Economic Globalization Over the Past Twenty Years Essay

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economic globalization over the past twenty years sparked demand for a single, worldwide set of high-quality accounting standards" (Benjamin 2012). The SEC's allowance for American companies with international holdings to use IFRS supports convergence to some extent by providing an incentive for filers to use IFRS. Companies that use IFRS can be compliant with both U.S. And international filing requirements, without having to keep 'double books.' All firms with an international scope are now likely to consider using IFRS because of its compatibility with U.S. And worldwide standards. Given the globalization of the economy, even small and mid-sized U.S. organizations may begin using IFRS, which will make firms which use GAAP more isolated. Convergence will be facilitated, with a likely bias in the new, universal standards towards using IFRS with minor (or no) modifications.

Q2. The EU is one of the most powerful trading blocks in the world. The wholesale adoption of a single accounting standard strongly resembling IFRS will be incentivized by the EU's economic integration, given that more companies will likely be doing business with Europe and are therefore interacting with companies that use IFRS.

Q3. For ordinary shareholders, having a single type of financial reporting system makes it far easier to compare the financial performance of different companies.

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There are substantial differences between GAAP and IFRS that can make direct comparisons between companies using the different systems difficult, even for an accountant, much less an ordinary shareholder. For example, "GAAP contains more detailed, specific requirements than IFRS [because] IFRS contains broad principles to account for transactions across industries, with limited specific guidance and stated exceptions to the general guidance" (Benjamin 2012).

It should be noted that this is a frequently-cited reason for the benefits of using IFRS -- it is easier to understand, less technical, and many argue, more ethical, given that there is less potential for adhering to the 'letter' while still engaging in unethical conduct that violates the 'spirit' of accounting ethics, one criticism frequently leveled against GAAP. "Principles-based systems offer broader guidelines….....

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