Accounting and Globalization

INTRODUCTION

As today’s companies become more globally oriented and expand into multinational corporations, there is a growing need to compress financial regulations into a homogeneous unit. To achieve this homogeneity, accounting practices in the modern economic market must strive for a symbiotic relationship with globalization. Because consumer capitalism has spread to non-originating countries, and non-Americanized cultures, the practices of accounting and financial management must standardize their policies. Thus, accounting must be regarded beyond capital market settings, and the different effects that accounting has had in such sites must be examined.

WHY ACCOUNTING IS CHANGING

GLOBALIZATION

Since leading companies have subsidiaries in all important market regions, globalization has changed record keeping. Globalization is operating and investing, but also financing (Gebhardt, 2000). The home base of most global investors is the United States, and hence, one of the major sets of standards for accounting is the Generally Accepted Accounting Principles (GAAP) (Nolke, 2005). However, some countries cannot interpret this format, or they are following the International Financing Reporting Standards (IFRS), the second major global standard (Nolke, 2005). Because accounting reports are a means of internal communication between managers and employees all over the world stage, it would follow, as a matter of sense, that the language of this reporting should be homogeneous and convergent. Accounting influences goals and performance, both in the capital market settings, and in supranational organizations (Gebhardt, 2000). Furthermore, accounting creates social distinctions and a cross-boarder flow of more than capital (Nolke, 2005). The movement of people and the mixing of cultures are also calculated in accounting practices (Gebhardt, 2000). One is able to study how social technologies operate in contemporary societies and to examine certain relations of power in foreign sites (Gebhardt, 2000).

INTERNATIONAL MARKET PLACES

Accounting practices in the international market places are affected by distinctive flows. These flows, which impact financing principles, are: capital, product, information, polices, and people.

FLOWS OF CAPITAL

Capital flow occurs across national borders, and is associated with currency arbitrage and short-term portfolio investment in financial securities (Graham & Neu, 2003). Underlying both these activities is the accounting