Change from National to Global Capital Markets
Many factors are changing the current environment to suggest that nations cannot live in isolation from one another. Here are some of the relevant factors:
- Information technology
We have witnessed an incredible transformation in the speed and scale of communications among companies and individuals across borders. As communication barriers continue to drop, companies and individuals in different countries and markets are becoming comfortable buying and selling goods and services from one another.
- Multi-national Corporations
Today companies view the entire world as their markets. As a result, it is not surprising to find that some of best known corporations such as Coca Cola, Intel, and McDonalds are generating more than 50% of their sales outside the United States. These companies no longer think of themselves as simply U.S. companies. The same situation is occurring overseas as many foreign companies find their largest market to be the United States.
- Mergers and Acquisitions
All you have to do is look in the Wall Street Journal to quickly understand the merger activity taking place between companies from different countries. The recent mergers of such international giants as DaimlerChrysler and Vodafone/Mannesmann suggest that we are going to see even more of these types of mergers in the future.
- Financial Markets
Financial markets are some of the most significant international markets today. Whether it is currency, equity securities (stocks), bonds, or derivatives, there are active markets throughout the world trading these types of instruments. With the touch of a computer key, often billions of dollars are transferred from one market to another. Given this setting it is no wonder that many are working for the establishment of a set of accounting principles that can be used worldwide. This is because companies find it costly to comply with different reporting standards in different countries. And investors, who are attempting to diversify their holdings and manage their risks, have become very interested in investing overseas. By having one common set of accounting rules it makes it easier for these international investors to compare the financial results of companies from different countries.