Challenges of Accounting in Global Organizations: A Case Study of Blue Scope Steel

This report examines the challenges faced by multinational companies in managing their accounting systems, focusing on Blue Scope Steel, an Australian company operating globally. It explores the importance of accounting systems, their advantages and disadvantages, and the specific challenges arising from global operations. The report analyzes the impact of accounting systems on the company's performance and identifies potential solutions to address these challenges.

HI6008 - ASS 1
Challenges of Accounting in Global Organizations
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Contents
Introduction......................................................................................................................................3
Project Objective.............................................................................................................................4
Project Scope...................................................................................................................................5
Literature Review............................................................................................................................6
Research Gap.................................................................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
Appendix........................................................................................................................................15
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Introduction
Multinational companies play a vital role in the development of the economic condition of the
countries. The growth of the multinational companies results in the development of good
relationships among different countries. This report is based on Blue Scope Steel which is
headquartered in Australia and operates its business in various other countries like New Zealand,
North America, Pacific islands, and Asia. It deals in developing steel related products and runs
its business on a global level. Accounting is the system which ensures the flow of financial
information between the parent company and its subsidiaries. The economic activities of the
business are determined with the help of accounting systems. The company faces certain
challenges and issues with the accounting systems. It becomes difficult for the global
organizations to handle as well as manage the financial information about the business at various
levels and places.
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Project Objective
Objectives are set by the companies to handle the project in an effective and appropriate manner.
Objectives are set by considering the different aspects of the business and also the aspects of the
project. They provide a guideline to the project manager to direct the project activities and
achieve the desired outcome. This project has the following objectives:
 To determine the importance of accounting systems for the multinational companies.
 To evaluate the various advantages and disadvantages of the accounting systems of
multinational companies.
 To identify the challenges faced by multinational companies due to accounting.
 To evaluate the impact which the accounting systems possess on the global organization.
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Project Scope
The project defines the various challenges and issues which are raised in the accounting systems
of the global organizations. Scope states the extent to which the project has the opportunity to
improve the overall accounting systems and also the performance of the business. The project
gives knowledge about the various challenges and issues which the multinational companies face
while operating their business across the countries. With the help of this project, the various
challenges faced by the Blue Scope Steel Company will be analyzed and evaluated, so that
further actions and measures can be taken for solving the issues of accounting. Appropriate
accounting system enables Blue Scope Steel Company to manage the financial resources and
performance of its own and its subsidiaries. It is important for the company to understand the
various challenges associated with the accounting so that effective steps can be taken for
improving the overall business performance. With the proper analyzing the project, the company
will be able to understand the various aspects of the accounting and the ways in which it gets
affected due to the various operations conducted in the multinational companies. Effective
accounting systems are chosen for maintaining the performance of the business.
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Literature Review
Accounting
According to Soudani (2012), Accounting is a systematic process of maintaining the financial
information of the company across the world. It is a procedure in which all the finance related
transactions are recorded in the accounting systems, financial details of the business are given to
the management and the senior management which makes it simpler for them to take effective
decisions, internal audits are conducted, etc. It is a procedure which consists of the analyzing of
the financial details, evaluation of profit and loss, the financial value of the company is evaluated
and effective decisions are taken on the further basis (Soudani, 2012). Management accounting,
tax accounting, financial accounting, cost accounting, and external auditing are some of the
accounting fields which are followed by the Blue Scope Steel Company and its subsidiaries to
maintain the proper financial records of the company. Accounting functions are handled by
accounting information systems and also helps the company in handling other business-related
activities as well as operations.
Multinational companies and Accounting
The main source of raising the income level of the country is the development of the
multinational companies. Global organizations act as an advantage for the countries in all
respects, as it concentrates on the social change, generation of new and innovative ideas,
technological advancements etc. Global organizations operate their business all over the world. It
becomes important for the global organizations to implement and manage the appropriate
accounting systems so as to handle all the financial operations of the entire business (Sakini &
Awawdeh, 2015). Implementation of the right accounting software and system helps Blue Scope
Steel Company to analyze the financial condition and financial availability with each subsidiary,
on the basis of which further decisions are taken for improving the organizational effectiveness.
In the words of Terzungwe (2012), Management of proper accounts and financial data helps the
companies to attract the financial investors towards the company. Accounting proves to be quite
beneficial for the companies, but on the other hand, it becomes difficult for the companies to
handle the accounting systems of its various businesses. Accounting systems helps the
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companies in depicting the actual financial position of the business in the market and also
examine the areas and fields where investments are required for making the business more
effective and efficient. Accounting helps the company to appropriately maintain the financial
records and statements and make the business more profitable by taking effective decisions and
actions on the basis of the information available to the management (Terzungwe, 2012).
(Source: Dreamstime, 2018)
Advantages of Accounting
There are certain principles which govern the accounting systems of the global organizations.
Blue Scope Steel Company should ensure that all the financial transactions are recorded and
maintained in an appropriate manner, as accounting provides the company with a wide variety of
advantages. Accounting helps the global organization with the systematic and complete record of
the financial information in the parent company as well as its subsidiaries (Sacer & Oluic, 2013).
The company is able to keep track of all the financial transactions which it has done during a
period of time. Proper monitoring and tracking become easier with the help of the appropriate
and suitable accounting systems.
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(Source: Knowledge, 2014)
In the viewpoints of Soudani (2012), Accounting helps the company in taking effective decisions
regarding the business in terms of analyzing the selling price, maximizing the sales, reduction in
the cost etc. The fair value of the entire business can be evaluated with the effective use of the
accounting systems. The net worth of the business is calculated with the help of evaluating the
net assets and liabilities. Proper maintenance of the financial records enables `the company in
attracting the financial investors to further grow the business and also measure the profitability of
the business. Accounting includes all the financial records and statements which act as the
evidence of the operations of the company (Soudani, 2012).
The comparison can be made between the performances of different companies on the basis of
which further actions are taken and strategies are developed by the company to enhance the
business to a great extent. Accounting facilitates internal and external auditing which helps the
company to get an audit certificate which provides the company with a clean chit. It represents
the regularities within the organization at all levels. The various activities of different
departments are effectively coordinated, the performance of the business is enhanced and timely
actions are taken to avoid any shortcomings and errors and proper management is ensured with
the effective implementation of the right kind of accounting systems (Sakini & Awawdeh, 2015).
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Disadvantages of Accounting
According to Bagley, et. al. (2012), Accounting has many benefits for the organization and the
entire business but on the other hand, it has many disadvantages and challenges too which are
faced by the companies at the global level. With the implementation of the accounting systems
within Blue Scope Steel Company and the other organizations, it becomes difficult for the
employees to learn to operate the systems. It consumes much time of the company as learning
depends on the grasping power of the employees. Proper training is required to be given to the
employees for effectively working on the accounting systems which is a time consuming and
costly process for the entire organization. It takes time for the management and the employees to
completely understand the accounting systems (Bagley, et. al., 2012). Systems are usually at risk
of losing the information and details about the business if not protected and properly managed.
A system crash is also a challenge or a threat to Blue Scope Steel Company as it may result in
the loss of the entire accounting data of the business. Building coordination among the parent
company and its subsidiaries is a major challenge and a problem which is faced by Blue Scope
Steel Company while operating its business on a global level. Use of the updated accounting
systems and producing the detailed information about the financial resources and transactions of
the company is a major challenge for the companies running its business on a global level.
Development of the new regulations and executing it in the entire business is difficult for the
parent company (Akhmetshin and Osadchy, 2015).
According to Houghton (2013), Different systems develop different results which become
difficult for the parent company to analyze the overall financial transactions of the business.
Execution of the new accounting systems is difficult to manage for the Blue Scope Steel
Company as the company has to convey the standards and accounting systems information to its
subsidiaries. Measuring the exact profitability and revenues of the entire business operating
across the globe becomes difficult for the company. Financial reporting requirements and
standards are different for all the companies and it becomes difficult for the parent company to
manage the entire financial data of the business (Houghton, 2013).
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Profitability and revenues of the parent company are affected by the different countries’
economic condition. It also becomes difficult for the Blue Scope Steel Company to forecast the
financial performance of the whole business. The cost incurred by different global organizations
is difficult to record as a result of which it becomes difficult for Blue Scope Steel Company to
set and prepare the budget to carry out the entire business functioning. Accounting systems are
operated by the skilled and knowledgeable accountants and the accounting functions are totally
dependent on them (Arkorful and Abaidoo, 2015). As a result of which it becomes difficult for
the company to get accounting professionals for handling the business and setting coordination
of the subsidiaries operating their business on a global level.
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Research Gap
The economic conditions, conversion rates, other economic factors are some of the elements and
its impact and effect on the global organizations like Blue Scope Steel Company could not be
researched upon. Analysing and evaluating the different viewpoints of various authors were
difficult to come to a particular conclusion. In this research, the accounting systems used by
different global organizations and also the ways or methods in which the financial records are
maintained and handled in different organizations could not be researched. Further research will
be conducted on the details of the accounting systems used by the global organizations.
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Conclusion
Accounting and accounting systems are important to be implemented in the organizations for the
effective management of the financial records and information about the entire business. Global
organizations like Blue Scope Steel Company which have its subsidiaries across the world are
highly helpful for the economic growth of the country. It becomes difficult for the multinational
companies to handle and manage their accounting systems for its businesses operating on a
global level. Appropriate accounting systems are required by Blue Scope Steel Company and
other global organizations for maintaining the financial information and details of its business in
a proper manner. Accounting has some challenges along with the benefits. Technological
changes and lack of coordination among the parent company and its subsidiaries are the main
challenges which are faced by the global organizations.
Software and applications are continuously monitored and reviewed so as to eliminate all kinds
of loopholes in the accounting systems. Lack of skilled accountants is also a challenge for the
global organizations for handling the accounting systems of the business. For reducing or
eliminating the chances of fraud and risk it is important for Blue Scope Steel Company and other
global organizations to adopt and implement modern concepts of accounting rather than old
concepts. Accounting strategies are required to be adopted by the organizations for getting a
competitive advantage in the highly competitive business environment.
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References
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maintenance of accounting records of the company in the conditions of the economic
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decisions to seek careers with big 4 versus non-big 4 accounting firms. Accounting
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 Soudani, S. N., 2012. The Usefulness of an Accounting Information System for Effective
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Appendix
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