GLOBALIZED SECURITIES MARKETS AND ACCOUNTING: HOW MANY STANDARDS? *
SYNOPSIS This paper examines the relationship between globalized securities markets and accounting systems. After describing that globalization, I discuss the reasons for the increase in globalization over the past few decades: changes in government policies and rapid improvements in the technologies-telecommunications and data processing-that underlie finance. I then develop the idea of a financial reporting system as a "network", with the accounting system providing the standards that determine the compatibility between the components of the network. Using this framework, I show the pluses and minuses of a single accounting system versus multiple accounting systems and illustrate the current "systems competition" among national securities markets and their accounting systems. Though a single accounting system decreases comparability costs and thereby encourages globalization, while multiple accounting systems increase comparability costs and thereby impede globalization, those multiple accounting systems also permit national adaptation to national circumstances and permit greater opportunities for experimentation and innovation. On balance, a competitive framework is preferable. The current limited and muted competition between accounting systems could be enhanced by the introduction of the IASB's International Accounting Standards as a second allowable system in the U.S. alongside U.S. GAAP.