Globalization's Impact on Accounting EducationAuthor:
Globalization is the integration of a business into economies and markets of other countries. It provides opportunities for businesses to expand their regions of exporting, build relationships with foreign partners to increase infrastructure, and attract large corporations as clientele. All of these potentially beneficial factors are motives for companies to go global, but they also pose complex problems for accountants due to the differences of international standards and preparations of financial statements. Accounting students today are forced to practice by the rules of the Generally Accepted Accounting Principles (GAAP), because the United States has not acknowledged the increase of globalization in businesses and adapted education policies for these changes.
The Generally Accepted Accounting Principles are used by companies throughout the United States for consistency in reporting financial statements and for other investment purposes. Because of an increase in globalization over the past few years, countries are adopting the International Financial Reporting Standard (IFRS). These are a set of rules for reporting created from the London-based International Accounting Standards, and are less specific than GAAP (Klett, 1). As of 2008, over 113 countries such as the European Union, Hong Kong, Russia, South Africa, and Australia, have recognized these global changes and now require use of the IFRS reporting rules and, therefore, are educating current accounting students with these international standards (Accounting Forensics, 2).
International clientele is not uncommon for many of the top accounting firms today. Nearly half of the top accounting firms are equipped with the appropriate knowledge of the International Financial Reporting Standards and have been practicing them for years. So how is an education of GAAP beneficial to current accounting students when almost fifty percent of the time, further education on IFRS will be required in the workplace? Should both principles be taught so a common accounting language can be established between international clients?
The United States struggles with setbacks in the process of switching to a completely new set of standards. Although it would make it easier and more cost efficient in translating financial statements, it would also be an expensive switch in the educational field. It would be necessary to rewrite all textbooks to include IFRS, educate all teachers and professors on these global standards, and train professionals who are already in the accounting industry.
Although it would be a costly transition, an education in the international accounting standards can provide a great deal of additional opportunities for students entering the accounting world. Multinational companies prefer candidates who are internationally knowledgeable and will be able to travel to their developing business in countries such as Asia and Europe and perform necessary accounting procedures. With the current education policies, a graduating student with a Bachelor\'s degree in accounting would have to decide to advance his or her education on IFRS after college, because it is not offered in accounting programs.
The importance of the international financial reports prepared by accountants is crucial to a business\'s success. In many corporations, top management executives prefer the advice of experts in accounting who are familiar with the organization and operations that are occurring internationally. But many of the accountants coming out of school in the United States are unaware of the technical knowledge of IFRS and, therefore, are not qualified to analyze financial reports. An education of GAAP and IFRS can have a major influence on perception of the value of a company and ultimately manipulate investment decisions. Of all Pricewaterhouse Coopers employees surveyed in 2006, 79agree that the change to IFRS is of significant importance and then stated, 'key benefits of IFRS include improved transparency, management information, and consistency of reporting between jurisdictions and sectors' (Connected Thinking, p. 6).
Ultimately, globalization has a vast impact, both positive and negative, on the traditional education policies and practices that have been used in the United States for decades. Whether or not the United States voluntarily makes a change in its current education strategies, the continuously increasing amount of businesses going global will eventually force the International Financial Reporting Standards to be learned and used by all accountants. Even though the change would require rewriting textbooks and training education professionals, the final outcome would be beneficial to all current global companies and the businesses that are considering entering the markets of other countries. Therefore, the interpretation of financial statements and the establishment of an accounting language used in firms out of the country could have more consistency if IFRS was incorporated in accounting education.
'IFRS: The European investors\' view.' Connected Thinking Feb. 2006: 1-8. Pricewaterhouse Coopers. Web. 12 Apr. 2011. <http://www.pwc.com/en_GX/gx/ifrs-reporting/pdf/IFRSInvestorSurvey.pdf>.
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Klett, John. 'The Transition from GAAP to IFRS: Advantages vs. Disadvantages.' Hostgator Discount. N.p., 18 Mar. 2011. Web. 12 Apr. 2011. <http://hostgatordiscount.net/the-transition-from-gaap-to-ifrs-advantages-vs-disadvantages/>.
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