Accounting in Global Organisations-Free-Samples for Students

Question: Discuss about the Challenges of Accounting in Global Organisations. Answer: Introduction: The following chapter delves in to the accounting system and its challenges that the global organisation faces during their business performances. As a matter of fact, several factors have been detected and the problems have already been discussed in the first chapter. This chapter would depend on the profundity of the study on various scholarly articles and the topics that have already been addressed associating the chosen topic. With constant argument and counter argument on the relevant research works, this chapter would try to find out the missing links in association with the challenges of accounting. It is clear that the management accounting professionals ought to ensure adaptation of the changes in order to keep relevance with the competitiveness in the future opportunities and practices in accounting sector. Different factors have been detected that would determine the practice of accounting of the global organisations in PAN world. These factors are: the changes in terms of technological intervention, changes in terms of business response, change bin manufacturing practices, structural hierarchy, environmental factors and organisational factors. Introduction of Global Capital Market and Its effect on Accounting: Global capital market and the recession have integral relation with each other. The global process of accounting has a standard maintained by most of the global capital companies. As a matter of fact, emergence of the capital sectors in economy has direct impact upon the accounting system. For instance, the recession of 2008 had dismantled the entire business sectors and their economic practices. due to sudden downfall of the value of the currency and the cut throat of huge number of the employees, the accounting practices experienced a sudden change. The companies felt huge challenges to carry on the same mode of quantification. In the year 2010, the global capital market faced a huge recovery having been supported by the equity market capitalisation. In this aspect, the accounting system made sure that the capital market and its strength remains intact in the upcoming years. However, it cannot to be assured that changes would not be affecting the existing accounting performances. S ince no one can predict the changes in the market in terms of the mode of cash flow and economic cycle, it is quite difficult for the capital industries to find out immediate possible ways to fight the challenges of accounting. Inspite of strong market practices by the organisations in 2009 and 2010, accounting in the trading sectors has been quite hectic. There raised the issue of credibility. Global Financial Crisis and Accounting: Accounting practices are profoundly implicated in association with the ongoing financial crisis in different countries. In order to recapitalise the strength of the financial institutions in terms of intervening in to the fact of high performance of the organisations, the accounting practices are too be set under certain standards. According to Rajhi Mala and Parmod Chand, FVA (Fair Value Accounting) is a factor to threaten the convergence of accounting practices across the world. Though FVA has been accepted by International Financial Report Standards, it has certain setbacks that would question the credibility of the same. Not only global financial crisis, but also the individual financial crisis of the countries is strongly addressed by IASB (International Accounting standard Board). Sustainability in Accounting: Business sustainability and social responsibility of the corporate lead the organisations in to the practice of successful quantification of cash flow within the company. However, International Federation of Accountants has identified several challenges pertaining to the accounting with effectiveness from the working responsibility along with environmental and corporate obligations. According to IFAC, the companies face certain challenges as the employees are not found to be flexible when it comes to the matter of accounting. Three key dimensions have been found by different scholars and even by the members of IFAC. These are economic viability, social well being, and responsibility associated with the environment. Since the accountants work in their respective areas to find out the relevance of embedding the factors of sustainability- both social and corporate, they need to grasp the changes associated with the task they are entitled to do. It has been noticed that the employees- th e accountants are captivated within a particular circle as they are likely to adhere to the rules and policies set by the organisations (Ifac.org 2017). The Inequality footprints of Nations: There is not enough doubt in the fact that income inequality exists both between the nations and within the nations. There has been an agreement in the fact that there is a possibility of an increase in both the cases. The relative causes of inequality are accredited variously to factors like natural resource possession, governance and conflict along with the changes in the technology, cost of transportation and globalization. According to the UN, inequality can be stated as an issue of social justice along with it being threat to political, economical and social constancy across the globe (Alsamawi et al. 2017). Elements to the factor of inequality like the dreadful global consequences as instability that lies socially, politically and economically has certain insinuation for the global action. There has been lack of any clear solution related to this matter and the identification of inequality along with the consequences it brings with the commitment. Consumer dollar competition has been able to drive demand for cheaper services and goods. The debate that exists around the causes of the inequality within-country and within the countries it has been rising or falling has remained unsolved. Blaming of the bad governments in countries like that is mostly generalization of issues. Global companies have been doing business with these nations. Global trade is mostly about the association of the goods between the firms positioned in various countries instead of the flow of the goods between the countries, so the firms should be taking the blame for supporting and exploiting the factor of dissimilarity (Reyes, Lenzen and Murray 2016). The inequality footprint can offer a tool in assisting the tracking of the inequality concerned in goods as they have been moving around the globe. Alternative Accounting: In the year 2014, the Financial Accounting Standards Board (FASB) went on to issue four reporting options for simplifying the U.S. Generally Accepted Principles (GAAP) for the private organizations. In the present scenario, the FASB is making things easier for the private organizations in electing the alternative accounting or reporting methods by eradicating the preferability assessment. Little GAAP: For most of the years, the private organizations along with their stakeholders have been complaining about FASB and its cater too much into the bigger and public organizations, ignoring the private and smaller companies having less complicated issues in financial reporting. Therefore, in the year 2012, the Financial Accounting Foundation (parent organization of FASB) recognized the Private Company Council (PCC). The main role of its is the amendment of areas of GAAP that are tricky for the private organizations and advising the ways FASB could make the rules more simpler, without negotiation on the reliability factor of the information offered to the users of the financial statement (Biondi and Giannoccolo 2015). The FASB signed off four alternative options of reporting: a. Accounting Standards Update (ASU No. 2014-02), Intangibles- Goodwill and Other: Accounting For Goodwill. In this alternative, private organizations might be electing amortization of goodwill over period not exceeding 10 years, instead of testing it on annual basis for mutilation. ASU No. 2014-03, Hedging and Derivatives: Pertaining for Certain Receive-Variable, Rate Swaps of pay-Fixed Interest- Approach of Simplified Hedge Accounting. This would be facilitating the non-financial private organizations in electing an easier version of hedge accounting while using simple rate of interest swapping to lock fixed-rate loans. ASU No. 2014-07, Consolidation: Pertaining Uneven Entities of Interest Supervision to Common Manage Leasing Arrangements. This alternative simplifies the consolidation requirements of reporting of lessor in some of the classified companies letting transactions. ASU No. 2014-18, Business Combinations, Accounting for Particular Intangible Assets in Business Combination. This combination would be exempting the private organizations from identifying certain hard-to-value resources of intangible nature, like intangibles that are customer oriented, while they would be buying or merging with other organizations (Christensen and Nikolaev 2013). At the time of issue of these alternatives originally, companies did not select an alternative on or before the date indispensable for preferability of the alternative as stated in Accounting Standards Codification Topic 250. Aiming for Global Accounting Standards: From the year 2001 till 2011, the International Accounting Standard Board (IASB) along with its International Financial Reporting Standards (IFRS), acquired the innermost position in the exercise and regulation of the financial treatment across the globe. As an unique instance of a private segment body situation of the standards with the legal force within several jurisdictions (Albu, Albu and Alexander 2014). The rise of the IFSB into eminence has been escorted by the debates of vivid political nature about the governance and the factor of accountability. Similarly, the innovative attempts of IASB are in changing the face of the financial exposure making the centre of the frequent controversies. References: Albu, C.N., Albu, N. and Alexander, D., 2014. When global accounting standards meet the local contextInsights from an emerging economy.Critical Perspectives on Accounting,25(6), pp.489-510. Alsamawi, A., McBain, D., Murray, J., Lenzen, M. and Wiebe, K.S., 2017. The Inequality Footprints of Nations; A Novel Approach to Quantitative Accounting of Income Inequality. InThe Social Footprints of Global Trade(pp. 69-91). Springer Singapore. Biondi, Y. and Giannoccolo, P., 2015. Share price formation, market exuberance and financial stability under alternative accounting regimes.Journal of Economic Interaction and Coordination,10(2), pp.333-362. Bodie, Z., 2013.Investments. McGraw-Hill. Christensen, H.B. and Nikolaev, V.V., 2013. Does fair value accounting for non-financial assets pass the market test?.Review of Accounting Studies,18(3), pp.734-775. Ifac.org. 2017. Sustainability | IFAC. [online] Available at: https://www.ifac.org/global-knowledge-gateway/sustainability?overview [Accessed 18 Jun. 2017]. Reyes, R.C., Lenzen, M. and Murray, J., 2016. Better Global Assessment of Worker Inequality: Comment on The Employment Footprints of Nations.Journal of Industrial Ecology.