Emerging Accounting Regulations: International Standards, Tax Reforms and Regulatory Compliance (2024)

With technological advancements, events in any one country’s financial markets often have global effects. Standardized accounting practices promote transparency, accountability and confidence in financial institutions worldwide. Many countries have adopted international standards to encourage foreign trade and investment. However, not all countries have adopted the same standards, which can lead to confusion.1

This article will explore international accounting standards, tax reforms and how companies ensure regulatory compliance, and how a master's in accounting can help you become a leader in this complex landscape.

International Accounting Standards and Compliance

The need for cross-border convergence in accounting practices for public companies has been recognized since the 1950s when the aftereffects of the war led to an increase in trade between multiple countries. The International Accounting Standards Committee (IASC) was founded in 1973 and reorganized into the International Accounting Standards Board (IASB) in 2001. The IASB passed the International Financial Reporting Standards (IFRS) to promote trust in financial reporting and make it easier to compare businesses in different countries.2

Currently, the United States, Japan and China are the only major financial markets that don’t follow IFRS, although they’re working to connect their standards.2

International Financial Reporting Standards

The IFRS accounting standards aim to make international financial reporting more transparent, comparable and consistent. The IFRS gives investors information about a company’s market position and financial health.3

It emphasizes fair value as a measurement basis. Fair value is the price of selling an asset or transferring a liability between market participants on a specific date. The IFRS uses a principles-based approach and covers a wide range of accounting activities, including revenue recognition, financial instruments, leases and financial performance reporting.3

Generally Accepted Accounting Principles

The United States requires publicly traded companies to adhere to the Generally Accepted Accounting Principles (GAAP). The GAAP provides outside parties such as investors and creditors with an objective measure of a business’s performance. In contrast with the IFRS, the GAAP is a rules-based system.4

It standardizes financial reporting to clearly define a company’s financial information and prevent unethical practices that could deceive the public. While U.S.-based companies are only required to follow the GAAP, those with a significant presence in other countries may also be required to follow the IFRS.5

Evolving Accounting Tax Reforms and Implications

Countries around the world have been working toward developing a fairer tax system that considers the globalization and digitization of businesses. The Organisation for Economic Cooperation and Development (OECD) rolled out a two-pillar tax system in 2021.6

Although Pillar One is still under development, Pillar Two will go into effect this year. The purpose of the tax reform is to prevent multinational corporations from gaining an unfair advantage by shifting their tax burden. To do this, multinational companies will have to pay a 15% global minimum tax on income in each country where they operate.7

The impacts of Pillar Two will be felt beyond the tax department, however. Organizations need to be prepared for the impacts on their financial operating model and determine if their current data collection systems, business processes and technologies are aligned with the new framework.8

Adopting Technology in Regulatory Compliance

New accounting regulations will place an increased burden on business reporting and compliance departments. Adopting technology will help companies comply with the increased data collection requirements.9

Under Pillar Two, organizations will have to collect over 150 data points from various IT systems to prepare and pay the new minimum tax. Accounting departments will need to determine if they want to develop their own IT tools or seek out external tools to streamline and automate new processes.9

Preparing for the Future of Accounting Regulations

Accounting regulations, standards and compliance regulations are complex and change rapidly. Business leaders need to look ahead to be prepared for further accounting regulatory changes and accounting compliance trends, such as incorporating environmental, social and governance (ESG) factors into financial reporting.10 Regulations will also likely emerge to address the challenges posed by the digital economy, including the taxation and reporting of digital assets and cryptocurrencies.11

Accounting professionals will need to develop agile compliance processes to rise to the challenge of meeting emerging regulations. A culture of continuous planning, along with flexible systems for information flow and data analytics, will equip business leaders with the tools they need to handle regulatory and compliance risk management.12

Balancing Regulatory Compliance Management in Accounting With Business Growth

Compliance obligations can restrict a business’s growth if they aren’t managed efficiently. However, with the right approach, businesses can not only comply with regulations and regulatory compliance laws, but also leverage them for competitive advantage and foster a culture of compliance that supports long-term growth.13

A comprehensive compliance strategy doesn’t just stop a business from violating regulations, it also helps leaders develop more efficient and safer methods and processes to achieve regulatory compliance. Companies that are known for their strong compliance culture can build greater trust with customers, investors and partners, which can translate into a significant advantage over competitors.13

Prepare To Be a Global Business Leader and Meet Compliance Regulations With William & Mary

William & Mary’s Online Master of Accounting will equip you with the skills and knowledge you need to understand emerging international accounting standards and how to incorporate them into modern business strategy. The specialized expertise you’ll acquire will put you at the cutting edge of modern business. Graduate with new fluency not only in accounting but also in business leadership—prepared to make important executive decisions as you thrive in a career that’s in demand everywhere.

With our comprehensive curriculum, you can prepare to advance your career or pass the Certified Public Accountant (CPA) exam in as few as 16 months. You’ll learn to go beyond the numbers to translate data into informed business decisions.

Schedule a call with an admissions outreach advisor today to learn more.

Sources

  1. Retrieved on January 1, 2024, from investopedia.com/terms/i/ias.asp
  2. Retrieved on January 1, 2024, from fasb.org/page/PageContent?pageId=/international/briefhistory.html
  3. Retrieved on January 1, 2024, from businessinsider.com/personal-finance/ifrs
  4. Retrieved on January 1, 2024, from investopedia.com/ask/answers/06/rulesandpriciplesbasedaccounting
  5. Retrieved on January 1, 2024, from forbes.com/advisor/business/generally-accepted-accounting-principles-gaap-guide/
  6. Retrieved on January 1, 2024, from bdo.com/global-tax-reform
  7. Retrieved on January 1, 2024, from deloitte.com/xe/en/insights/topics/leadership/pillar-two-tax-reform-changes-coming-in-2024.html
  8. Retrieved on January 1, 2024, from pwc.com/gx/en/services/tax/pillar-two-readiness.html
  9. Retrieved on January 1, 2024, from ey.com/en_us/tax/five-steps-tax-accounting-teams-can-take-for-beps-2-0
  10. Retrieved on January 1, 2024, from journalofaccountancy.com/issues/2023/oct/how-accounting-leaders-can-embrace-esg-for-a-strategic-advantage.html
  11. Retrieved on January 1, 2024, from home.treasury.gov/news/press-releases/jy1705
  12. Retrieved on January 1, 2024, from renaix.com/agile-for-accountants-six-steps-to-provide-necessary-tools-and-relevant-processes/
  13. Retrieved on January 1, 2024, from northrow.com/blog/how-to-develop-a-compliance-strategy-that-improves-decision-making

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As an expert in international accounting standards and regulatory compliance, my knowledge is deeply rooted in the history, development, and ongoing changes within the field. I have actively followed the trajectory of accounting practices and their impact on global financial markets, demonstrating a comprehensive understanding of the nuances involved.

The article you provided delves into several key concepts within the realm of international accounting and regulatory compliance. Let me break down the main ideas covered in the article:

  1. International Accounting Standards (IAS) and Compliance:

    • The need for cross-border convergence in accounting practices has been recognized since the 1950s, leading to the establishment of the International Accounting Standards Committee (IASC) in 1973, later reorganized into the International Accounting Standards Board (IASB) in 2001.
    • The IASB introduced the International Financial Reporting Standards (IFRS) to promote transparency and comparability across different countries.
    • Notably, the United States, Japan, and China are the major financial markets that have not fully adopted IFRS.
  2. International Financial Reporting Standards (IFRS):

    • IFRS aims to make international financial reporting transparent, comparable, and consistent.
    • It emphasizes fair value as a measurement basis and covers various accounting activities such as revenue recognition, financial instruments, leases, and financial performance reporting.
  3. Generally Accepted Accounting Principles (GAAP):

    • In the United States, publicly traded companies are required to follow the Generally Accepted Accounting Principles (GAAP).
    • GAAP is a rules-based system, providing an objective measure of a business's performance and preventing unethical practices in financial reporting.
  4. Evolving Accounting Tax Reforms and Implications:

    • The Organisation for Economic Cooperation and Development (OECD) introduced a two-pillar tax system in 2021.
    • Pillar Two, aimed at preventing multinational corporations from gaining unfair tax advantages, requires companies to pay a 15% global minimum tax on income in each country of operation.
  5. Adopting Technology in Regulatory Compliance:

    • New accounting regulations, especially under Pillar Two, necessitate increased data collection. Technology adoption is crucial for compliance.
    • Organizations will need to collect over 150 data points from various IT systems to prepare and pay the new minimum tax.
  6. Preparing for the Future of Accounting Regulations:

    • Accounting regulations are complex and rapidly changing.
    • Future trends may include the incorporation of environmental, social, and governance (ESG) factors into financial reporting and addressing challenges posed by the digital economy.
  7. Balancing Regulatory Compliance Management with Business Growth:

    • Efficient management of compliance obligations is essential for business growth.
    • A comprehensive compliance strategy not only prevents violations but also fosters trust with customers, investors, and partners, providing a competitive advantage.
  8. William & Mary’s Online Master of Accounting:

    • The article concludes by highlighting how William & Mary’s Online Master of Accounting can equip professionals with the necessary skills to navigate international accounting standards, regulatory compliance, and modern business strategy.

In summary, the article provides a comprehensive overview of the evolving landscape of international accounting standards, tax reforms, and the critical role of technology and compliance strategies in this dynamic environment.

Emerging Accounting Regulations: International Standards, Tax Reforms and Regulatory Compliance (2024)
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