atheoreticaljustificationforasingleglobalcurrencyin.docVIP

WRITING THE FUTURE: A THEORETICAL JUSTIFICATION FOR A SINGLE GLOBAL CURRENCY IN INTERNATIONAL ACCOUNTING Ratnam Alagiah Division of Business University of South Australia GPO Box 2471, Adelaide, South Australia 5001 And Department of Accounting, Finance and Economics Griffith Business School PMB 50, Gold Coast Mail Centre Queensland 9726 WRITING THE FUTURE: A THEORETICAL JUSTIFICATION FOR A SINGLE GLOBAL CURRENCY IN INTERNATIONAL ACCOUNTING WRITING THE FUTURE: A THEORETICAL JUSTIFICATION FOR A SINGLE GLOBAL CURRENCY IN INTERNATIONAL ACCOUNTING Abstract This paper submits that the advantages gained by introducing a single currency at the domestic level, equally applies to the economy at the global level. The advantages gained are, 1. a reduction of the inflation rate to one common rate (if required) amongst all countries, 2. a possible reduced interest rate, 3. an expansion in investment, 4. an increase in development and trade due to the removal of uncertainty, 5. the reduction in transaction costs, and 6. the reduction in the cost of capital (Moshirian, 2004, p. 306). A single global currency has immediate implications in international accounting. It presents an opportunity for the permanent removal of problems associated with accounting for inflation. This paper addresses the phenomenon of inflation and how accounting measurement and valuation associated with inflation is removed by the introduction of a single global currency. WRITING THE FUTURE: A THEORETICAL JUSTIFICATION FOR A SINGLE GLOBAL CURRENCY IN INTERNATIONAL ACCOUNTING “It would be difficult to exaggerate the psychological and social impact of the anticipated replacement of the jumble of existing monetary systems – for many, the ultimate fortress of nationalist pride – by a single world currency operating largely through electronic impulses.” Bahá’í International Community, 1999, p. 12 1. Introduction In accounting, under historical cost accounting, it is assumed that the monetar