1/2 Accounting for Non-Specialists

Reinforcing the Role of Accounting in the Age of Globalization

As the world of business is revitalizing to answer the demands set by globalization , the role of international accounting could never lose its way to serve the needs of the different users of the accounting information . In view of this , the London-based International Accounting Standards Board (IASB ) has foreseen this phenomenon and they began a mission in 1993 to develop financial reporting rules that all countries could use . The goal of the IASB is to identify a set of accounting standards that

will be acceptable to all governments and their related securities markets . Although they have conveyed themselves a very ambitious goal as accounting rules , procedures , and standards are affected by the political , legal , economic , and cultural systems in which they are embedded , the variations in these systems from country to country have a significant impact on how investors and creditors understand and use financial statement information (Williams , Haka Meigs , 2003

According to Haskins , Ferris and Selling (2002 , the global economy is characterized by electronically accessible stock exchanges and multinational enterprises operating in scores of countries , the production , dissemination , and use of financial information are no longer restricted by national bs . To understand the context within which information from other nations , the financial accounting for their international imposes special demands on both managers and investors More specifically , the premises on which financial data are constituted in other parts of the world are now a matter of crucial importance . This makes international financial reporting significant as a new imperative for interpretation in the age of globalization

More and more companies are gearing towards expanding their businesses globally . Expanding globally is a huge challenge that many multinational companies are facing because of the diversity of culture and population that exists in each and every country they are planning to do business with . France 's Carrefour and Wal-Mart are just two companies that have expanded their global reach . With stores in 31 countries , a visit to Carrefour 's website provides a clear indication of their international orientation because visitors can access the site in five languages . On the other hand , Wal-Mart currently has stores in nine countries after creating its first store outside of the United States more than a decade ago . Visitors can access the Wal-Mart website only in English . However Wal-Mart executives have established a daunting task of preparing themselves to have international operations that would play a significant role in providing one-third of Wal-Mart 's profits within the next five years

Both Carrefour and Wal-Mart face financial reporting issues associated with their global reach . Because Carrefour is listed on the Paris Stock Exchange , their financial reports to investors comply with France 's generally accepted accounting principles . Alternatively , Wal-Mart listed on the New York Stock Exchange , prepares financial statements according to U .S . GAAP (Generally Accepted Accounting Principles

In considering the basis for international accounting for global companies like Carrefour and Wal-Mart , this greatly affected by environmental forces which could be...