Globalization is becoming increasing more prevalent in today’s society. Not only are individual firms across the United States becoming more connected and developing similar ways of communication, but it is occurring across the world. For accounting and education, this has a huge impact, especially in the United States. The United States accounting standards are different from the entire world. However, students today need to know both processes in order to be successful in international relations with accounting. Globalization has a tremendous impact on what students are being taught and what they need to know.
Many accounting majors in college will graduate and enter in to public accounting jobs. The United States is the only country which uses Generally Accepted Accounting Principles as the method of accounting. This means when students enter into the workforce and deal with clients overseas, they are not using the same accounting practices. Students are not taught all of the fundamentals of IFRS (International Financial Reporting Standards) as well as GAAP (Generally Accepted Accounting Principles). There is too much content and not enough time for students to learn both methods which leaves them at a disadvantage as they enter the workforce.
Rules are consistently being changed as the FASB is trying to converge to similar standards as IFRS. For example, GAAP recently did away with extraordinary items, which is something that IFRS does not contain.
The changes of these standards are making accounting education more complex but also help the students to develop a better understanding of accounting as a whole across the world. Accounting education is evolving and adapting daily to take into account the globalization of accounting. Students are being taught what it means to do accounting and learning why GAAP has different treatment of items than IFRS. The globalization of accounting is allowing students to think deeper into the financial statements and understand why items are put on certain lines and develop their own thoughts. As Belverd Needles, Jr. states, “When explaining a principle-based requirement the educator can build from the objective of financial reporting through the concepts set out in the Framework to the principle in a particular IFRS and explain how ‘good’ rules (e.g. application guidance) give effect to the principle. When a requirement is not based on the Framework, the educator could provide reasons why the standard-setter deviated from the Framework. Educators could also teach students to make accounting judgments and discuss areas of judgment in each IFRS (Needles Jr.).” Students are learning about the biggest differences and developing a real understanding for the accounting behind them. This will be a significant when they enter the workforce and have to make accounting decisions without having a textbook telling them the correct way to approach it.
The topic of convergence has been a big one in accounting education. If the United States eventually makes a decision to converge from US GAAP to IFRS, this would change the entire curriculum which students are learning today. It is very important for students who are learning the basic accounting principles today to understand the primary differences and the advantages or disadvantages of converging. This is where globalization plays a key role because with the increase in technology today, we are becoming an extremely globalized world with companies who have offices in almost every country of the world. A speaker of the SEC does an excellent job explaining what convergence means, and why it is beneficial, “In the long-term, this definition of convergence is a laudable one to which all should aspire so that a single set of high-quality accounting standards could be used by all preparers. And, more important to the SEC, whose duty is to take the steps necessary to protect investors, a single set of high-quality accounting standards applied even-handedly greatly reduces uncertainty about comparability of published accounts, thereby greatly enhancing the transparency of information to the market place (Herdman).” As Mr. Herdman explains above, convergence would allow investors all over the world to be able to compare financial statements and simply line items which would help them to develop a better understanding of the organizations around the world.