Challenges of Accounting in Global Organizations †Free Samples

Question: Discuss about the Challenges of Accounting in Global Organizations. Answer: Introduction Accounting is a key concept that has a vast history with several concepts, approaches, practices and other continuous technological interventions. With change in time and increasing amount of dynamicity in the subject of accounting, the complexities and challenges are rising with an instant rate. These challenges are faced by the organisations at the global level and need much emphasized consideration so that accounting functions in the global organisations can be free from such issues. The paper will provide a literature review based on the viewpoints and thoughts of several authors regarding the challenges of accounting and measures by which the same can be overcome. Project Objectives The objective of this literature review is to primarily understand the challenges of accounting in the global organisation and to understand the measures by which the accounting issues in the global organisations can be overcome Project Scope There are enormous challenges of accounting in the global organisations which the companies have to sustain for having more improved productivity and functions. The changes and modifications in the accounting practices are taking place since decades. The scope of the literature is to have a global perspective of the accounting practices in the global organisations. There are several accounting measures which are diverse in all the global countries and when the trade becomes more global and worldwide, the accounting requires highly competent and skilled human resource to manage the global accounting (Akisik, 2013). Literature Review Accounting is one of the most essential parts of the global and contemporary organisations. Through the application of various financial procedures, there can be gathered constructive info for the purpose of decision making. Financial accounting can be understood as an economic management function which helps in monitoring, summarizing and systematically recording the financial transaction of the business organisations (Allen, et al., 2012). The purpose of financial accounting is to offer specific and key information to the external stakeholders that include the government authorities, creditors and the investors so that they can analyze the profitability, growth and financial conditions of the organisation. Global accounting offers new challenges as well as opportunities for the accountants of the organisations. Instead of just making decisions on dividend and capital structure, in the global operations, the accounting aspect also involve the profit repatriation as well as capital s tructuring practices in the organisations and the associate subsidiaries (Bushman, 2014). As per Burns and Needles (2014), the approach of financial accounting has established in 1930s. By having an insight of the past 80 years of history, it has been analyzed that with all the critical progress and growth of financial accounting has several challenges associated with it. With the shared aspects of globalization and accounting there as occurred reporting, disclosures, measurements of the performances, reforms on recognitions, reporting to external parties have appeared as the key financial principle which regulates the measurement and recognition activities in accounting (Burns and Needles, 2014). The key logic of financial accounting is closely linked with its subsequent challenges which the organizations and the executives have to face due to increased globalization. As per the views and studies of Weygandt, Kimmel and Kieso (2015), it can be stated that with the continuous development of accounting, there are increased number of challenges that are encountered by the m anagers and the accountants in the globalised business functions (Weygandt, Kimmel and Kieso, 2015). The organisations are paying huge attention on the issues and challenges that occurred in the accounting practices as these challenges are rising rapidly which is ultimately affecting and influencing the organizational performance (Hodges, 2012). In the diverse and extensive literature, Warren, Reeve and Duchac (2013) have highlighted numerous issues related to financial accounting in the global organisation. Issues of diverse accounting standards, technological interventions, incompetent human resource, environmental issues, and multiple-jurisdictional issues and measuring and reporting non-financial indicators are the main challenges impacting the accounting in the global perspective. The first and the key challenge highlighted by the authors are the issues occurring from the economic environment. In present scenario, the traditional accounting is considered as the primary and major stream in few of the countries, that has a consideration with the economic environment (Warren, Reeve and Duchac, 2013). Because of the continuous technological developments, there have been realized vivid improvements of the managerial abilities and the skills to manage those changes in the operations and business functions due to technological innovations. There is a huge impact upon the traditional accounting of e-commerce and digitalized business operations and it creates huge need and requirement for the new and improved accounting models. As a result of this, there is application of e-accounting which are internet-environment in the global companies. The meaning of this type of e-accounting is that internet outside business and intranet. The internet inside business enables the communication as well as information sharing among the customers, trading partners and the global organisations whereas intranet allows the sharing of info and communication among the organisational departments (Schaltegger and Burritt, 2010). And this affects the accounting aspects in a negative manner such as in terms of reporting, measurement and recognition. The innovative and high technologies leave no room for the employees to effectively handle the accounting functions in an effective manner because of the lack of competence and skills to manage the new and high tech accounting techniques and functions (Richardson, 2017). The existing or the old employees are not much capable to work with such new technologies and the imbalance between the competence of employees and innovative accounting techniques results in inefficient and decreased organisational productivity (Gordon, et al., 2013). Multi-jurisdictional reporting is recognized as one of the major challenge in the globalised world as the organisations that have multiple number of subsidiaries or branches encountered numerous challenges in the aspect of reporting in an adequate and accurate manner. In is a challenge for the accounting executives to prepare the financial statements in every nation they have operations but abided by the legal regulations and the accounting principles of that specific nation. All the accounting standards are diverse in nature and vary from nation to nation (Salvato and Moores, 2010). The organisation is also required to report the overall group of firms on a consolidated basis that requires repeating the all overseas reporting into the accounting standards of the home country of the parent company. This is considered as a much complicated as well as extremely time consuming process that decreases the faster completion of the accounting function. Numerous nations have agreed to work a s per the accounting standards of the IASB i.e. International Accounting Standards Board for having increased uniformity in the financial accounting across the board (Zeff, 2012). Most of the countries have agreed to implement these standards by last year but it becomes challenging for the global organisations when those nations have their business operations in those countries tether does not follow these standards and have their specific and separate accounting practices, principles and standards. Another key issue in the financial accounting is the non-financial measures. The non-financial measures are the one which are outside the circle of financial measures and could not be measured or calculated through the set accounting functions or standards. These non-financial measures are of vital significance in the overall success of an organisation. There are various factors that show whether an organisation will achieve success or not in the coming time frame. But out all these factors maximum are non-financial in nature that comprises of aspects such as the employment policies and practices, brand reputation of the organisation, satisfaction level of the customers and many others (Owolabi and Iyoha, 2012). All these measures and aspects are subjective in nature and can be interpreted in a diverse manner which depends upon the users and thus it makes difficult to set the measurement standards (Kieso, Weygandt and Warfield, 2010). It becomes difficult to analyse them with much ef fectiveness due to high level of diversity and inconsistency. And as a result of this, it remained as one of the most challenging factor for the financial accounting in the global companies to measure the impact of these non-financial measures and achieve a specific analysis of the performances of the financial and non-financial measures (Karadag, 2015). One more challenge in accounting emphasized by the researchers is related to the financial instruments as with the increased complexity of the trading aspects, there is upsurge difficulty in the accounting too (Narayanaswamy, 2017). The financial agreements comprise of numerous assets which in reality do not have any physical existence for example the options, forward contracts and the repurchase agreements. All these financial instruments have high complexity and as a result it creates difficulty in their valuation. It makes feasible for the global organisations to manipulate the financial instruments values (Gordon, et al., 2013). The authors have identified that in the past business history there are several cases of manipulation of the values and this has given rise to corporation frauds where the companies have been sued for over-valuing the financial instruments and making false profit (Sharma and Panigrahi, 2013). Instead of trading function, these instruments are majorly the source of making misinterpretations and manipulations in the disclosure of the financial performance of the companies to the general public. Such valuation issue is one of the key challenges which the accounting standards are trying to overcome by reducing the complexity of the financial instruments (Horngren, et al., 2012). These challenges are faced by the organisations at the global level and need much emphasized consideration so that accounting functions in the global organisations can be free from such issues. To overcome the issues and challenges of accounting in the global organisations, there are several practices adopted by the companies. A vast amount of literature and researches of authors have highlighted multiple ways to sustain the challenges of accounting. As per Hopwood, Unerman and Fries (2010), the one of the most recognized way of managing the accounting challenge is adopting and implementing Green Accounting practice. To save the environment from the negative impact, there must be used green accounting which is considered as the environment-caring business (Hopwood, Unerman and Fries, 2010). Some of the developing countries who are still using the traditional accounting practices must implement new technologies (Schlesinger, Libby. and Geiszler, 2013). One more key practice or approac h for managing the issues of global accounting is recruiting and staffing individuals that are techno savvy and have an in-depth knowledge of the new techniques and technological intervention so that they can help in managing the accounting functions in an more efficient manner and also there must be training offered to the existing as well as the new employees in an adequate manner so that they can work effectively with the innovative technology and e-accounting (Taipaleenmki and Ikheimo,2013). The next practice which can help in overcoming the challenges of accounting is taking use of the accounting harmonization (Hancock, et al., 2010). As per this practice, there can be reduced the complexity in financial accounting which is the result of multi-jurisdictional reporting by limiting the differences of the individuals accounting standards and the practices for enhancing the performance of the organisations that are participating in the overseas trades and business operations. The international harmonization in accounting is the key trends across the globe by which the institutes and regulatory bodies and striving hard to adopt similar sort of accounting standards so that the issues related to diversity and complexity can be reduced (Power, 2010). To manage the challenge of non-financial measures of financial accounting, the global organizations can take use of various practices such as by having an analysis of the customer satisfaction scores which will help in analyzing th at whether the customers are satisfied or not from the services offered by the organisations and the employees and if not then this is not negatively impacting the revenues of the organizations. Another way of measuring the non-financial measures includes employee productivity scores, external audit and internal audit and task completion scores (Northcott and Ma'amoraTaulapapa, 2012). From the insights of the literature gather from various academic sources and through the comparative analysis, there has also recognized a research gap that there the solutions or techniques for resolving the accounting issues are more of theoretical rather than practical as with the change in technology, these issues will keep on increasing. And all the organisations are not that much financially sound so that they can implement such techniques to overcome the issues. The literature gathered as well as the researches in the field of accounting in global organisations has a vital contribution in the field of academic such as it offers the concept and advantage of taking use of green accounting and this is one of the vital and significant initiatives for reducing the pollutants that degrade the environment. Another contribution of the literature is that it helps the new entrepreneurs as they can be prior informed about the key issues which can occur in their accounting function. With the knowledge gained from the literature, these businesses or entrepreneurs can prepare them in advance and can frame appropriate strategies to mange such issue (Hopwood, Unerman and Fries, 2010). Other contributions of the literature includes understanding of the concept of accounting harmonization, benefits of e-accounting, the ways in which the organisation can gain competitive benefits through e-accounting approach and Application. Conclusion From the vast literature and the research work of various authors, the report concludes with some of the key challenges that exist in global accounting. Issues of diverse accounting standards, technological interventions, incompetent human resource, environmental issues, and multiple-jurisdictional issues and measuring and reporting non-financial indicators are the main challenges impacting the accounting in the global perspective. It can be concluded that with having a collaboration approach and in-depth analysis of these issue, there can be gained insights to overcome these challenges. From the paper, it is stated that there is a vital role of some of the measures such as non-financial reporting for managing the issues related to challenges in accounting occurred due to non-financial measures. The global organizations can also practice accounting by the means of adopting common standards developed by International Accounting Standards Board. As well as by practicing green accountin g, accounting harmonization and other few measures these challenges can be sustained and there can be efficient financial accounting in the global organisations. References Akisik, O., 2013. Accounting regulation, financial development, and economic growth.Emerging Markets Finance and Trade,49(1), pp.33-67. Allen, F., Qian, J., Zhang, C. and Zhao, M., 2012.China's financial system: opportunities and challenges(No. w17828). National Bureau of Economic Research. Burns, J.O. and Needles, B.E. eds., 2014.Accounting Education for the 21st Century: The global challenges. Elsevier. 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