Globalization is understood to be the act or procedure for globalizing : the condition to be globalized especially : the introduction of an more and more integrated global economy marked especially by free trade, free flow of capital, and also the tapping of cheaper foreign labor markets. Globalization has altered accounting standards by creating the requirement for a universal group of reporting standards. Because of the urgent requirement for Globalized Accounting Standards, globalization has further produced an effect on accounting education too. The impacts of globalization within the accounting profession should be addressed to ensure that accountants to effectively compete in the current globalized economy and also to provide users of monetary information with comparable data.
Relevant and reliable financial information is really a critical success element in any functioning, developing or growing capital market. To assist in effective capital markets, effective accounting standards and operations are going to make sure that relevant and reliable financial information has been provided. Within the U . s . States, these standards are known as generally recognized accounting concepts (GAAP). GAAP is understood to be a typical group of accounting standards and operations, that either an authoritative accounting rule-making body has built a principle of reporting inside a given area, or higher time, confirmed practice continues to be recognized as appropriate due to its universal application. Worldwide Financial Reporting Standards (IFRS) are the accounting rules recognized for worldwide use, from the Worldwide Accounting Standards Board (IASB) (Kieso, Weygandt, & Warfield, 2012). The main difference backward and forward is the fact that IFRS is extremely broad and susceptible to interpretation, while GAAP is extremely specific and sophisticated. Users of IFRS frequently come with an edge on you of GAAP, which doesn’t provide users of monetary information with comparable information required for investment purposes.
The accounting scandals of numerous US companies for example Enron and World Com introduced focus towards the convergence of GAAP and IFRS. In 2002 FASB and IASB signed the “Norwalk Agreement” for the exact purpose of convergence of GAAP and IFRS into top quality Global Accounting Standards. In Feb 2006, the 2 boards reaffirmed this shared objective. On November 15, 2007, the Registration (SEC) no more needed foreign firms to reconcile their statements from IFRS to GAAP when filing upon us stock markets (Fosbre, Kraft, & Fosbre, 2009).
It’s understandable the globalization’s effect on accounting standards has consequently impacted accounting education too. The move toward IFRS has affected the understanding that accountants must possess to compete in the current globalized marketplace. For Instance, Accountants within the U.S. must realize the variations between IFRS and GAAP reporting standards and manage to conveying these variations to clients making investment decisions. The SEC’s decision to permit using both IFRS and GAAP on U.S. stock markets is yet another illustration of why it is crucial for accounting education to incorporate both IFRS and GAAP in to the curriculum. Furthermore, Bruce Pounder makes a legitimate point regarding the effect on accounting education the following “as worldwide accounting standards have started to overshadow U.S. standards in significance, most U.S. accountants will discover their understanding, skills, and talents are obsolescing faster than in the past” (Pounder, 2006). With this thought it may be assumed that U.S. accountants don’t have any choice but to adjust to both GAAP and IFRS to organize themselves for that shift toward IFRS.
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