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International Accounting
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1. Chapter 2 International Accounting Patterns, Culture and Development
2. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black 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
3. 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
4. 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
5. 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
6. 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
7. 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
8. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Nobes’s Hierarchial Classification
9. 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
10. 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
11. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Cultural Influences on Accounting Systems Culture, Societal Values, and the Accounting Subculture – Fig. 2.3
12. 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
13. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Hofstede’s Societal Dimensions Individualism versus Collectivism
People’s self-concept: “I” or “we”
Large versus Small Power Distance
How a society handles inequalities among people
Strong versus Weak Uncertainty Avoidance
Control the future or just let it happen
Masculinity versus Femininity
The way a society allocates social roles to gender
Confucian Dynamism
Short-term or long-term orientation
14. 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
15. 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
16. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Uniformity versus Flexibility Uniform accounting plan and imposition of tax rules for measurement purposes
France and Spain
Facilitate national planning
Pursue macroeconomic goals
Intertemporal consistency and some degree of intercompany comparability b/c of flexibility
U.S. and U.K.
Link to societal value dimensions – Uniformity
Strong uncertainty avoidance
Collectivism
Large power distance
17. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Figure 2.4 Culture and Accounting Systems in Practice
18. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Authority and Enforcement
19. 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
20. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Secrecy versus Transparency Stems from management and accountants
Closely related to conservatism
Secrecy relates to disclosure
Conservatism relates to measurement
Secrecy
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
21. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Accounting Values and Societal Values
22. 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
Professionalism and Uniformity
Both concerned with regulation and degree of enforcement or conformity
Accounting values most relevant to measurement and disclosure
Conservatism and secrecy
Country groupings
Optimistic and transparent
Conservative and secretive
23. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Accounting Values and International Classification
24. 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
25. International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black Economic Groupings and International Organizations European Union
Promotes economic integration/harmonization
UN
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
26. 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
27. 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