As international ideas, processes, goods, and beliefs are transposed from one region to another, the world in which we live and conduct business becomes smaller and smaller, making it impossible for people to operate solely within the comfortable parameters they’ve grown accustomed to, without being affected by happenings beyond their border. This international network of economic and social systems threatens those unwilling to change their practices with the potential of obsolescence within their field, however, for individuals willing to embrace the constant state of flux within our economy and society, and take advantage of the various opportunities it presents, the rewards are substantial; particularly in the accounting industry.
Favor towards international accounting standards is nothing new, and as world markets become more intertwined, the necessity for a set of universal standards, that would make financial statements around the globe more comparable, is increasingly apparent. The rise in efficiency would lead to lower costs associated with financing businesses, which would, in turn, promote global economic growth. GAAP has, until recently, been recognized as the set of standards used for accounting and financial reporting among organizations, however, it failed to be adopted universally, and hasn’t progressed quickly enough to accommodate the advancing world of business encompassing it, resulting in the development of a new array of standards, better equipped to handle today’s economic structure.
These principles, established by the International Accounting Standards Board, are known as the International Financial Reporting Standards, and are being adopted by more public organizations, replacing US GAAP as the dominant set of accounting rules used in business. These guidelines share many similarities with GAAP, however also contain variations that make them better suited to operate in today’s business world. As years pass, the number of countries and organizations complying with International Financial Reporting Standards increases, while simultaneously, the differences between International Financial Reporting Standards and GAAP are being eradicated, significantly impacting accounting education in the United States. The rules of GAAP have already been altered since the emergence of new standards, and they will continue to change as International Financial Reporting Standards expand across the globe. Even with these modifications in GAAP, this traditional system becomes less and less relevant to the global economy, while International Financial Reporting Standards experience a much different outcome. This is problematic for those, like myself, receiving their accounting education in the United States, and puts us at a disadvantage compared to those in other countries, who have already been learning this new set of standards, and find themselves better prepared to take advantage of the opportunities presented by convergence. Accounting firms in the US have not been as aggressive or driven as their foreign counterparts in learning the new standards, and as these rules become more widely accepted than GAAP, the skills and education of American accountants become increasingly obsolete, as those of foreign organizations, focused on International Financial Reporting Standards, dominate the accounting industry.
To remain competitive, or even relevant within the field, accountants, and those studying to become one, must include knowledge of these new standards in their education, as well as possess the skills necessary to execute them. This requires leaving the bubble of familiarity, and developing an awareness of economies and cultures around the world, as they impact the way notions of accounting are taught and applied in different regions. They should also incorporate management accounting into their education, rather than focusing solely on preparing and auditing financial statements. By analyzing financial, as well as non-financial data, educated decisions can be made regarding both finance/investing activities and various other managerial issues dealing with operations. Managerial accounting also focuses on the past as well as the future, unlike financial accounting, which is only concerned with prior transactions. This helps decision makers properly budget and plan for the organization. Financial accounting looks at activities happening inside the company, but the addition of management accounting practices, which considers events outside the organization as well, enable managers to perform SWAT analyses, giving them a better competitive edge, as opposed to simply making sure their financial statements are in accordance with the accepted set of standards.
Despite the fact that I’ve been blessed with exemplary instructors, in an institution recognized for its superior quality of education in the discipline of business, I feel as though I will be dramatically unprepared for today’s world, upon graduation. I’m being taught a framework as it exits the scene, and not even introduced to the one taking over. After years of stress, tears, panic attacks, and the seemingly endless work that goes into making it through an accounting program, the last thing people in my position want to hear is that they need to buckle in for additional semesters, so they can now be familiarized with International Financial Reporting Standards. The new standards should, however, be taught to students just entering school, and the rest of us will have to do our own research, and attend other classes or seminars after graduation. In order to keep up with the evolving world of business, the learning can truly never stop.