Impact of any change in the business environment is always felt on the processes and procedures into place. In the past few years, overall business environment has gone tremendous ups and downs. During the last two decades, multinational companies have grown like they had never done ever in the history. Nations like India and China which have great population and market potential but were earlier following socialistic trends had opened their gates for foreign direct investments. There were so many changes in the business environment in past twenty years that the whole arena seems to be entirely different from what is actually was some years back.
Due to such a ride in the business environment, companies and people from different parts of the world have come closer to each other. Their closeness is depicted by various examples like Coca Cola and Nike which are available almost everywhere in the world. Huge companies find different methods to enter in new markets to tap the potential of these markets at initial stages. This is the time when issues due to difference in statutory requirements and accounting standards and policies between different nations come into existence. For example, a company based in the United States has its branch office in China. It needs to show its investors the consolidated statements as per US GAAP so that US investors could easily understand the outcome of their China branch. However, due to different rules and accounting policies applicable as per Chinese laws, they need to work twice on the same financial statements as they have to prepare the statements once in China and then consolidate them as per US GAAP rules. This puts immense amount of pressure over the accounting team as well as makes the life of an auditor really difficult as he hardly has proficiency in all accounting standards of the world.
IFRS: The way out for
References: BP 6-K 2006: Retrieved on 17th October 2013 from website: http://www.wikinvest.com/stock/BP_(BP)/Filing/6-K/2006/F1234287 http://www.bp.com/content/dam/bp/pdf/investors/BP_Annual_Report_and_Form_20F_Financial_Statements.pdf http://www.wikinvest.com/stock/BP_(BP)/Filing/6-K/2006/F1234287 http://www.wikinvest.com/stock/BP_(BP)/Transition_International_Financial_Reporting_Standards