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.