International Accounting Patterns: Culture and Development

1. Chapter 2 International Accounting Patterns, Culture and Development DOSEN PENGAMPU: Dra. SITI NURLAELA,SE,MSi.,Ak. CA

2. 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 Classification of Accounting and Reporting Systems International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

3. 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

4. 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

5. 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 Classification Research International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

6. 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

7. 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

8. Nobes’s Hierarchial Classification International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

9. 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

10. 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

11. Cultural Influences on Accounting Systems Culture, Societal Values, and the Accounting Subculture – Fig. 2.3 International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

12. 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

13. 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 International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

14. 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

15. 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

16. 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 International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

17. Figure 2.4 Culture and Accounting Systems in Practice International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

18. Authority and Enforcement International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

19. 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

20. 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 International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

21. Accounting Values and Societal Values International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

22. 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 International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

23. Accounting Values and International Classification International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

24. 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

25. 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 International Accounting & Multinational Enterprises - Chapter 2 - Radebaugh, Gray, Black

26. 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

27. 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