As the world's countries are becoming more and more associated with each other, growing globalization is inevitable. Farms are linked to a web that can not be undone. Nevertheless, most countries have their own accounting standards. It is currently difficult to compare a company's financial statements from one country to another. As globalization accelerates, the idea of harmonizing the accounting systems of different countries becomes necessary. While this is a complex challenge for creating and validating world-wide accounting standards, it would have many advantages. The Single Accountancy System would provide more comparable financial information, encourage international investment and trade, and minimize future economic crises.
The harmonization of accounting standards would make it possible to compare the financial statements of all companies. If all financial statements were calculated using the same standards, it would be easier to compare the performance of a company with others. It would also be possible to compare a company's financial statements to the financial statements of a company in any country around the world. None of the users of the various financial statements would be confused, as they would all be prepared according to the same standards. Adopting Harmonized Accounting Standards could Compare Financial Statements for Different Countries in the World
Easily comparable financial statements would facilitate facilitating international investment. Most individuals know only the financial statements of their country of residence. Foreign financial statements were not most commonly based on the same accounting policies. Although the information they provide may appear to be similar, a comparable comparison can not be made because numbers are not calculated in the same way. This makes international investments a little more risky, so it is less likely that the average person will be involved. If a universal accounting standard exists, the flow of capital across borders will increase. Everyone, from multinational corporations to individuals, can easily compare any company's financial statements in any country. Investors could be more secure about the financial condition of a foreign company and would be more likely to invest.
In addition to increasing international investment, harmonization will also affect international trade. Today, companies often buy their products and natural resources from other countries because they have more abundance or better prices. Sometimes, however, the international market for goods and resources can lead to disputes and tensions. They often differ from pricing to calculate the costs of using different accounting practices. For example, US sawmills have been making formal complaints against Canadian saws for many years. It is believed that the cost of Canadian softwood timber is too low. This allows Canadian saws to offer their products at a more competitive price, while maintaining a profitable reserve. Lower costs to Canada give unfair advantage to the international market. If a general accounting method has been applied to costs, both the United States and Canada will calculate their costs in the same way. There is no reason to disagree, and any price on the market could be more accurately and comparatively comparable.
Universal accounting standards can help avoid possible future economic crises. In the past, full understanding of the information on foreign financial statements has not helped to create financial crises. Such a crisis occurred in Southeast Asia in the late 1990s. This crisis began when investors believed that the country was no longer able to maintain the level of foreign investment and withdrew its money. The capital inflow to Thailand has facilitated the economic crisis. The impact of the infection affected investors to remove their money from other similar Southeast Asian economies, including Indonesia. Indonesia and other Southeast Asian countries have faced an economic crisis, despite the fact that their financial information indicates the state of health. If there is a universal accounting standard, there has never been a sustainable assessment in Thailand. In addition, foreign investors have increased confidence in their investments, knowing that financial information is accurate. Make better choices about your investments. In the future, harmonization can help prevent such events.
Globalization requires investors and companies to access financial information from all over the world. It would be good for each country to create and enforce universal accounting standards. Financial information is more transparent and easier to understand. It is also easy to compare financial statements of companies in any country. Harmonization would lead to an increase in international investment as investors would be more convinced of foreign financial information. International trade would be affected as general accounting procedures limit disputes. Finally, future economic crises can be avoided because of misinformation and confusion. While the task of harmonization is terrible, it is clear that the universal set of accounting standards would have many benefits.
Source by Zoe E Greenblatt