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ACOUNTING FOR GLOBALISATION AND ITS IMPACT ON CORPORATE REPORTING

 INTRODUCTION                                                        

 Accounting is often called the language of business. The basic function of any language is to serve as a means of communication. The financial result of different companies cannot be compared and evaluated unless full information is available about the accounting methods, which have been used. The varieties of accounting practices have made it difficult to compare the financial result of different companies. Further, the alternative accounting methods have also enabled the reporting of different result even by the same company.

 NEED FOR STANDARDS

 The information contained in published financial statement is of particular important to external user; it is the responsibility of the accounting profession to ensure that the required information is property presented. The information contained in financial s statement to carefully considered standards. In this context, unless there are reasonably appropriate standards, neither the purpose of the individual investor nor that of the nation as a whole can be served. The purpose is likely to be served if the accounting methods used by different firms for presenting information to investor allows correct compression to be made.

 

CHANGING NATURE OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

  GAAP are usually developed by professional accounting bodies like Americans institute of certified public accounting and institute of chartered accountants of India. In developing such principles, however, the accounting profession has to reflect the realities of social, economic, legal and political environment in which it operates. Besides academic research, regulatory and tax laws of the government in a large measure, influences the formulation of acceptable accounting principles. Stock exchange and other regulatory agencies like controller of capital issues have laid down rules for disclosure and extent of accounting information.  Since the environment in which business operated undergoes constant changes as a result of changes in economic and financial policies of the government and changes in the structure of business, continued evaluation of the revenue of generally accounting principle is required. In this, the principal of accounting are not everlasting truths.

 

ACCOUNTING FOR GLOBAL BUSINESS         

Recent years have witnessed the growth of global environment influences upon business activities of the MNCs. Different economic, legal, social, political dimension have opened a new horizon of international business and simultaneously have been changed on account of change in technologies rebated with information, communication, space, computer and so on, especially in the last decade to the 20th century, therefore, changes in accounting become mandatory. The global business entrusted new challenges and responsibilities upon the accounting professionals, professors, personnel and bodies to fit accounting to the changes business environment of the world as a whole.

The GATT also encouraged the global in whom business in which 124 countries signed to primate world trade in a manner that benefits every country in its 8th round meting held at Uruguay (south America) on aprial 15, 1994.

A CCOUNTING AN D FOREIGN TRANSACTIONS

The role of accountant increase as on enterprise engages in foreign trades. Accounting has to deal with monetary mechanism and other transactions related to the international business.

Globalize international business having multinational companies by virtue of nature required of special and standardized system of accounting. As the international  business covers a range of actives, accounting must be in accordance with the need of such transactions which may be recorded reported and analyzed for decision making by the internal and external user. Accounting has to serve the need of international trade, commerce, industry, international finance, taxation, currency, export-import procedures, documentations laws, trade environment, auditing etc.

 The global business required such as a  system of accounting in which no scope for personal biasness and it should be automatic, irrupted, and  transparent system involving a greater sense of self responsibility interest, loyalty, integrity and honesty.

Beside computer accounting, accounting language there are a number of other voices related with accounting for MNCs in global business such as forms preformed of final account foot-notes schedules, statement etc have their due consideration. 

CHANGING HORIZON OF THE ACCOUNTING PRACTICES

The changes that are taking place in the different facets of traditional accounting practices in the global accounting scenario are given below:

PAST SCENARIO

PRESENT SCENARIO

  1. Profitability performance accounting

Total performance accounting

  1. Unit cost accounting

Unit value accounting

  1. Product costing-

Services accounting

  1. Overhead absorption costing

Activity based coasting

  1. Depreciation accounting

Appreciation accounting

  1. HR as expense accounting

HR as asset accounting

  1. 2:1 Liquidity accounting

Zero liquidity accounting

  1. Debtors velocity accounting

Customer as asset accounting

  1. Creditors velocity accounting

Suppliers as asset accounting

  1. Environment protection expense accounting

Greenhouse accounting

  1. Goodwill writer off accounting

Goodwill as asset accounting

      12 Standard cost of mass production

Elemental cost under flexible

 

manufacturing system            

13.Extrapolation as budgeting

Zero base budgeting

14.Expenditure budgeting-

Performance budgeting

15.Historical cost accounting

Relevant cost accounting

16.Historical cost accounting

On-line cost control

17.Owned asset accounting                                       

Not-owned asset accounting

18 Statutory audit                                         

Operation/energy/quality/management audit

19.Money flow accounting                                      

Real flow accounting

20.National accounting standards                            

International accounting standards.

From the table, it is apparent that the traditional accounting practices are going through the process of transformation to meet the ever-increasing demands of supporitiverole of accounting in different function Ares of corporate management.

ACCOUNTING STANDARDS IN INDIA

          With a view to harmonies varying accounting policies and practices currently in use in India, the institute of chartered accountant of India (ICAI) formed the accounting standards board, (ASB) April 1977, which includes representatives from industry and government. So far 10 standards have been issued by ASB.

ATTEMPTS TOWADS STANDARDISATION

 International accounting standards committee was formed and was entrusted with the responsibility of formulating international standards. All the member countries of IASC resolved to confirm to the standards developed by IASC.  Attempts have also been made in countries of European Economic Community and Canada for sanitation of accounting practices regarding disclosure and consistency of procedures.

 GLOBALIZATION- ITS CONSEQUENCES TO INDIAN CORPORATE REPORTING

 The following are certain critical areas of the Indian corporate accounting to be corrected and reported with international accounts standards.

 1.GROUP ACCOUNTING:

International standards prescribe consolidation for subsidiaries; equity method for associated and proportion consolidation for equity joint ventures in India the approach followed does not provide full information determining the efficiency and effectiveness of thaw management.

 2.BUSINESS COBINATIONS:

India has accounting rules in place, only to deal with legal merged and not with other modes of combination. Internationally, the process of uniting interest is treated as an exception on account of the potential that exists for manipulation the EPS of the combined entity. Indian accounting rule provide scope for creative accounting.

3.FOREIGN ACTIVITIES:

Indian accounting rules in respect of foreign activities are divergent from the international standards in the following crucial areas. 

a) All exchange differences are required to be reorganized and the exchange losses can be amortized. The Indian rules are liberal whereas the international standards are stringent and logical.

 b) Indian rules do not make any distinction between independent and integral foreign operations.

 4) PROFIT OR LOSS FOR THE PERIOD:

                   In order to enable intra-firm and inter-firm comparison of earning, the international standards requires corporate to give full and comprehensive information on the effect of fundamental errors, unordinary items and changes in accounting policy contrarily, Indian accounting rules appear tentative incomplete in these areas

 

5) EPS:

At present there is no uniformity in the method of computing EPS. Consequently  the EPS  data presentation is misleading and unhelpful  for analysis. There is a need to create standards  on the computation of EPS  in line with the IAS

  6.OTHERS:

1.      FURNISHING INFORMATION ON INDUSTRY AND GEOGRAPHICAL SEGMENTS.

2.       Tribulation norms in clear cut terms for measuring and disclosing current assets and current liabilities

3.      Providing information on sales, cost value of goods sold and gross profit

4.      Presenting cash flow statements

5.      Interim reporting

 CONCLUSION:

US and international accounting practices vary significantly. Worldwide  accounting uniformity is an  unattainable goal.  This due to differences in economic, political and social values , and  in the different developments I, and goals of each individual country.  However, IASC and the IOSCO were formed to promote same kind of accounting uniformity throughout the world.

 

 

 
 
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