As countries around the world are increasingly interconnected, 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 need to harmonize the accounting systems of the different countries becomes increasingly necessary. While this is a complex challenge for creating and validating world-wide accounting standards, there would be many benefits. The Single Accountancy System would result in more comparable financial information, encourage international investment and trade and minimize future economic crises
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 to Compare Financial Statements for Different Countries of the World
Easily comparable financial statements would facilitate international investment facilitation. Most private individuals know the financial statements of their country of residence. Foreign financial statements are not most commonly based on the same accounting policies. Although the information they provide may appear to be similar, a proper 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 private individuals, could easily compare any company's financial statements in any country. Investors can make the financial situation of a foreign company more secure and are more likely to invest.
In addition to increasing international investment, harmonization will also affect international trade. Nowadays, companies often buy products and natural resources from other countries because they are in higher or better prices. Sometimes, however, the international market for goods and resources can lead to disputes and tensions. They often differ from pricing in calculating the costs of using different accounting practices. For example, in the USA, wood producers have formally complained to Canadian woodworking manufacturers for years. It is believed that the cost of Canadian softwood wood is too low. This allows Canadian wood producers to offer goods at more competitive prices while maintaining a profitable margin. Lower costs for Canada are an unfair advantage for the international market. If a standardized accounting methodology was used for costs, both the United States and Canada would be charged the same way. There is no reason to disagree, and any price on the market would be more accurate and fairer comparable.
The universal range of accounting standards can help avoid possible future economic crises. In the past, the lack of complete understanding of foreign financial information has helped to cope with financial crises. Such a crisis occurred in Southeast Asia in the late 1990s. This crisis began when investors thought the country was no longer able to maintain the level of foreign investment and withdrew its money. The capital outflow into Thailand has made it easier for the economic crisis. The impact of the infection affected investors by removing their money from other similar economic features, including those from Indonesia, South East Asia. Indonesia and other Southeast Asian countries have been in economic turmoil, despite the fact that their financial information has shown their health status. If a universal accounting standard exists, there has never been a sustainable assessment in Thailand. In addition, foreign investors have made more 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 around 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 the 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 also be affected as general accounting procedures limit disputes. Finally, the future economic crises of misleading information and confusion would become inevitable. Although the task of harmonization is terrible, it is clear that the universal set of accounting standards would have many benefits.