THE EFFECT OF GLOBALIZATION ON FRAMEWORKS AND CONCEPTS IN ACCOUNTING

In today's fast changing economic environment the accounting data of business organizations have to provide relevant information about the income and financial conditions of firms in order to show a faithful picture. Over the past few decades global markets have gone through significant changes, nevertheless social and economic transformation, the development of information technology, and the expanding variety of financial transactions have created new challenges in financial reporting. Because of these quick changes in the economic environment and the more unpredictable and uncertain competition in the case of some balance sheet items, fair valuation of these items has arisen beside the historical cost-based measurement – especially in the case of financial instruments. Growing international trade has resulted in increased import and export activities, and the horizons of investors and borrowers have become global, which has increased the level of their risks. Practices and markets have developed which help firms manage the added risks of doing business abroad. The importance of financial instruments has increased considerably in line with the dynamic development of capital markets. Financial instruments used by not only financial institutions but other organizations as well have become more and more sophisticated, thus enhancing the role of related regulation. Financial instruments, including derivatives, are the most uncertain elements in the global financial system, affecting its stability the most. The latest financial crisis has raised the question of whether the current accounting concepts brought about the crisis or not. Answering this is difficult, since the crisis encouraged the re-thinking of several accounting issues. The research question focuses on attesting that more and more current practice of fair valuation does not decrease the usefulness of the information in financial statements. The main finding of this paper is that measuring certain financial instruments at their fair values corresponds to the concepts of the accounting paradigm of the information economy