Transcript Chapter 2
Chapter 2
International Accounting
Patterns, Culture and
Development
Classification of Accounting
and Reporting Systems
Classification aids in
Describing, analyzing,
and predicting the
development of
accounting systems
Strategic planning and
control decisions
International systems
integration
The Challenge?
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
Describe and compare international systems
Improved understanding of
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
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
Deductive or
judgmental approach
Environmental factors
identified and linked to
national accounting
practices
International groupings
or development patterns
are proposed
Inductive or empirical
approach
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
Mueller’s four approaches to accounting
development
Macroeconomic pattern
Business accounting is tied to national economic
policies – Examples: Sweden, France, Germany
Microeconomic pattern
Accounting is a branch of business economics –
Example: replacement-value accounting in Holland
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Deductive approach
Mueller’s four approaches to accounting
development
Independent discipline pattern
Accounting is a service function derived from business
practice – Examples: U.S. and U.K.
Uniform accounting pattern
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
Nair and Frank (1980) findings
1973 data
Four measurement groups
British Commonwealth
Latin America
Continental European
U.S.
Seven disclosure groups
Could not be plausibly described
No explanation offered for difference in groupings
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Inductive Approach
Nair and Frank (1980) findings
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
Hofstede – 4 Underlying societal dimensions
Individualism
Power Distance
Uncertainty Avoidance
Masculinity
Countries grouped into culture areas
Hofstede and Bond – 5th dimension
Confucion Dynamism
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Hofstede’s Societal
Dimensions
Individualism versus Collectivism
Large versus Small Power Distance
Control the future or just let it happen
Masculinity versus Femininity
How a society handles inequalities among people
Strong versus Weak Uncertainty Avoidance
People’s self-concept: “I” or “we”
The way a society allocates social roles to gender
Confucian Dynamism
Short-term or long-term orientation
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Accounting Values – Gray
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
Accountants are perceived to have independent
attitudes throughout the world
Public regulation or self regulation
U.K. – rely on judgment of accountant
France and Germany – implement detailed legal
requirements
Link to societal value dimensions – Professionalism
Individualism
Weak uncertainty avoidance
Small power distance
Masculinity
Short-term orientation
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Uniformity versus Flexibility
Uniform accounting plan and imposition of tax rules
for measurement purposes
Intertemporal consistency and some degree of
intercompany comparability b/c of flexibility
France and Spain
Facilitate national planning
Pursue macroeconomic goals
U.S. and U.K.
Link to societal value dimensions – Uniformity
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
Conservatism seen as a fundamental value
Strongly conservative
Japan, France, Germany, Switzerland
Less conservative
U.S., U.K., the Netherlands
Link to societal value dimensions – Conservatism
Strong uncertainty avoidance
Long-term orientation
Collectivism
Femininity
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Secrecy versus Transparency
Stems from management and accountants
Closely related to conservatism
Secrecy
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
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
Accounting values most relevant to professional or
statutory authority and enforcement
Accounting values most relevant to measurement
and disclosure
Professionalism and Uniformity
Both concerned with regulation and degree of enforcement
or conformity
Conservatism and secrecy
Country groupings
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
Growing international interdependencies
Harmonization of the regulatory framework
internationally
Centrally planned economies embraces
market-oriented approach
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
European Union
UN
Promotes economic integration/harmonization
World Bank
International Monetary Fund
UN conference on Trade and Development
World Trade Organisation
OECD
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
Cultural and social
Employment and consumption patterns
Significantly influenced
Pressure for more accountability
Environmental impact
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black
Impact of MNEs and
Globalization
OECD, EU, IOSCO work for harmonization
and internationalization of securities markets
IASB and the International Federation of
Accountants (IFAC)
Professional organizations involved in
harmonization
International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black