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. Classification Deductive 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. Classification Deductive 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. Classification Inductive 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 Influences Hofstede’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 Influences Hofstede’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 Influences Gray’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)