While the effort to reduce international accounting diversity is important in its own right, there are today a number of additional factors that are contributing to the growing importance of studying international accounting. These factors stem from significant and continuing reductions in national trade barriers and capital controls together with advances in information technology.
National controls on capital flows, foreign exchange, foreign direct investment, and related transactions have been dramatically liberalized in recent years, reducing the barriers to international business. Changes in financial sector policy in both developed and developing countries reflect the growing realization that information and financial technolgy render capital controls ineffective. National governments also realize that financial market liberaliztion affords them access to international funds with which to finance national debts. As accounting is the language of business, cross-border economic interactions mean that accounting reports prepared in one country must increasingly be used and understood by users in another.
Advances in information technology are also causing a radical change in the economics of production and distribution. Vertically integrated production is no longer proving an efficient mode of operation. Real-time global information linkages mean that production, including accounting services, is increasingly being outsourced, or offshored, to whomever in the world can do the job, or portions of the job, best.1 Leading locations for offshore services today include Argentina, Brazil, Canada, Chile, Costs Rica, Mexico, and Panama in the Americas; Australia, China, India, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Thailand, and Vietnam in Asia Pacific; and the Czech Republic, Egypt, Hungary, Ireland, Israel, Morocco, Poland, Romania, Russia, Slovakia, South.
Africa, Spain and the Ukraine in Europe, the Middle East, and Africa.2 Adversarial, arm’slength relationships that have characterized companies’ relations with their suppliers, middle persons, and customers are being replaced by cooperative global linkages with suppliers, suppliers’ suppliers, middle persons, customers, and customers’ customers.
In producing the ProLiant ML150, a small box that helps companies manage customer databases and run e-mail systems, among other things, Hewlett-Packard (H-P) turned to the usual sources of low-cost labor: China and India. However, it also decided to make some ML150s in higher-cost locations such as Singapore and Australia, which were closer to targeted customers. Initial design for the ML150 was done in Singapore and then handed off to an outside contractor in Taiwan. Although China possesses the lowest wage rates, it is but one part of a highly specialized manufacturing system.
