IFRS and Globalization of Accounting
In 2002, The International Accounting Standards Board (IASB) produced a new standard for financial reporting known as the International Financial Reporting Standards. These new standards made an effort to bring the accounting and financial reporting throughout the world together. The IFRS is attempting to globalize the accounting and financial world by having a set of standards that allow investors in different countries understand the financial records and make an informed decision on whether to invest or to not invest. With markets becoming more complicate, easing the examination of financial records is a necessity so that the market can have the most accurate price for stock, bonds, or any other financial investment.
Globalization is occurring more rapidly than ever before, with the communication systems that are obtainable. The market truly never sleeps, companies have interests in other countries and have the method of knowing the current price of their investments. The IASB amends the IFRS when they see fit. The newest amendment was announced on December 8th, 2016 and to take effect for annual periods beginning on or after January 1st, 2018. This allows companies or countries who use the IFRS time to adapt to the changes. Although some countries have their own set of accounting standards, they nevertheless will use the IFRS for investors in different countries because the financial reports will be in a readable format that international investors will understand.
The United States has their standards for financial reporting, Generally Accepted Accounting Principles (GAAP), some companies will also use IFRS to characterize their reports and for their affiliate companies in other countries. This will help companies save money on keeping just one set of books for only one way to record their transactions. Companies can now expand easily into other countries because they can learn the IFRS methods and apply them to their current business. The IFRS has many different standards for different categories, such as bookkeeping, financial statements, accounting standards, and auditing.
Companies today can easily grow and expand past their own country’s border. Companies go into other countries, whether that be to sell their products or service or to have their products produced. Globalization helps spread the ideas between companies, an employee in Europe could have an impact on an employee in America. Globalization is leading helping technology grow at the rate it is currently growing at. With better technology producing products becomes more efficient, times of delivery become more accurate, communication would be faster, and research and development would rule to new products quicker. Globalization has impacted nearly everyone on Earth, and will continue to grow and expand the global economy for many years to come.