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Accounting 4570/5570

Accounting 4570/5570. Chapter 2 - International Accounting Patterns, Culture and Development. Purposes of International Classification. Sharpen analysis and prediction Describe and compare systems to better understand them Similarities/Dissimilarities Potential for change

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Accounting 4570/5570

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  1. Accounting 4570/5570 Chapter 2 - International Accounting Patterns, Culture and Development

  2. Purposes of International Classification • Sharpen analysis and prediction • Describe and compare systems to better understand them • Similarities/Dissimilarities • Potential for change • Reasons for dominance • Assess prospects for convergence

  3. ClassificationDeductive Approach • Identify relevant environmental factors and link them to national practices • Describes accounting systems that should be similar, normative • Mueller • Macroeconomic - national economic policies • Microeconomic - branch of business economics • Independent discipline (capable of self-governance) • Uniform (efficient administration)

  4. ClassificationDeductive Approach • Nobe’s model • Macro-uniform (government/tax/legal vs. government/economics orientations) • Micro-based (business/pragmatic oriented or business/economic theory oriented) • Figure 2.1, page 38 • Supported by Doupnik and Salter (1993) • Nobes (1998) distinguished between strong and weak equity market and shareholder orientations (Figure 2.2, page 39)

  5. ClassificationInductive Approach • Accounting practices are analyzed and used to develop accounting groups • Describes what is going on in the business world • Nair and Frank 1980 studies • 1973 and 1975 • Found differences in groupings based on measurement and disclosure practices • Exhibit 2.1, page 40

  6. Cultural InfluencesHofstede’s Study • Study conducted in 1980s • Looked at the structural elements of culture that affect behavior in work • Evaluated values of IBM employees in 50 countries

  7. Divisions of International Classifications • More-developed Latin - France, Italy, Brazil, Spain • Less-developed Latin – Mexico, Chile, Venezuela • More-developed Asian - Japan • Less-developed Asian – Indonesia, Pakistan, India • Near Eastern – Arab countries, Greece, Turkey, Iran • African – East Africa, West Africa • Asian Colonial – Hong Kong, Singapore • Germanic – Germany, Austria, Israel and Switzerland • Anglo-American - U.S., U.K., Canada, Australia • Nordic – Netherlands, Denmark, Finland, Sweden

  8. Cultural InfluencesHofstede’s Study • Basic Value Systems • Individualism vs. Collectivism • Power Distance (Large vs. Small) • Uncertainty Avoidance (Strong vs. weak) • Masculinity vs. Femininity • Short-term vs. Long-term orientation

  9. Cultural InfluencesGray’s Accounting Values • Professionalism vs. statutory control • Uniformity vs. flexibility • Conservatism vs. optimism • Secrecy vs. transparency • There is support for culture as an influential factor in the development of accounting.

  10. International Organizations Involved in Accounting Change • European Union (EU) • United Nations (UN) • Organization of Economic Cooperation and Development (OECD) • World Bank • International Monetary Fund (IMF) • UN Conference on Trade and Development (UNCTAD) - ISARs • World Trade Organization (WTO) • International Organization of Securities Commissions (IOSCO) • IASB and IFAC (discussed in Ch. 7)

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