When the national economy continues to grow and begin to intertwine, they create a global system of international economics known as globalization. Because of its modern and complex nature, this term is better described than defined, but for the sake of argument, the United Nations Development Program defines it as: “The growth of human interdependence in the world. This is a process that integrates not only the economy but culture, technology, and governance. People everywhere are connected by the influence of events in the corners of the world. ” Financial institutions continue to gain influence from multi-national assets which causes strong opposition in fear of global monopoly, while the leading countries involved slowly begin to develop generally accepted codes of conduct and reporting standards to mediate these growing concerns.
The idea of international trade is not a new topic;
Even back hundreds of years to the East India Trading Company which links trade between much of Europe and the East Indies. The problems that emerged at that time were very similar to what we are facing today, where two rival companies joined the esteemed East India Company (HEIC) to obtain a monopoly on the trade industry, often using military force and functioning as a government body. After a brief pause in international trade in the early 1900s, due to World War I & II, more advanced countries began to develop at an unimaginable rate to third world countries that lacked the infrastructure, capital, and reporting standards to be able to compete in this world market.
Proponents of globalization tend to become macroeconomic experts when they see greater economic benefits and tend to be impersonal in their judgments. The economic framework of our own United States, which was founded on small businesses, shows doubts because they do not have the ability to compete with foreign competitors that operate with higher outputs that enable them to spread thin fixed costs into unparalleled competitive prices. George Soros, one of the leading defenders for globalization, has focused his attention on the need for reform through his “Open Society Foundation”. This ideology serves to strengthen boarding ties and eradicate corruption and false reporting.
To counter false reporting led by the International Accounting Standards Board (IASB), it has continued to formulate an international system of generally accepted accounting principles known as International Financial Reporting Standards (IFRS). This board aims to perfect current accounting standards to reflect changes from national markets to global markets. For IFRS two accounting models have been formulated; maintenance of financial capital in nominal monetary units, and maintenance of financial capital in constant purchasing power units (IFRS framework Par 104). These two models can be further broken down into deeper fundamental accounting assumptions such as; historical cost accounting and stable monetary unit assumptions to name a few. IFRS continues to increase support from global countries as they struggle to build generally accepted principles.
As of August 2008, 113 countries, including all of Europe, require or permit the use of IFRS. Around 85 of these countries require IFRS reporting on all of their domestic business activities. The United States SEC itself is slowly shifting from only allowing US GAAP with the aim of eventually turning to IFRS to promote international business. The SEC issued a “Work Plan” in February 2010 about when and how the current reporting system should be transitioned to the IFRS system. The Board has planned to complete their joint project in early June 2011, even delaying other projects until this date.
Although there is no clear answer about whether the impetus to the global market or not will benefit the general public, there are many precautions taken to ban financial injustice. While third world countries have argued that this transition will push them further below the poverty line, many supporters have questioned whether there is actually a lack of capital or just a lack of desire on their part. Globalization is a function that functions just like any other market that exists today, and when passing through peaks and valleys of the general business cycle, we and the IASB can only try to alleviate the complications that arise. Overall, for every decision made there is an opportunity cost and not all institutions can bear the disadvantages of competitive markets, but we can fight for a fair and fair playing field in competition because uncertainty is the only thing that remains certain.