Would having a standard global accounting system increase global trade
The primary objective of developing financial statements is to make information about a particular company available for transparency and accountability. They provide information about the cash flow, balance sheet, and profit and loss statement of a company, which are accepted globally. This paper seeks to discuss the way in which having a standard global accounting system increases global trade. Advantages of International Accounting Standards Firstly, it leads to an enhanced flow of equity. They provide transparent and strong accounting practices. They have a format that applies to different areas and accommodates different business within different countries. In case of any unpredictable changes, it would not lead to any difficulties because the statements are flexible. Further, it helps business to get excellence financial reports this is due to the high standards.
Good reports help to market the business and give the investors more assurance to invest in the industry. The standards are very high on building these statements meaning they normally give very good and comprehensive reports, which remain accepted globally. International standards for global markets Apparently, most transactions in today's business are done across the border and enable a free flow of more equity. The growth is at a high rate since most companies are targeting a wide range of the market. To avoid the high cost of preparing the financial reports, it would be better to adopt the international accounting standards. It enables a business to provide only one standard financial report instead of two hence reducing the cost. Its information is also going to be available globally since it is going to use the international accounting standard, which is acceptable in many countries (Daske et al.
All the countries who are members of these bodies are encouraged to use these standards although some countries find it hard to implement due to its cost to the small-scale business (Brown 269-285). They give full back up to the international accounts standard board to reduce the challenges which face the investment flow globally. It also helps them to strengthen and create an excellent universal fiscal architecture. These bodies like transparency and accountability and one central goal for these standards are providing them; hence, these bodies will provide more capital that has been accounted. It leads to influence on corporate administration. The factors of all these trade variables δ h are expected to be positive. Physical distance is an essential variable in gravity calculations.
The factors coefficient is anticipated to be negative since it is a substitution of all the expenses involved in undertaking dealings. The equation used to determine gravity model is F ij = G * Mi * Mj / D ij where G is used to represent the constant, F is used to represent trade flow, D is used to the distance and M represents financial magnitudes of the nations that are being measured. For econometric studies, the equation can be changed to a linear form by using logarithms. Progress towards global standards A body of different groups that regulate the worldwide security and future markets is known as the International Organization of Securities Commissions (IOSCO). It has encouraged its members to use International Financial Reporting Standards (IFRS) since it understands the importance of it.
Since the recommendation of its usage, it has become a critical standard used by all its members. It is mandated to three main functions that include developing, implementing, and encouraging high ethics of guideline to improve investor safety and decrease general menace. This will lead to more investors feel secure to invest in a particular business. These are because the formats are very different from the local ones. In essence, there has been some good evidence that shows improvement on the trade globally among the countries which have adapted to the global standards. For example, we can look at some highlight of Korea Accounting Board. Korea adopted the IFRS fully in the year 2011 where after entire adoption it recorded a positive result.
It showed that after IFRS adoption it increased cross-border investments. It increased a lot by the end of 2005. Bond is a fixed amount of used to investment issued by an investor as a loan to be paid later with some interest. It is a form of raising a certain amount of money to invest in the company. Apart from that, lending from financial companies is another way of funding enterprises. These are financial institutions responsible for lending cash to the firm, and they pay for a fixed period. They experienced fewer challenges using and the mostly faced challenge was reclassification from Japanese GAAP basis to IFRS and keeping several books. This medium shows that many firms have enjoyed the benefits of using it.
It noted the following: Numerous businesses reflect, “Influence to the business administration as the major value of acceptance of IFRS. This appears to mean that numerous businesses recognize the importance to deliberate implementation of IFRS from the broader perception that complexity of the business administration would “bring to enhancing ‘receiving power,’ (Hung 401-420). Expenses for implementing IFRS vary with the primary goal, and how large or small is the business. Conclusion In summary, International Financial Reporting Standards (IFRS) are the set standards given by the IFRS Foundation and the international accounting standards board (IASB) to offer a general worldwide language for business to develop financial reports, which are accepted globally. They have improved accounting statements in many areas like transparency, efficiency, and accountability.
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