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1
Pertemuan 4
International Accounting Patterns, Culture and
Development
2
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
3
Deductive approach
Mueller’s four approaches to accounting development Macroeconomic pattern
Business accounting is tied to national economic policies – Examples: Sweden, France, Germany
Goals of Corporation follow rather than lead national economic policies (e.g., might smooth earnings to promote economic stability)
Microeconomic pattern Accounting is a branch of business economics – Example:
replacement-value accounting in Holland Maintenance in real terms of monetary capital invested in
entities.
4
Mueller’s four approaches (continued) Independent discipline pattern
Accounting is a service function derived from business practice – Examples: U.S. and U.K.
Accounting is considered to be capable of developing its own conceptual framework from business practice – self regulating like other professions
Uniform accounting pattern Accounting is an efficient means of administration and
control – Ex: France, Germany, Sweden, SwitzerlandIn addition, other influences such as the legal system, political system, and social climate impact (Eg. Sarbanes Oxley) – witch hunt for poor practices.
Deductive approach
5
Cultural Influences on Accounting Systems
Importance of Culture/Historical roots on accounting systems is increasingly being recognized
Culture is considered an essential element in the understanding norms / values
Culture/Societal values at nat’l level permiate organizational/occupational subcultures
Accounting systems and practices can influence/reinforce values
6
Structural Elements of Culture
Hofstede – 4 Underlying societal dimensions Individualism Power Distance Uncertainty Avoidance Masculinity
Hofstede and Bond – 5th dimension Short v. Longterm Orientation: Confucion
Dynamism
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Hofstede’s Societal Dimensions Individualism versus Collectivism
People’s self-concept: “I” or “we” : U.S. v Europe? Large versus Small Power Distance
How a society handles power inequalities among people / organizations – distributed unequally. Large power distance: accept hierarchical structure Small power distance: strive for me equality
Masculinity – preference for achievement, heroism, assertiveness, material success
Feminism: preference for relationships, modesty, caring Allocation of social roles (not biological) to the sexes
8
Hofstede’s Societal Dimensions - Continued
Strong v. Weak Uncertainty Avoidance Degree to which society is OK with ambiguity Strong: demand uniformity, intolerant of deviation Weak: more relaxed, practice > principle, deviance from
norm OK
Short v. Long-term Orientation: Confucion Dynamism ST: respect for tradition, social obligations regardless of
cost / quick results LT: adaptation of traditions to meet modern needs / thrifty
sparing approach to resources
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Accounting Values v. Societal Values – Gray
Professionalism versus statutory control preference for individual professional judgment / self
regulation
Uniformity versus flexibility Preference for enforcement of uniform practices
Conservatism versus optimism Preference for cautious approach / less risky approach to
measurement.
Secrecy versus transparency Preference for confidentiality v. transparency
10
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
11
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
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Authority and Enforcement
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Conservatism versus Optimism Conservatism seen as a fundamental value
Strongly conservative Japan, France, Germany, Switzerland
Less conservative U.S., U.K., the Netherlands – though changing post Sarbanes Oxley -
Link to societal value dimensions – Conservatism Strong uncertainty avoidance Long-term orientation Collectivism Femininity
14
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
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Accounting Values and Societal Values
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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
17
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
18
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
19
Impact of MNEs and Globalization
Cultural and social Employment and consumption patterns
Significantly influenced Pressure for more accountability Environmental impact
20
Impact of MNEs and Globalization
OECD (Organization for Economic Cooperation and Development), EU (European Union), IOSCO (International Organization of Securities Commissions) work for harmonization and internationalization of securities markets
IASB and the International Federation of Accountants (IFAC) Professional organizations involved in
harmonization
21
Anglo-American Accounting Less conservative and more transparent
Pre-Sarbanes Oxley – what about post? United States
Focused on large corporations and interests of investors Securities markets are the dominant influence on
accounting regulation SEC has authority to formulate and enforce accounting
standards Delegated to the FASB
Only listed corporations are required by law to comply with GAAP
Very public standards-setting process – solicit input before rules go into place
22
Anglo-American Accounting
United Kingdom Focus on information needs of investors Securities markets dominate the process of acctg.
Regulation. Commercial/Company law has a much wider remit Accounting requirements are for all LLCs and corporations
Why LLCs too? Accounts present a “true and fair view” of company results Accounting Standards Board (ASB) recently incorporated
International Financial Reporting Standards (IFRS)
23
Anglo-American Accounting
Australia English influence Focus on investors rather than tax needs Australian Securities & Investments Commission
Regulate and enforce company law Australian Accounting Standards Board – creates
standards Urgent Issues Group (UIG) Financial Reporting Council oversees AASB Provides guidance for public and private sector
24
The Netherlands Though Nordic, more similar in approach to U.S. and U.K. Business economics approach to accounting – focus on investors and
other uses access and disclosure - voluntarily Tradition of
Public ownership of shares International business outlook
“Generally Acceptable Accounting Principles” – mandating true and fair concept in financial reporting. Provided by Council for Annual Reporting
Members from the accounting profession (NIVRA) and others Not mandated by law, but followed by most companies
Influence of Commercial law supplemented by case law is increasingly present in setting accounting standards.
IFRS required for listed companies in 2005
25
Nordic Accounting Nordic Countries: Denmark, Finland, Iceland, Norway, and
Sweden Sweden
Focus on creditors, government, and tax authorities Also heavily involves accounting profession in standard setting. Capital Markets important to accounting and disclosure req’ts Two-tier approach
Individual accounts – traditional basis Consolidated accounts of major groups – international capital
market needs The law provides a framework rather than detailed requirements
Accounting Standards Board and Accounting Council provide guidance in the context of company law
IFRS required for listed companies in 2005
26
Germanic Accounting Germany / Austria
Focus on needs of creditors and tax authorities MNEs are becoming more investor-oriented Commercial law is predominant influence
Accounting rules amend the Commercial Code Annual accounts are the basis for tax accounts
Tax rules dominate legal accounting issues Limited impact of accounting profession
German Accounting Standards Board Fair and true standard = transparent and reliable for in
German viewpoint. IFRS required for listed companies in 2005
27
Germanic Accounting Switzerland -
Favors needs of creditors and authorities More companies are making further voluntary disclosures – as
Swiss Securities Markets grow./ Swiss companies face competition
Very secretive and conservative system Dominated by commercial law and tax regulations
New law – 1992 Improved disclosure and protection for investors
Secret reserves are still allowed Accounting profession consists of – still relatively small
Foundation for Accounting and Reporting Recommendations – supervises the Accounting Standards Board
Recommendations elaborate and supplement company law
28
Latin Accounting France
Focus on needs of creditors and tax authorities Consolidated groups can report in U.S. GAAP or IAS Commercial law/tax law are the predominant influences
Focus on national economic planning Tax laws tend to override accounting rules
Small accounting profession established by law OECCA (Ordre des Experts Comptables et des Comptables Agrees)
and CNCC (Compagnie Nationale des Commissaires aux Comptes) for public accounting and auditing
Small stock market Most capital contributed by banks, government, or family French equivalent of the SEC – Commission des Opérations de
Bourse (COB) IFRS required for listed companies in 2005
29
Latin Accounting Italy
Focus on interests of government and tax authorities Focus is shifting because of globalization
Accounts are used as the basis for taxation Tradition of conservatism to minimize taxes
Italian equivalent of the SEC – CONSOB (Commissione Nazionale per le Societa e la Borsa)
Slow to adopt EU directives because External investor interests are seen as less important than
family and state interests Tendency to protect the right of companies to keep
business secrets Professional accounting bodies are advisory IFRS required for listed companies in 2005
30
Asian Accounting Many countries have a colonial accounting history or
foreign influence Japan
Focus on needs of creditors and tax authorities Commercial Code (similar to Germany) Corporate tax law is very influential
Leads to conservative accounting Government institutions are directly involved in standard-
setting Ministry of Finance – responsible for securities and
exchange law Ministry of Justice – responsible for application of
Commercial Code
31
Asian Accounting Japan continued
Accounting for business combinations is a source of concern Keiretsu – system of interlocking directorates of related
businesses formed to work together Small accounting profession
Makes recommendations on the practical application of legal accounting rules
Tendency for secrecy and a lack of disclosure Increased international focus
ASBJ in Japan is similar to the FASB in the U.S. Approximately 30 Japanese companies listed in the U.S.
prepare financial statements in accordance with U.S. GAAP.