Issues of accounting in a Global Organisation-Samples for Students

Question: Discuss about the the Challenges and Issues of accounting in a Global Organisation. Answer: Introduction Accounting is a major concept which possesses a history comprising number of practices, models, theories, frameworks, approaches as well as also has regular technological intervention. But with the effect of modernization, globalization and increasing dynamicity, there have been an increased number of challenges and issues. All these issues are experienced by the companies at the international level and are required to have more emphasized concern for letting the accounting functions free from these challenges. The following paper will an in-depth section of literature review farmed on the basis of several notions and viewpoint different authors have in respect with the challenges of accounting and also the respective measures for overcoming those issues. Project Objectives The key purpose of the literature review is to develop an understanding of the challenges and issues of accounting in a global organisation as well as to comprehend the various measures through which the organisations can cope up with those accounting issues. Project Scope There are number of issues and challenges of account ting which the organisations are required to manage and resist for achieving effective functioning and improved productivity. Since few decades, there are regular changes which are taking place in the account ting practices. The literature scope is to have an overall perspective of the various accounting approaches in the global companies (Akisik, 2013). There are diverse set of accounting measures in the international organisations and in the phase of globalisation, there is a vast need of skilled and talented human resource for effective management of the global accounting practices. Literature Review In global organisations, accounting holds a strong position. There are a number of financial approaches by which the companies can gather appropriate information for organisational decision making. The financial accounting is a function of economic management that support in aspects like recording of financial transaction, monitoring and summarizing (Allen, et al., 2012). The key objective of the financial accounting is to present the external stakeholders with adequate and particular information which includes offering info to investors, creditors and the government entities. The reason behind offering the info is to help them in analysing and evaluating the overall financial conditions, growth and development and profitability of the company. Global accounting offers both opportunities as well as threats in terms of challenges to the global accountants of the companies (Bushman, 2014). Other than the two primary function i.e. making decisions on the basis of capital structure and d ividend, the global accounting also support in capital structuring practices and profit maximization in the companies as well as their subsidiaries. According to the view points of Burns and Needles (2014), the practice of financial accounting was initiated in the 1930s. With an in-depth study and research in past eighty years, there has been evaluated by the researchers that financial accounting not only have positive aspect but there are some negative aspects too which poses a number of challenges for the global organisations. With mutual features of accounting and globalisation, there took place performance measurement, recognition reforms, disclosures, reporting and reporting to the various external parties were counted as the major financial principles which control and govern the activities of recognition and measurement in accounting (Burns and Needles, 2014). There is a direct link between the objective of financial accounting and the associated challenges experienced by the organisations and the managers. According to the thoughts of Weygandt, Kimmel and Kieso (2015), it is identified that the challenges of accounting go hand in hand with the developments in the field of accounting (Weygandt, Kimmel and Kieso, 2015). The companies pay high emphasis on the challenges which are there in the accounting practices as there is a direct impact of these challenges on the performance and productivity of the companies (Hodges, 2012). In the vast literature on accounting, there are number of issues highlighted by Warren, Reeve and Duchac (2013) in their research in respect with accounting in the global organisation. the key challenges which impact the organisations comprises of reporting of the non-financial indicators, diverse accounting standards, multiple-jurisdictional issues, technological interventions, environmental issues and incompetent human resource. The primary challenge which has been discussed by the authors is the challenge related to economic environment. In current business scenario, in maximum number of nations, the traditional accounting is recognized as the key accounting stream (Warren, Reeve and Duchac, 2013). Due to rapid developments and technological advancements, there are growing improvements in the competence and skills of the managers so that they can manage the modified business functions and operations based on rapid technological innovations. There is immense impact posed on the tra ditional accounting of the new developments in the accounting function or of the digitalised accounting functions. It also develops a need of working on new accounting models. In present time, there is high emphasis posed on e-accounting concept in eth international organisations. E-accounting explains internet which is exterior to the intranet and business. The use of intranet is bound by the info sharing among the organisational departments whereas the internet enable sharing of information and communication among international companies, trading partners as well as the customers (Schaltegger and Burritt, 2010). There is a negative impact on the accounting function in respect with measurement, reporting and recognition. The improved technologies left no chance for the workforce for managing the accounting functions in an appropriate and effective manner as there is lack of ability to work on new and innovative accounting standards (Richardson, 2017). The existing workforces are no t able to develop a balance between the new technologies and their skills thus it results in reduced organisational productivity and growth (Gordon, et al., 2013). The second major challenge is in relation with the financial instrument as due to continuous improvements and complexity, the accounting executives face difficulty in performing accounting function (Narayanaswamy, 2017). There are number of assets in the financial statements that even do not exist in the actual business life such as the agreements of repurchase, forward contracts, options etc. the complexity of these financial instruments made their valuation challenging. It helps the global organizations to easily manipulate the values and figures of the financial instruments (Gordon, et al., 2013). The researchers have identified a number of instances of frauds and manipulation in the business history which have led the businesses to perform corporate frauds by over-valuing the statements (Sharma and Panigrahi, 2013). Rather than being the trading function, the companies take use of these instruments for performing manipulations in the financial performance of the global organizati ons to show a misrepresented data to the public. Thus, the valuation of they non-financial instruments is one of the biggest challenge faced by the account ting executives (Horngren, et al., 2012). The next challenge is of multi-jurisdictional reporting. This issue rose because of the reason that there are number of subsidiaries of global organisations which require adequate reporting and thus issues take place. It becomes challenging for the accounting executives to have individual financial statements for all the branches as per the diverse laws and regulation of that particular nation or region (Salvato and Moores, 2010). The companies are necessitate submitting a consolidated statement that comprises of the data of all the subsidiaries and this is one of the complex task or challenge as it takes immense time for accomplishment of the accounting operation. Maximum of the countries have started working on the basis of the accounting standards developed by International Accounting Standards Board i.e. IASB so that there can be extended level of uniformity across the international business units (Zeff, 2012). But the change still remains as thereat res till many countries who d o not work on these standards and it becomes challenging for the global organisations to manage the accounting function while working in those countries as they are required to follow specific and different laws and regulations, practices and standards of accounting. The next issue or challenge highlighted by authors is the non-financial measures. Non-financial measures can be understand as the measures which are exterior to the loop of the financial measures and are not possible to measured by the means of the accounting standards. There is a vital significance of these measures in any business as it is one of the dependent success factors for the organisation (Karadag, 2015). The non-financial measures comprises of satisfaction of the customers, brand image of the company, employment practices, etc. (Owolabi and Iyoha, 2012). These measures are subjective and diverse as they depend upon user ton user thus their measurement is a challenging task and thus their impact can also ne not measured (Kieso, Weygandt and Warfield, 2010). All these issues are experienced by the companies at the international level and are required to have more emphasized concern for letting the accounting functions free from these challenges. The organisations take use of a number of approaches for overcoming these challenges. According to Hopwood, Unerman and Fries (2010), one of the best ways is by the implementation and the adoption of the practice of Green Accounting (Hopwood, Unerman and Fries, 2010). Green accounting is the accounting practice which is performed for achieving an environment-caring business. There are still number of developing nation that take use of traditional accounting are require to have new and innovative techniques (Schlesinger, Libby. and Geiszler, 2013). Another key practice for overcoming the challenge of accounting is to take use of the recruitment of the people that possess updated technological knowledge and skills so that they can effectively work and manage the new accounting functions. There is a lso a need to offer adequate training to the workforces in respect with the effective use of the e-accounting practices (Taipaleenmki and Ikheimo, 2013). Another approach which can help the global organizations in managing the challenges of account ting is to take use of the accounting harmonization (Brusca, et al., 2014). The practice of accounting harmonization helps in reducing the difficulty and complexity of the various financial instruments which have arisen because of the multi-jurisdictional reporting (Hancock, et al., 2010). The practice help in limiting the enormous number of differences exist among the individual accounting standards so that the overall performance of the companies can be improved. The global or international harmonization in accounting is one of the major factors which are extensively being adopted by the regulatory bodies for achieving increased level of similarity in eth accounting standards for eliminating eth challenges of diversity and the associated complexity (Power, 2010). For managing the challenge posed by the non-financial measures in accounting, the international organisations can take use of s everal practices for example by performing an evaluation of the scores and rating of customer satisfaction which can support in effective analysis of that whether the customers are contended or not from the organizations services and if not then there will be a negative implication on the overall organisational profits (Bebbington, Unerman and O'Dwyer, 2014). The next way of overcoming eth challenge of non-financial measures is through calculation and analysis of the task completion scores, employee productivity scores, internal audit and external audit (Northcott and Ma'amoraTaulapapa, 2012). From the vast literature gathered and the analysis performed, it ahs also been analyzed that there exist a research gap as that the techniques used for managing the accounting challenges are more of subjective i.e. theoretical in nature instead of being practical and objective and with more technological advancements these issues will arise simultaneously. As well as not all the companies are much financially strong so that they can easily implement the new techniques for overcoming the challenges (Rajkumar, 2013). The work of the researchers and the literature collected play a significant role in the field of academic as it helps in understanding the importance of green accounting as it is one of the best ways to reduce the pollutants which play a major role in environmental degradation. Next major contribution of literature is that it supports the new business ventures and entrepreneurs in getting aware of the issues of accounting in global organisations. The knowledge help the ent repreneurs in preparing themselves and take use of adequate strategies for managing these future accounting challenges (Hopwood, Unerman and Fries, 2010). The various other contributions comprises of effective understanding of the benefits of e-accounting, approach of accounting harmonization and the manner in which there can be gained competitive advantages by the companies through the e-accounting practices. Conclusion The insights gained from the literature and the research, the paper concludes that there are number fo challenges that are present in the global accounting. The issues related to reporting of the non-financial indicators, diverse accounting standards, multiple-jurisdictional issues, technological interventions, environmental issues and incompetent human resource are the primary challenges in accounting function in global companies. It can also be stated that through collaboration approach and effective analysis there can be gained knowledge that how these challenges must be sustained. The report also concluded that there is a major role of measures such as reporting of the non-financial, measures for coping up with the challenges of accounting of -financial measures. 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