One major impact globalization is having on us today deals with college accounting education and the way countries analyze and report their financial statements. Concepts, standards, and rules of accounting are being affected by globalization and may cause concerns to many college students, professors, current accountants, and textbook companies.
The United States has been following one standard set of rules for accounting for over seventy-five years called the Generally Accepted Accounting Principles or GAAP. This is a general set of accounting information, rules, standards, and procedures that American companies use to assemble their financial statements. Companies are required to follow GAAP standards when reporting and analyzing financial information and cannot report any data that does not agree with GAAP. GAAP rules and procedures are established and governed by the Financial Accounting Standards Board, as well as the American Institute of Certified Public Accountants.
The problem with the United States following GAAP standards is that over one hundred countries around the world follow a different set of accounting rules called the International Financial Reporting Standards of IFRS. IFRS are issued and administered by the International Accounting Standards Board and used by companies from over one hundred countries to report their financial statements. The goal of the IFRS is to make international comparisons as easy as possible because all countries are preparing their financial statements using the same set of rules and regulations.
The Securities and Exchange Commission has announced that the United States will attempt to abandon the use of GAAP and move towards using IFRS. This will resolve comparison problems and create one standard set of rules for accounting used throughout the world. A complete withdrawal of GAAP would force drastic changes in accounting education and college business programs in the United States. Professors will need to be educated and updated on new IFRS rules, new textbooks will have to be produced, and more classes will have to be available to educate students on the new standards. IFRS will affect current accounting students, accountants, and professors who may not be well informed regarding these principles. IFRS will need to be taught as soon as possible in current accounting classes, as well as added courses that may be solely focused on the changes. Current students and accountants are going to be strongly affected by this change because even though they have been taught GAAP throughout their schooling, they will need to familiarize themselves with brand new laws and regulations for preparing financial statements and data.
Professors are going to be required to take classes to learn IFRS in order to implement their knowledge to the students they are teaching. Professors are currently trying to incorporate ways of applying IFRS into their current classrooms. Until the United States officially adopts IFRS, current college courses will be taught the fundamentals of GAAP, as well as trying to learn IFRS rules. Textbooks are going to be in high demand, so textbook companies are going to be forced to quickly create books that incorporate new IFRS chapters and problems. Current accountants may be required to enroll in classes at a university so that they can be taught the changes that will be needed to effectively continue being successful in their profession.
Globalization has helped to recognize that this change for the United States is much needed. It is important for the United States to adopt IFRS because this will result in all countries’ financial statements being consistent with one another. As of today, you cannot compare a United States company’s financial statements with a foreign company’s because the ways in which the statements are prepared are different. With every element that will need to be changed with accounting education, it may take time for the United States to fully adopt IFRS. In the long run, everyone will benefit from these changes. Professors, students, and accountants will gain more knowledge on the new standards and will be able to evaluate financial statements according to IFRS.