Accounting theory & Accountability essay on stock exchange
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Powerpointslides-InternationalAccountingPart11.pptxAccounting Theory
International Accounting, Part 1
The 5 key Learning Objectives in this lecture about International Accounting
Nature of International Accounting
Diversity of International Accounting Practice
IFRS
Cultural Impact in accounting practice
MNC
DEFINITION OF INTERNATIONAL ACCOUNTING
International accounting refers to a description or comparison of accounting in different countries and the accounting dimensions of international transactions.
DEFINITION OF INTERNATIONAL ACCOUNTING
Can be defined at three levels:
Supranational, universal or world accounting
The company level standards, guidelines and practices that companies follow relating to their international business activities and accounting for foreign subsidiaries; and
Comparative or international accounting.
DIVERSITY OF INTERNATIONAL ACCOUNTING PRACTICE
Variation in accounting requirements can result in significant differences being recorded in company accounts when they are required to report under the rules of different jurisdictions.
While there have been some moves to harmonise accounting practices globally, there are still a number of environmental and cultural factors which are likely to lead to diversity in accounting practices around the world.
ENVIRONMENTAL INFLUENCES ON ACCOUNTING
ENVIRONMENTAL INFLUENCES ON ACCOUNTING
In some countries financial reports are used to directly determine an entity’s tax liabilities.
This leads to variations in accounting policy choice even when the same standards are used.
Sources of finance differ across countries.
Major sources of finance may be banks, government, families and shareholders.
This leads to a difference in financial statement orientation
ENVIRONMENTAL INFLUENCES ON ACCOUNTING
Different countries will have different
Political philosophies and objectives
Levels of economic growth and development (E.g China move from agriculture to manufacturing)
Economic systems (state ownership the state influences the nature of accounting requirements – e.g China.
Legal systems
Codified or civil law (e.g Europe – France and Germany)
Common law (e.g U.K, USA, Australia, New Zealand).
All of which will influence accounting practice.
Cultural Impact on Accounting Practice
Gray adapted Hofstede’s categories to identify four accounting values
Professionalism (UK, USA, Aust) versus statutory control (developing countries (China, Malaysia), Continental Europe (Belgium, France)
Uniformity versus flexibility (tax systems – France uniformity versus USA flexible system)
Conservatism versus optimism (Europe more conservative than USA or UK)
Secrecy versus transparency (lower levels of disclosure in Japan and Europe compared to Australia and U.K).
Religion and How it Affects Accounting Practice
Religion is often seen as a subset of culture.
It can have a significant effect on business practice
For example in Islam
Islamic law regulates all aspects of life.
In addition certain Islamic economic and financial principles have a direct impact on accounting practices. Particularly
Requirement for zakat (a religious levy)
Prohibition on riba (usury)
The End
