Transcript Chapter 2

Chapter 2
International Accounting
Patterns, Culture and
Development
Classification of Accounting
and Reporting Systems
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Classification aids in
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Describing, analyzing,
and predicting the
development of
accounting systems
Strategic planning and
control decisions
International systems
integration
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The Challenge?
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Adapt past effective
techniques to meet the
demands of the global
market
 Must understand
international traditions
and heritage
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Purposes of International
Classification
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Describe and compare international systems
Improved understanding of
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Similarities and differences of systems
Development of systems and potential for change
Dominance of some systems over others
Assess issues of international harmonization
Identify and solve problems
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Purposes of International
Classification
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Developing countries
will be informed of
systems in other
countries
Aid international
accountants and
auditors
Problems with
accounting and control
systems for MNEs –
understood and solved
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Classification Research
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Deductive or
judgmental approach
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Environmental factors
identified and linked to
national accounting
practices
International groupings
or development patterns
are proposed
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Inductive or empirical
approach
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Individual practices
analyzed
Development patterns or
groupings identified
Explanations based on
economic, social,
political, and cultural
factors proposed
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Deductive approach
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Mueller’s four approaches to accounting
development
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Macroeconomic pattern
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Business accounting is tied to national economic
policies – Examples: Sweden, France, Germany
Microeconomic pattern
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Accounting is a branch of business economics –
Example: replacement-value accounting in Holland
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Deductive approach
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Mueller’s four approaches to accounting
development
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Independent discipline pattern
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Accounting is a service function derived from business
practice – Examples: U.S. and U.K.
Uniform accounting pattern
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Accounting is an efficient means of administration and
control – Examples: France, Germany, Sweden,
Switzerland
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Nobes’s Hierarchial
Classification
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Inductive Approach
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Nair and Frank (1980) findings
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1973 data
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Four measurement groups
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British Commonwealth
Latin America
Continental European
U.S.
Seven disclosure groups
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Could not be plausibly described
No explanation offered for difference in groupings
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Inductive Approach
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Nair and Frank (1980) findings
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Differences between measurement and disclosure
groups
Hypotheses not supported
 Cultural and economic variables associated with
disclosure practices
 Trading variables associated with measurement
practices
Overall – little attention given to influence of
culture
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Cultural Influences on Accounting
Systems
Culture, Societal Values, and the Accounting Subculture – Fig. 2.3
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Structural Elements of Culture
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Hofstede – 4 Underlying societal dimensions
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Individualism
Power Distance
Uncertainty Avoidance
Masculinity
Countries grouped into culture areas
Hofstede and Bond – 5th dimension
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Confucion Dynamism
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Hofstede’s Societal
Dimensions
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Individualism versus Collectivism
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Large versus Small Power Distance
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Control the future or just let it happen
Masculinity versus Femininity
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How a society handles inequalities among people
Strong versus Weak Uncertainty Avoidance
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People’s self-concept: “I” or “we”
The way a society allocates social roles to gender
Confucian Dynamism
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Short-term or long-term orientation
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Accounting Values – Gray
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Professionalism versus statutory control
Uniformity versus flexibility
Conservatism versus optimism
Secrecy versus transparency
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Professionalism versus
Statutory Control
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Accountants are perceived to have independent
attitudes throughout the world
Public regulation or self regulation
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U.K. – rely on judgment of accountant
France and Germany – implement detailed legal
requirements
Link to societal value dimensions – Professionalism
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Individualism
Weak uncertainty avoidance
Small power distance
Masculinity
Short-term orientation
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Uniformity versus Flexibility
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Uniform accounting plan and imposition of tax rules
for measurement purposes
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Intertemporal consistency and some degree of
intercompany comparability b/c of flexibility
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France and Spain
 Facilitate national planning
 Pursue macroeconomic goals
U.S. and U.K.
Link to societal value dimensions – Uniformity
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Strong uncertainty avoidance
Collectivism
Large power distance
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Figure 2.4 Culture and Accounting
Systems in Practice
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Authority and Enforcement
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Conservatism versus
Optimism
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Conservatism seen as a fundamental value
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Strongly conservative
 Japan, France, Germany, Switzerland
Less conservative
 U.S., U.K., the Netherlands
Link to societal value dimensions – Conservatism
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Strong uncertainty avoidance
Long-term orientation
Collectivism
Femininity
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Secrecy versus Transparency
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Stems from management and accountants
Closely related to conservatism
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Secrecy
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Secrecy relates to disclosure
Conservatism relates to measurement
High – Japan, France, Germany, Switzerland
Low – U.S. and U.K.
Link to societal value dimensions – Secrecy
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Strong uncertainty avoidance
High power distance
Collectivism
Femininity
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Accounting Values and
Societal Values
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Accounting Values and
International Classification
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Accounting values most relevant to professional or
statutory authority and enforcement
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Accounting values most relevant to measurement
and disclosure
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Professionalism and Uniformity
 Both concerned with regulation and degree of enforcement
or conformity
Conservatism and secrecy
Country groupings
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Optimistic and transparent
Conservative and secretive
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Accounting Values and
International Classification
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
International Pressures for
Accounting Change
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Growing international interdependencies
Harmonization of the regulatory framework
internationally
Centrally planned economies embraces
market-oriented approach
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Former U.S.S.R., Eastern Europe, China
New opportunities for international
investment, joint ventures, and alliances
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Economic Groupings and
International Organizations
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European Union
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UN
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Promotes economic integration/harmonization
World Bank
International Monetary Fund
UN conference on Trade and Development
World Trade Organisation
OECD
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Foster international economic and social development in
industrialized countries
 “Code of Conduct” for MNEs
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Impact of MNEs and
Globalization
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Cultural and social
Employment and consumption patterns
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Significantly influenced
Pressure for more accountability
Environmental impact
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Impact of MNEs and
Globalization
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OECD, EU, IOSCO work for harmonization
and internationalization of securities markets
IASB and the International Federation of
Accountants (IFAC)
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Professional organizations involved in
harmonization
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black