Paradoxes and Issues of the Globalisation of Accounting

Abstract

Financial globalisation goes along with a strong change of the globalisation of accounting. This situation can be explained by several phenomena:¹

• A multiplication of financial scandals (the Enron affair and WorldCom, for example) undermined the confidence of financial markets and led to a wave of reactions aimed at improving financial and accounting-information transparency.

• Europe’s decision to make the International Financial Reporting Standards (IFRS) the mandatory standards for all listed companies.

• The accelerated power climb of the IFRS (resulting from this decision), which have now been implemented (or are being implemented) in more than 125 countries worldwide (Deloitte, Iasplus.com).

• The convergence process, engaged by Norwalk agreements between IFRS referential and the American standards Generally Accepted Accounting Principles (US GAAP), which is producing tangible results, especially regarding financial instruments, segment reporting and the restructuring of the Income Statement.

Following the Enron affair, the report prepared by the Economic Analysis Council for the French prime minister, pointed out the contradiction between the fast capital markets’ globalisation and the fragmentation of national systems governing accounting and financial information. For companies operating in different countries and listed on different markets, ‘… this disparity of standards is at least, a cost, and at worst, a source of confusion in their communication strategy; for investors it is a factor of opacity which handicaps comparisons and represents an obstacle to mobility, and therefore to the proper capital allocation’ (De Boissieu et al., 2003).