Question

What are the advantages of having a single set of accounting standards used worldwide?
 

What are some of the major problems caused by worldwide accounting diversity a multinational corp

Answer 1

Part 1

A single set of accounting standards are useful to companies that looking for international expansion. It would enable company to save huge amount of money that it would have required to invest to adopt countries’ current accounting standards.

Moreover, it reduces the chances of conflicts while conducting business in different countries.

The comparison among companies all over the world becomes easy as due to the single set of accounting standards they all are at the same ground. Investors can fairly evaluate potential investment opportunities.

Part 2

Multinational corporations have to undertake the complex task of preparing consolidated financial statements according the format followed by the parent company.

All Foreign subsidiaries are required to maintain to sets of books.

The financial statements prepared in local GAAP being the basic requirement for investors and lenders in different countries, it becomes complicate to have access to foreign capital markets for multinational corporations.

Worldwide accounting diversity creates difficulty in making comparison of financial statements among companies in different countries and thus making hard to take international expansion decisions.

Different accounting standards in different countries affects the quality of the accounting information.