of conducting business. In the article, “How Globalization Is Affecting American Accountants” by Bruce Pounder, Pounder states that “American accountants will find themselves at a severe disadvantage compared to the many foreign accounting professionals who already master international accounting standards and who, for Therefore, they are much better positioned to take advantage of fast-growing career opportunities in China, India and other emerging economies” (Pounder, 2007, p. 3). He then goes on to predict that as GAAP is eclipsed by IFRS, US accountants will find their skills and knowledge become obsolete. Therefore, IFRS have become more integrated into the accounting curriculum for education. Students are required to understand not only GAAP but also IFRS and the changes that occur when working with both. By involving IFRS in the learning process, students will be prepared to take the CPA exam that was recently updated to include IFRS information in the Accounting and Financial Reporting (FAR) section. Students are increasingly equipped with skills and information that will make them more marketable and efficient in the globalized business environment.
In the US economy, a driving financial sector is often backed by strong public accounting and auditing firms. Therefore, the focus in recent years has been to ensure that accountants excel in compiling information related to assets, liabilities, capital, investments, etc. of a company. However, due to globalization, external accounting practices are not as valued if internal practices are not also involved. Internal practices are important because they shape how companies reach their customers in the foreign market. Authors Paul Danos and Richard L. Measelle stated in their article, “Globalizing the Business Environment: Implications for the Accounting Profession and Business Education,” that “In a competitive global marketplace, the internal accountant must be sensitive to what drives the product costs and must work with production and marketing people to streamline all cost accounting procedures” (Danos, 1990, p. 79).The responsibilities of the internal accountant are becoming more critical to the success of companies. For a company that wants to expand into foreign territory, cost accounting is used to accurately develop product pricing information, manufacturing facility locations, supplier selection, etc. Due to these factors, internal accountants they should be familiar with cross-border regulations, tax treatments, and currency conversion costs. In public accounting, auditors must 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 continues to promote global standards for auditors because he strengthens his practices just by having to be familiar with those regulations. In order to be well-versed in the global marketplace, accounting students are encouraged to take courses specifically designed to analyze different cultures, languages, and political factors that influence societies.
Globalization has influenced many changes that have taken place both in the accounting profession and in education. Students are now exposed to the problems that occur in the global marketplace and how to solve them. Not only are these students expected to understand all the math and jargon related to the business world, but they are also expected to have a good sense of foreign consumer culture as well as the regulations of each country. Implemented with these skills, students will be able to excel in the new world of business.
References
Danos, P. and Measelle, RL (1990). Globalization of the Business Environment: Implications for the Accounting Profession and Business Education. Human Resource Management, 29(1), 77-84
Needles, B.E. (2010). Accounting Education: The Impact of Globalization. Accounting Education, 19(6), 601-605. doi: 10.1080/09639284.2010.501578
Pound, B. (2007). How globalization is affecting American accountants. Montvale: Institute of Management Accountants.
