Due to the emergence of globalization process, many changes are taking place within the mainstream business activity. As the organizations becoming to more and more globalized, the need to have a uniform set of international standards is strongly felt.
This argument is based on the fact that since organizations are becoming global and have to face the different legal as well as cultural environments therefore in a bid to reduce the bottlenecks for the international firms as well as creating a uniform set of accounting rules and regulations, it is critical that a convergence shall be made to the international accounting standards so that a uniformity can be achieved.
The experience of EU and Canada has been successful so as those of other countries who are making a transition to the international accounting standards. This experience is also considered as a strong signal for the US to adapt to the new standards because it is connected with the global world.
The complexities of the international trade have led much international business to remove the conflict between the different standards in place and as such the effort from the US is one of the attempts to converge to the International standards to achieve the desired results. However, it is also critical to note that many argue that such transition will be costly for the American firms because an earlier transition to Sarbanes Oxley has been a costly proposition for the many companies and most of them may be reluctant to adapt to the new standards.
The costs, however, may be relatively high but the added benefits which US firms may enjoy after this convergence may greatly outweigh the benefits. The uniformity of the standards will allow international firms, especially to be more flexible and support the initiatives taken by the Security and Exchange Commission to make a phased transition to the adaptation of the IFRS.
The process of this convergence can be difficult to assess as it is a phased process however, given the fact that more than 85 countries have adapted the IFRS itself indicate that more and more countries are now willing to adapt to the international standards in order to facilitate the businesses to adapt a uniform set of standards. Such large scale adaptation of the standards however, also creates cultural as well language problems as the correct and accurate interpretation of the standards itself is an issue to deal with.
Language and culture therefore are two of the potential impediments which can restrict the true applicability of the standards even if the standards are fully implemented and adapted by the countries. If we assess the globalization of accounting standards with special reference to US, we will also come to know that few of the international firms in US have already adopted the standards for their foreign subsidiaries and as such this process may not be as complicated to them as they may perceive it.
However, what is also critical to note that those firms which have only the domestic presence within the US market may find it difficult to cope with the increasing costs as well as adapting to the new standards? This will not only require investment into improving the skill level of the employees as well as would require additional funds to implement the new system.