This paper will aim to achieve a three fold purpose. Firstly a review of the financial environment in which IFRS and GAAP operate. Secondly the paper will also discuss the objectives of the two in addition to this an analysis of the regulatory framework will also be included. Lastly, with reference to a US firm, the paper will outline a number of changes that will have to be made in their financial statements in order for t to be eligible for use in the United Kingdom.

Radical transformations are taking place in accounting and financial reporting in the US and generally the world. “Up to 2008, the Securities and Exchange Commission the financial regulatory body in the US) necessitated for financial reporting by organizations doing business in the US stock market” (Ruppel, 2010), that their financial statements should use US generally accepted accounting principles (GAAP) or be made with accordance to US GAAP. The SEC did not recognize the International Financial Reporting Standards (IFRS) released and updated by the International Accounting Standards Board (IASB). It wasn’t until the early years of the current decade that securities commissions in a large amount of nations took the identical fundamental arrangement toward IFRS as did the United States SEC.

In nations that have frail and insubstantial financial disclosure obligations, financiers usually require and stipulate supplementary financial details when organizations issue equities (stock). As a consequence, administrations in these states are frequently obliged to amend or extend securities rules that necessitate enhanced financial reporting revelation. Developing accounting and financial reporting requirements, that is, generally accepted accounting principles, is a complex and time-consuming process. An easier and more effective solution is to adopt IFRS, which have a higher level of financial reporting disclosure than lots of countries’ GAAP.

For the particular nations that possess and implement well-built financial disclosure requirements, for instance the United States, there is not as much of an enticement or motivation to implement IFRS, owing to a minor additional advantage of shareholder safety and security. Conversely, states with tough financial statement disclosure requirements in their present GAAP can still stand to gain from assuming IFRS; specially, the aforementioned states gain by taking part in standardized and homogenous reporting principles not bound by international lines. “Shareholders consequently gain from cross-country similarity.” (Epstein, 2010) Unvarying reporting standards lessen the expenditure of financial statement reconciliation linked and connected to transnational equity (stock) listings and possibly encourage and endorse financial growth and progress.

The International Accounting Standards Board was introduced in the year 2001 by its predecessor; the International Accounting Standards Committee (IASC), which itself was created in 1973. The IASC Foundation continues to function as the mother ship of the IASB. The configuration and arrangement of the International Accounting Standards Board was an end result of a stratagem appraisal assumes by its precursor organization, the Board of the International Accounting Standards Committee. The IASB doles out standards in a sequence of assertions referred to as International Financial Reporting Standards (IFRS). The IASB assumed the body of standards first prepared by the Board of the International Accounting Standards Committee. These principles were all between the years 1973 and 2000, and carry on to be nominated.

The IASB is based in London, sovereign, clandestinely funded accounting standard-setting organization. Its members come from a wide array of different nations and possess an assortment of practical backgrounds. The IASB is dedicated to expand, in the interest of the investors, a solitary set of first-rate, comprehensible, and implemental global accounting standards that necessitate translucent and analogous details in general rationale financial statements. “The basic goal of the IASB is to work with the standard setters of different countries in order to achieve convergence all across the board.” (Pounder, 2009)

The IASB exemplifies over a hundred bookkeeping and financial institutes, representing more than eighty nations. IASB projects normally necessitate a minimum of three years from development to typical issuance. Issuance of a Standard, Exposure Draft or concluding SIC Interpretation needs endorsement and support by at least eight of the board’s fourteen members. The Securities and Exchange Commission in America seems on the threshold of recognizing IFRS as the single standard, not exclusively for non-US companies doing business in the United States market but for the companies originating from the United States as well.

The continuing globalization and resultant complication of business makes book keeping and economic reporting a theoretically difficult and intimidating procedure. From one corner of the globe to the other, accounting standards swerve as a consequence of exclusive educational, political, official, and monetary aspects and rationale. Effectual and well-organized performance/implementation of the global market demands uniformity in accounting standards. At the present time, speculators, shareholders, and investors must give sufficient thought and deliberation to the dissimilarities that subsist. Such disparities considerably restrict the growth and progress of worldwide business goings-on. Coordination and synchronization of standards has a very high probability of assisting financial and economic movement around the world.

Looking back in the very beginning i.e. of confirmed history, different people from all over the globe have contributed to and taken part in international trade and business. As far back as intercontinental buying and selling has taken place, bookkeeping is helpful and practical for recording and coverage of the conclusions. “International maneuverings are all the time more significant and vital to all kinds of business organizations.” (Financial reporting group of E, 2005) a lot of international firms are either increasing international business, or becoming element of further global conglomerate firms by means of mergers or acquirement. Therefore, additional firms than ever before are offering goods and services to consumers in just about every corner of the world.

The internationalization of trade, commerce and money markets has led to a monetary and financial setting where if accepted, homogeneous measures for financial report preparation would assist sponsors, lenders, monetary analysts, bookkeepers, and assessors. Consistency and standardization assists comparability of financial reports amongst firms of varied state settings. The International Accounting Standards Board (IASB) has always and is still making an effort to enlarge and extend coordinated financial accounting principles to please universal demands. Several international firms are required or choose themselves to follow international principles in making their financial statements.

Several reviews of standpoints regarding IFRS exposed that top business accounting officials are exceedingly approving to recognition and approval of IFRS for economic reporting by each and every one of the companies in every country, together with the United States. Merging the positive points of view of top accounting officials with the all the time more extensive acceptance and implementation of IFRS in nations all over the planet, IFRS appears to be the proverbial ‘King Kong’ for United States and international financial statements. According to many senior accountants, recognition of IFRS in almost each and every country, counting the US, seems forthcoming, possibly taking place inside the subsequent few years.

Future study could judge if acceptance of global principles directs to a more hassle free admission by a firm to distant investment hubs, lessen the outlay of capital, and monetary lucidity. Prospective research however might and possibly will examine the pros and cons connected to IFRS. Potential research can conduct a longitudinal investigation of how international standards modify over time. In accumulation, future research should evaluate the economic benefits of using worldwide standards at the localized (corporation) level and comprehensive (nationwide or international) level.

Now the paper will go on to discuss the key differences in the regulatory framework between IFRS and GAAP. To outline the basic objectives outlined in the IFRS framework; it should give details with regards to the financial position, performance, and the modifications in financial position of an organization. These details would be valuable and handy to all sorts of users of financial statements in order to assist them in making their economic decisions.

GAAP on the other hand outlines its objectives in terms of; its usefulness to the potential investors and other users who are present in the market. Financial statements should also be helpful to creditors in assessing the timing and uncertainty of future cash flows. In addition to this GAAP also mentions that financial reporting should provide details about economic resources and their diversity.

Taking an overall view of the two frameworks it can be ascertained that the IASB and FASB possess the following similarities:

The main objective of the two frameworks is similar i.e. “to help the people setting the standards in making and readjusting (to suit future needs) accounting standards.” (Wiecek, 2009)

The particular framework does and can not supersede the standards already set, in that respect the framework itself has lower standing compared to the specific standards set down by the particular standard setting boards.

However there are differences as well. These are as follows:

In general, framework of the IASB is a lot more extensive and expansive compared to the FASB framework. Basically the initiative to help the IASB in making or rewriting existing standards is only the tip of the iceberg. It also serves other uses that include helping makers of accounting statements, auditors and the final end user as well. The FASB on the other hand does not focus as much on other uses.

The dissimilarity in the rationale and functions of the two are amplified when one considers the status of the two. IASB framework is factually at a superior level than its American counterpart. For organizations that prepare their financial statements using IFRS, the preparers of the statements have to explicitly stick with all the rules and regulations mentioned in the framework. On the other hand, the GAAP in the United states of America is ranked not even above all the various textbooks and other handbooks available in the market that direct companies on how to make and correct their financial statements. Extensively used and widely prevalent industry practices even rank higher then US GAAP.

There are also very big differences in between the two standard setting boards when one considers the scope of the two. There however three main topics that need to be outlined in order to get a full idea regarding the scope of the frameworks. Firstly, what sectors the framework applies to? Secondly, the different entities those have to follow the specific rules in their respective countries. Lastly, which of the financial statements of the firm have to be made in accordance with the set framework?

Let us consider the sectors that the two frameworks are applicable to. “The variability with respect to different countries is vast.” (Walton, 2009) In the UK the ASB is in charge of setting the standards that are applicable to the private sector and also some portion of the public sector. Diversely, in the United States the GAS and FASAB (Not the FASB) set the guidelines for the public sector.

Secondly, the IASB and FASB do not ascertain a vigorous notion of the reporting individual or organization, which means, the perception of what makes a lawful organization to which the framework can be relevant. Such an idea would also describe and expand upon the limitations of the treatments of different organizations for financial reporting uses and functions. For instance, merged financial statements are prepared on the foundation that the parent unit and other sub ordinates under its management collectively symbolize a reporting organization.

Finally in the case of the applicability of the frameworks to different financial statements, the IASB framework pertains to all-purpose company accounts. That is, “the chief and most poignant financial statements and the supplementary notes” (Price water house coopers, 2008), however they are applicable to the supplementary files or non economic details, such as directors report, management discussion and analysis etc. The FASB framework pertains to wide-ranging peripheral financial reporting. This comprises not only the financial statements, but also additional economic and non monetary information. Cases in point contain further financial and non financial information enclosed in the company yearly reports, company pamphlets, and service information presentation in the yearly reports of non business organizations.

Now let us consider a specific US company and outline what changes need to be made to bring it into accordance with IFRS. For the purpose of this comparison I will be using the financial statements of Ford Motor Company. (Web 1)

Following are some of the Key Differences and Similarities between US GAAP and IFRS that have to be considered when converting the statements prepared using GAAP in to IFRS:

US GAAP is “based on inherent rules which were developed to scandals” (RIA, 2009) such as Enron where IFRS is based on practical approach which is known as principle approach which will be leading to global harmonization.

Extra ordinary items are not to be shown in statement of comprehensive income as stated by IAS 1 which results in achieving the profit before tax where as under US GAAP extra ordinary items need to be shown in statement of comprehensive income which leads to increase in the reported profit for the period of rising costs for inputs.

IAS 8 requires changes in accounting polices to be accounted for as a last year adjustment which needs restatement of last year financial statement and US GAAP need changes with total net effect of change in policy which will be shown in present income statement.

IFRS 8 segmental reporting needs operating system to be managed using the management approach of the company to evaluate and allocate resources based on the decision made by the entity and US GAAP interpret segment as an internal reporting lines of an organization which may or may not be the same type of segment and will be disclosed in the financial statement.

According to IAS 16 Property, Plant and Equipment needs be to recognized in the statement of financial position at cost or revalued amount which will lead to depreciation or recognition of impairment where as US GAAP needs tangible non-current asset to be recorded at historical cost which will be deducted (depreciation or impairment).

Both IAS 18 Revenue recognition and US GAAP have the same rules and principles for listed companies as well as private companies.

IAS 23 states that borrowing costs incurred during acquisition or construction of non-current asset should be capitalized or treated as an expense where as US GAAP states that capitalization of borrowing cost are mandatory.

IAS 27 defines Subsidiary upon control of the initial company by another company which will be called a parent company, the company would need to hold more than 50 percent of the shares otherwise parent having below 50 percent of shares would be called either a joint venture or an associate. It is not necessary that control will only be measured by the number of shares which are held by the company. This can also be measured by the majority of ownership in voting shares or voting of the board of directors. US GAAP defines subsidiary through initial company controlling another company and it also requires voting of shares.

As discussed in the above point subsidiary has a different reporting date  which should not be more than 3 months but adjustment could be made will consolidating the financial statement where as US GAAP states that it would disclose such transaction in the financial statement.

Non-controlling interest on the consolidated statement of financial position should be disclosed as a part of equity as stated by IAS 27 and in US GAAP it will be disclosed separately in between equity and liabilities.

In IAS 31 investment in joint venture could be measured through equity method or proportional consolidation and US GAAP states that only equity method should be followed except for the construction, oil and gas industries.

In IAS 32 convertible debt instrument should be split at the date of issue between liability and equity component where as US GAAP states that the entire equity instrument should be classified as a liability.

IAS 33 states about Earning per share and diluted earning per share should be disclosed in the financial statement which is for continuing operation as well as net profit or loss per share but in US GAAP a more detailed disclosure is needed and earning or loss per share is also needed for discontinued operation.

Both treatment in the IFRS 2 which deals with share based payment and US GAAP is the same where expense is recognized on the fair value of goods and services also noting that it implies on the employees services which are received.

IAS 38 which deals with intangible non-current asset states that development costs need to be capitalized only where the definition for development cost criteria are met. US GAAP states that the development cost should be treated as an expense and shown in the statement of comprehensive income. IAS 38 also requires that the asset could be revalued where there is an existence of an active market where as US GAAP thinks otherwise.

To conclude, in evaluation, U.S. GAAP and IFRS are supported by a similar fundamental thinking; ancestry employed in widespread law practice, and capital-market point of reference.  In reality, “U.S. GAAP comprises a portfolio of first-rate principles that are reasonably similar to IFRS and predicted to be still nearer by the point in time when the U.S might assume IFRS.” (Epstein, 2009)  The IFRS implementation would be a simple and trouble free changeover assuring the identical superiority and satisfaction previously enjoyed with GAAP. The analogous advantages and system effects of IFRS, though, make available a tough foundation to make the change. Still if the aforementioned advantages are unpretentious, they are frequent in personality and accumulate in the extended run.

The U.S. employs GAAP that by now imitates the IFRS, has a great amount of worldwide processes, and keeps an eye on business using a severe enforcement administration.  When taking into consideration the changeover it should be assesses whether the cost-benefit trade off would be in everyone’s favor.  The price of adopting the IFRS would be the preliminary conversion and the movement of all influence to the FASB.  In return, America will take advantage from the comparability advantages beforehand converses, which are diffident but ensue over an extensive term basis, and the frequent price savings of coverage, which largely are a hindrance to huge international U.S. corporations.  In any case, “U.S. GAAP is gradually developing throughout its acceptance of a variety of principles and usage of the IFRS.” (Tierney, 2006)

Works Cited

Ruppel, Warren. Wiley GAAP for Governments 2010: Interpretation and Application of Generally Accepted Accounting Principles for State and Local Governments. Publisher: Wiley. 2010.

Epstein, Barry J. Wiley IFRS 2010: Interpretation and Application of International Financial Reporting Standards. Publisher: Wiley. 2010.

Pounder, Bruce. Convergence Guidebook for Corporate Financial Reporting. Publisher: Wiley. 2009.

Financial Reporting Group of E. IFRS/US GAAP Comparison. Publisher: Lexis Nexis. 2005.

Wiecek, Irene M. IFRS Primer International GAAP Basics. Publisher: Wiley. 2009.

Walton, Peter. An Executive’s Guide for Moving From US GAAP to IFRS. Publisher: Business Expert Press. 2009.

RIA. Us Gaap & Ifrs: A Comparative Analysis. Publisher: Warren Gorham & Lamont. 2009.

Price water house Coopers. A Global Guide to Accounting for Business Combinations and Non controlling Interests. Publisher: PricewaterhouseCoopers. 2008.

Web 1 – http://www.ford.com/microsites/annual-reports. Retrieved on December 23, 2009.

Epstein, Barry J. Wiley GAAP 2010: Interpretation and Application of Generally Accepted Accounting Principles. Publisher: Wiley. 2009.

Tierney, Cornelius E. Federal Accounting Handbook: Policies, Standards, Procedures, Practices. Publisher: Wiley. 2006.

After more than 60 years the events that started unraveling in 1945, still have influence on the way we live in 2008. As soon as the US and USSR started the space and the weapons race, the lives of the Americans and everybody in the world were going to change dramatically and at a breath takening speed. On the other hand, science, human rights and civil liberties also advanced like never before in history. The people even had the possibility to whitness those changes during their lifetime. Somebody born in 1935 would be 10 in 1945 and still has the possibility of being alive to see the first African-American get elected to the White House. However all of that didn’t occur overnight and every decade from 1950 untill today still influences what happens in our daily life as well as every decade left us a legacy that we must remember in order to make the world a better place.

The 1950′s were marked by the break between the US and the USSR and the begining of the Cold War. As the US launched an atomic bomb on Hiroshima and Nagasaki in 1945 the eniter world was scared and amazed by the power of this new weapon, making the US the the only atomic power in the world. This of course didn’t make the alreadt shaking alliance with Stalin ant easier and made the always nervous and suspicious Stalin even more nervous and suspicious. An intersting anecdote from 1945 actually shows us how Stalin functioned. Upon recieving the news of the US bombing Japan, he summoned his leading fisicists and asked them whether they slept through  the American development of the bomb. One of the braverscientists dared to answer that they didn’t but had spent that time waiting in breadlines. The brave scientist din’t get shot and the nuclear program stared reciving funding, which brought on the development of an A-bomb by the USSR in 1949. In 1949, however the US and the USSR were still allies, even though one could see constant friction between Stalin, Truman and Churchill as well as it was pretty clear to anyone in 1949 that a division between former allies was inevitable. On the home front, strong middle class was defining a healthy and progressing nation and it is not unusual that a nation sees great progress after a war. It doesn’t really matter whether the nation has lost or won that war, the creation of new jobs and the need to reconstruct motivate the people and the money that was so largely spent on the military before, is now spent on the reconstruction of the country. Excellent examples of how a winner and a looser of WWII have progressed and simultaneously became superpowers are the US and Germany. Germany started WWII and was the country that had most casualties and economic damage after the USSR but in the decade following the war it started re emerging and slowly became one of European leaders. On the other hand the US had still to face many problems and challenges at home and on the international scene, some of them not bveing solved yet. “The 1950s required hard work; many Americans made a conscious effort to leave behind the darker vision of the world that came with the Great Depression and the Second World War. The postwar era started with the loss of Eastern Europe, and then China, to communism; the Korean War and McCarthyism. It ended with Sputnik and the missile gap. The loss of Eastern Europe and China to communism garnered more attention than the various aspects of the “Red Scare” whipped up by Joseph McCarthy and others.” (Merkowitz)

The 1960′s can be considered a turning point in world history but nowhere was the impact felt in such a manner in the US. The sixties were also crucial for US history since that decade introduced many of both positive and negative characteristics that define the US even today. In 1960 modernization hit the US that was not prepared for it. It was a young country that still needed to grow up and find its place in the world. We can see this if we compare Europe and the US. Issues like liberal courts, racial segregation, and human rights in general were settled in most European countries by the end of the 1940′s. One of the clearest examples of that is Vietnam. The French pulled out of Vietnam in 1955 and by 1962 abandoned colonial policy and decided that France has no business invading other countries even if they held them for centuries and US mixing in the affaires of other countries actually began with Vietnam. For decades after the first police action in Vietnam, the US has invaded a number of countries but has maintained an appearance of legality for most of the time. In 1983 they almost broke the UN charter by invading Grenada but still managed to make that invasion look legal in the UN. In 1999 the US finally felt too mighty and bombed Yugoslavia which a total disregard for the UN and the international law. Since then the list keeps growing: Afghanistan, Iraq…

On the positive side however we have the pres Kennedy beginig the long process of emancipating and integrating the nation, the begining of the racial struggle and the precedent that showed the world that their leaders can be responsible in an atomic age. The greatest diplomatic challenge for both the US and USSR since the end of WWII was the Cuban missile crisis of 1962. It was a great victory of international relationships and diplomacy and it gave faith to many on this globe that the era of great wars is over and that the superpowers of the day could solve problems through diplomatic channels.  Of course a new diplomatic language and techniques were used for the first time in history and the best example of that would be Secretary of State McNamara’s comment to one of the generals:” don’t you understand that Kennedy and Khrushchev are speaking a new diplomatic language.” It was difficult for both presidents to contain “the brass” and others who wished for war, as a matter of fact, the generals couldn’t wait to start shooting at Russian ships but Kennedy and his advisers opted for a blockade of those ships and thus saved millions of lives. Both Khrushchev and Kennedy had to work the best of their abilities in order to reach an agreement between themselves and to keep their war hungry generals in place. And the biggest triumph of diplomacy in this particular case was when Adelai Stephenson told the Russian foreign minister in response to his statement that he is not in an American court: “no sir you are in the court of the world” However by 1965, the assasination of Kennedy and the escalation of war in Vietnam have silenced the optimists and the public opinion forced pres. Jhonson to act. In November of 1967, the Administration launched an extensive “public relations” campaign. It was designed to convince Congress, the press, and the public that there was “progress” in Vietnam and that the war was being “won.”  Johnson was advised to “[E]mphasize light at the end of the tunnel instead of battles, deaths, and danger.” “There are ways,” Johnson was told, “of guiding the press to show light at the end of the tunnel”  (quoted in Larry Berman, Lyndon Johnson’s War, p. 98 and 99).  To head this effort, Johnson brought General William Westmoreland, commander of American forces in Vietnam, to Washington. Westmoreland addressed the National Press Club saying that the U.S. had reached the point “where the end comes into view” (Berman, p.116).

Even though President Nixon is considered to be one of the most unpopular presidents the US ever had he was the one that pulled the US out of the Vietnam War and was forging relations with foreign countries that were to make the US so popular during the 70s and the 80′s.

With the cold war cooling down the 1970s were characterized by racial and social struggle. It all began with the first presidential candidate’s TV debate and ended with the man on the moon, the drastic change in technology allowed the humans to walk on the moon only nine years after the first use of television for political purposes, but on the political scene the things were more sinister. Even though we have seen significant advances in human rights, equality of race and gender and general cultural advancement the assassinations of JFK, Bobby Kennedy, Martin Luther King and many important civil rights activists showed us even back in the sixties that the US are not on the same path as Canada and Sweden, and the fact that many people mowed precisely to Canada and Sweden in the 70′s shows us that many were aware of it by 1969. Just as the actual landing on the moon is contradictory and disputed so is the legacy of the sixties.

On the political level the US were going through a reformation and were building up relations with the rest of the world, as pres. Nixon opened the market to the USSR and China and prepared the world for a new era. At home ge helped implement the rest of the changes that started under Kennedy and Jhonson. Martin Luther King’s non violent methods revolutionized civil rights struggle. Even though when Dr. King was shot the hope was not gone. This can be seen in the speech Bobby Kennedy gave when King was assassinated: “For those of you who are black-considering the evidence evidently is that there were white people who were responsible-you can be filled with bitterness, and with hatred, and a desire for revenge. We can move in that direction as a country, in greater polarization-black people amongst blacks, and white amongst whites, filled with hatred toward one another. The 1970s brought the real change for the American society, a change occured in the hearts and minds of the Americans and not only on paper.  Unfortunatley many causes satill had to be fought for in courts all over the country but the African and Latino population has fully integrated by 1972.

On the international level the best example of how Nixon’s policy worked out for the economy of the world is the Asian example. “The decision of Japan to contribute l percent of its gross national product in governmental and private transfers to foreign economic assistance by 1975 is a singular contribution to the kind of Asia they and we seek.  No less significant is Japan’s decision to liberalize its trade and capital restrictions, thus improving the access of others to the burgeoning Japanese market, and promising, to the benefit of all, a greater participation in meeting Japan’s capital needs. The Republic of China, five years after the termination of our economic assistance, is the source of economic assistance to twenty- three less developed countries. This is eloquent testimony to Asian abilities to expand creatively on the base that we helped construct.

By 1980 and the matters at home mostly settled the US was going to turn back to policing the world under pres. Reagan. The turning point for the US foreign policy in the 1980s and the 1990s was to be an invasion of a minuscule Caribean country that was going to create a precedent that will finally bring on the war in Iraq in 2003. When discussing the 1979-1983 U.S. actions in Grenada, one must ask the first and most important question: what interest could the world’s capitalist superpower possibly have in a tiny island less populous than a South American football stadium? The miniscule nation’s economy, lacking any significant natural resource or consumer markets (for example), naturally precluded almost any possibility of American business interest in Grenada that could capably provide a specific political-economic impetus for invasion. It likely follows, then, that the intervention was part of an arrangement of Cold War policy disassociated from narrow, influential business interests, and one more involved with broader ideological and strategic theories. The new socialist government of 1979 had already not been in good standing with the Carter administration; the coming of Reagan in 1981 only deepened U.S. negativity toward Maurice Bishop and the New Jewel Movement (NJM), which had aligned with Cuba and the Soviet Union. Washington could, in turn, publicly allege that Grenada was a significant security threat if it were used militarily by the Cubans as a base for regional subversion, notably in Central America, or by the Soviets for projection of power.

The other crucial event of the 1980s was the end of the cold war and the fall of Communism. It was the ultimate victory for pres. Reagan, a man who colaborated with Mac Arthy and dedicated most of his life to fighting Communism. As he co signed the the INF Treaty in the East Room at the White House in 1987 with pres. Gorbachev he knew that the USSR were “history” and that America was ready to implement the New World Order. The Grenada example was only the general rehersal for the policies the US were going to implement in the 1990s and the fact that the USSR didn’t intervene when Granada was invaded showed only that the Cold war was over and that the US could do anything they like in their zone of influence as long as the Russian could do the same (as in Afganistan) the 1987 treaty just offialised the deal between the US and a new, emerging soon to be independent Russia.

The 1990s were to mark the begining of the age of Globalization or Global givernance. What can be considered political global governance is when makers of global policies start behaving like bullies and agree to let each other do so. As a matter of fact, they have done that for a long time. Since WWII global policies have been decided by three countries: China, Russia/USSR and the United States; and all three of those countries have shown utmost disregard for the rights of their own people and the people of other nations. China and the USSR achieved their goals through brute force and communist rhetoric while the US always functioned with the: it’s not wrong unless you get caught philosophy and thus created black ops and secret wars. Modern Russia has adopted the American way since it has become a democracy. Those three countries also seem to respect each others territory or zones of influence. Even though the US will officially condemn what is going on in Tibet or Chechnya, that’s pretty much all they will do. China and Russia condemn what is going on in Afghanistan, Iraq and Kosovo but don’t go further either. It is not even necessary to mention that all three countries are tight business partners and depend very much on economic cooperation. However the US were totally going to abandon the  “humanist” policy and will start policing the world (or their zones of influence) with no regard for international law.

Stage one of the new us policy for the 1990s began with the Somalia blunder. The United States have no direct interest in Africa but trying to emerge as the victors of the Cold War and the World’s policemen, the Bush administration decided to act in Somalia. The US troops were supposed to help UN humanitarian relief reach its destination in a war thorn country and it had great public support when it started in 1992. Following the death of 18 US soldiers in 1993 the mission was withdrawn wit as much public support for withdrawal as there was for sending. That was the first and the last blunder the Americans committed in Africa. Both the government and the public opinion realised that Africa is not a place where they want to get involved. This mission was crucial in showing that the US had no interest in humanitarian missions and no tolerance for cost, specially casualties in pursuing purely humanitarian goals, most specifically   in third world countries where American political and economic interest are not directly at stake. This belief served as justification for policies such as the Presidential Decision Directive 25 that provides guidelines that practically exclude the Americans from any types of humanitarian and peace keeping missions.

On the other hand the US went as far as breaking the international law in order to intervene in conflicts that went on in countries that are in the interest zone of the US.  The US bombed Yugoslavia in 1999 due to alleged ethnic cleansing in the breakaway province of Kosovo, for which no solid evidence found afterwards. They did so by defying UN principals and international law. It was the bombing that triggered off the worst of the ethnic cleansing.  As for the atrocities it now seems that here again we were lied to about the extent of the crimes committed. United States Secretary of Defence Cohen told us that at least 100,000 Kosovars had perished. Tony Blair spoke of genocide being carried out in Kosovo. The media relished in these atrocity stories and printed every story told to them by Albanian, “eye witnesses.” The myth that the war was to stop ethnic cleansing and atrocities continue to be perpetrated by department spokesmen and large parts of the media.

This approach shows nothing but hypocrite attitude towards Africa. In 1994 Rwanda and 1993 Somalia it was clear that people at a rate of several thousand a day. The rebels and paramilitary troops that the US and UN should have dealt with were underfed and had little ammunition. In Ex Yugoslavia the US were ready to intervene only after most of the fighting was done. They let Milosevic, Tudjman and Izetbegovic massacre their neighbours and much of their own people and finally decided to intervene only when regular Serbian police was fighting a terrorist group and there very few civilian casualties due mostly to collateral damage. This is to create a very dangerous precedent that later brought on the war in Iraq.

The US bombed Yugoslavia in 1999 due to alleged ethnic cleansing in the breakaway province of Kosovo, for which no solid evidence found afterwards. They did so by defying UN principals and international law. President Clinton said so when he told on CNN that they will not go through the UN Security Council because they will certainly be vetoed by China and Russia. Strangely enough the very reason why the Security Council was created and the five victors of WWII were given the right to veto military actions of others is to keep the balance in the world and that none of those countries could invade somebody without the full consent of UN’s Security Council. This legacy of the 1990s and the disregard for international law allowed G.W Bush to invade Iraq and abolish civil rights at home. The last decade we have experienced ilegal invasions, the Patriotic act and Presidential executives that allow even children to be tortured. This clearly defies the US constitution, but by the they fisrt took the Jews… principle, Bush acted probbably thinking that if Clinton defied international law why can’t I the Domestic.

With Bush getting ready to leave the White House and Obama getting ready to move in, many hpoe thet thePatriotic act will be abolished as well as they hope that the US will start respecting the international law once again. As the people of the US compare Obama with Kenedy many hope that the spirit of the 1960s might return in a new age of hope.

The largest automotive industry in the world is the US automotive industry. The size and importance of the industry is due to the popularity of the product, i.e.; motor vehicle. Japans automotive industry is the second largest automotive industry in the world. The major competitors of US in this industry are Japan, Thailand, and china. This industry is the most important industries in the world It affects both the economy and the culture. It creates a lot of employment. It has revolutionized the transportation sector in the twentieth century. General Motors Corporation and the Ford motor corporation are the two major automobile manufacturers of the United States. Faster transportation of goods enabled the expansion of the market. The mobility provided by the expansion of automotive sector, has created situation in which the remote population can interact with each other, for improving commerce. [http://encarta.msn.com/encyclopedia_761563934/Automobile_Industry.html]

PRICE ELASTICITY OF DEMAND AND SUPPLY: As per the law of supply the quantity supplied is related to price. Supply curve is the graphical representation of the relationship between the quantity of goods supplied and the current market price. Demand curve is the graphical representation of the relationship between the quantities of goods purchased and the prices, other factors remaining the same. Elasticity is a very important concept in understanding demand and supply theory. If the number of substitutes for the product is more, the elasticity will be high. Here in the case of automotive industry we will be focusing on the price elasticity of demand and supply. The price elasticity of demand and supply explains the changes in quantity demanded and supplied, in the context of changes in prices. There is definitely a positive elasticity of demand and supply, in the normal economic conditions for the automotive industry. That means, when the price of the vehicle gets increased the demand gets reduced. Similarly when the price gets reduced the demand gets increased. But at the same time there is a possibility of cross elasticity of demand for the products of automotive industry. It is due to the variation in demand caused due to the price variation of fuel price. [http://en.wikipedia.org/wiki/Price_elasticity_of_demand] The sales promotion policy followed by the General Motors in 2005 was based on discount sales. The General Motors has changed its marketing strategy by which all vehicle prices are lowered. This policy resulted in increased volume of sales. This policy is followed to explore the positive price elasticity of demand for their product. [http://en.wikipedia.org/wiki/General_Motors]

POSITIVE/NEGATIVE EXTERNALITIES PRODUCED BY THE AUTOMOTIVE INDUSTRY: Value added per employee is the indicator of the productivity of the industry. Value added includes the total of profits, rent, interest, and labor compensation paid within the industry. With regard to the value added service the automotive industry of united state ranked third after beverage products and petroleum products. Externalities (positive or negative) in economics are the impact any transaction produces on any party who is not involved in the transaction. For example in the automotive industry, the manufacturing process and the further use of its product (motor vehicles) cause air pollution. This can be cited as a negative externality. As per theories of economics in any voluntary exchange, both parties are equal beneficiaries of the transaction. But such an exchange can have additional negative or positive effects on third parties. If the externalities can be monetized it can be indicated by a supply and demand curve. It may not be possible to monetize the cost and benefit of externalities. While car owners using cars, traffic congestion created by them, costs on all other users. This is a negative externality. Example of positive externality can be cited in the distribution of small pox vaccine by the automotive industry. This industry promotes the business of insurance sector. Automotive industry also promotes the technological inventions to improve the service. Major automobile externalities (negative) are pollution, oil dependence, traffic problems, and accidents. Other externalities are caused by noise pollution and high maintenance costs. Environmental externalities are caused due to improper disposal of vehicles and their parts. Externalities can be solved by agreements between the involved parties. Various externalities can be balanced by political compromises. Generally governments pass laws and regulations to address pollutions and other types of environmental harm. Explicit agreement through bargaining is another method of eliminating externalities. This bargaining will be possible under the proper application of the following conditions such as 1.a well defined right on property.2.rationality in people’s activity.3.minimum transaction costs.[http://en.wikipedia.org/wiki/Externality] In 2002, The Ford motor company of the United States ranked seventh air polluters in the country. It is found releasing about 9.67 millions of toxic air. During 2003 THE Ford was accused of causing many accidents due to the wearing down of firestone tires. These are some of the examples of negative externalities produced by this industry.

WAGE INEQUALITIES IN THE AUTOMOTIVE INDUSTRY: Surely there exists a wage inequality in the automotive industry. This inequality is present in the automotive industries of US and UK also. Egalitarian principles of income distribution were replaced by inequalities based on factors such as gender, race, ethnic, and skill. Understanding the volume of fragmentation and polarization will help to measure the wage inequality. The following are the important areas of fragmentation and polarization which is to be noted, for measuring wage inequality. (1) A large number of workers with long hours of work and at the same time a substantial numbers with insufficient hours or no work at all. (2) Inequality in distribution of wages and how it is moderated by government policies such as transfer payments and a progressive taxation. (3) The level of job security. (4) Bargaining rights available for various segments of society. Therefore wage inequality can be measured by analyzing the fragmentation in the setting of wages against relative level of work related earnings.[http://www.assa.edu.au/Publications/op/op12006.pdf]

Wage inequality can be measured by analyzing the collective bargaining and labor management relations existing in the industry. The major factors deciding the level of wage inequality are competition, labor peace, protection of income and employment etc. Thorough analysis of the above mentioned factors are required to measure the wage inequality in the automotive industry.[http://209.85.175.104/search?q= cache:UIBxvsMptQ0J:www.research.cornell.edu/VPR/CWC162-] Until 1941 Ford did not allow collective bargaining within the industry. This company was also accused of supporting the cause of the Nazi regime, in Germany during the war. Another example of labor unrest is the one which occurred with the General motors on 24 September 2007.On that day United Auto Workers (UAW) union went on a nation wide strike in the General motors. The UAW union then, ratified a new labor contract, which provides several product and employment guarantees.

FISCAL/MONETARY POLICIES AFFECTING THE INDUSTRY: There is a significant change in the structure of the manufacturing industries from the1950s to the first decade of twenty first century. Growth rate of non-farm employment was 2.1% in the 1960s and during the period from september2002 to april2004, it was only .49%. Today in the United States manufacturing companies are performing more like service companies. In the 1950s there were about six industrial workers to one non industrial employee. But today this ratio has been reduced to 2.4:1. In the context of globalized economic conditions all over the world, the fiscal policies followed by the individual states are to be followed carefully to regulate the economy. While deciding upon exports and imports and various related tariff structures; several global economic treaties and decisions of regional economic forums are to be taken in to account. Advantages over various resources, of the immediate competitors also be a decisive factor. [policyhttp://www.chicagofed.org/news_and_conferences/conferences_and_events/research_conferences_past.cfm]

Price stability and real economic stability can be provided to the industry by the central bank, supported by an appropriated monetary policy. To set a foreign exchange rate at an equilibrium level, an interest rate sufficient to create price stability has to be adopted. In the case of recession a relaxed monetary policy and in the case of upswing a restricted monetary policy is advisable. Loss of independent monetary policy will lead to high inflation volatility. This is a situation faced by many of the European states after shifting to the euro based economy. The rate of inflation and the volume of money supply can be regulated to a considerable extent by following a correct monetary policy. Therefore such a monetary policy can be influential in deciding the future of automotive industry. [http://209.85.175.104/search?q=cache:l6eTfhGicOAJ:www.nbs.sk/BIATEC/BIA08_06/2_7.PDF+monetary+policies+affecting+automotive+industry&hl=en&ct=clnk&cd=10&gl=i]

ECONOMIC INFLUENCES ON THE INDUSTRY: Exchange of skills and knowledge which are complimentary are made possible in a mutual learning arrangement between two industries in partnership. If the industries are different countries, for example from France and from Japan, cultural and economical back grounds can be exchanged constructively. We can illustrate this point by citing the collaboration of the French car maker Renault with the Japanese Nissan as an example. In this case it is said that the corporate know how of the French company has positively affected the Nissan’s turn around. This case is an example of positive effect of a globalized and technology advanced economy. [http://www. inform world. com/smpp/content~ content=a788483412~db=all~jumptype=rss]

There are cases of economic conditions adversely affecting the industrial sector as a whole and the automotive industry in particular. War and Terrorism are two such important factors. We can clarify this point with the help of historical example of the great depression occurred after the First World War. These types of adverse effects are happening to the automotive industry due to the constraints of economy, due to the enforced fiscal and monetary policies, in the context of the war.

Therefore as a conclusion it can be said that economy as a whole is very much influential to the industry. There are various aspects, both international and national, involved in this regard. National economic conditions are decided to greater extent by the fiscal/monetary policies followed by the state. International economic factors are decided by the global trends of competition and technological advancement. Among the several of such economic factors, there will be both positive and negative factors for a particular industry, in this case the automotive industry. It is up to the industry to study the factors systematically and plan accordingly so that the maximum positive economic influences suitable for the automotive industry are explored and utilized.

[http://links.jstor.org/sici?sici=0013-0133%28191606%2926%3 A102%3C145% 3ATEIOTW%3E2.0.CO%3B2-T&size=LARGE&origin=JSTOR-enlargePage]

During the mid to late 90s the American Economy experienced a boom. The fuel prices were also law at that time. During this period the sale of vehicles by Ford motors was large. Opposed to this case, in the beginning of the new century depressed economy and higher fuel prices caused a fall in market shares and decline in sales of the Ford motors. These examples illustrate how the economy influences the automotive industry. [http://en.wikipedia.org/wiki/Ford_Motor_Company]

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