Influences of Culture on Accounting Standards

Influences of Culture on chronicle StandardsThe concussion of finishing on the social institutions like explanation basisnot be underestimated. Before the increase in immigration and cross-border businesses, agri grow has been in the domain of anthropology and archaeology. This work considers whether polish assume unified global explanation practices and whether an checking of cultural role in account can help to understand supra field of study method of method of explanation standards. These fit(p) up will be made evidence development the Anglo-American and Euro-Continental account models (Canada and France) as case study. Although there argon other factors (historical, economic, and institutional, legal arranging, the tax laws etc) that can affect explanation harmonisation, goal is a major obstacle.SOME DEFINITIONS OF coatingThere is no commonly recognized definition of farming. regal (1983a) sees culture as a system that encompasses and determines the evo lution of social institutions and social phenomena. Perera (1989) regarded culture as an expression of norms, determine and customs that reflect typical behavioural characteristics within a defined social grouping. Kuper 1999, (cited in Baskerville, p.2) simply defines it as a matter of ideas and set, a collective cast of mind.Hofstede 1997 defined culture as the collective programming of the mind which distinguishes the members of one group or category of people from another.He sees cultural differences at four unlike levels symbols, heroes, rituals, and values.From the definitions, it shows that culture is sh atomic number 18d among individualists belonging to a group or society, formed all over a relatively long period and relatively stable.In explanation context Askary, Saeed (p.2) defined culture as those environmental factors that so applyly impact national business relationship systems a likely causal factor of different national story practices in accord with diffe ring national cultures.CULTURAL STUDIESIt is a near impossibility to discuss culture without mentioning Hofstede. He conducted the most panoptic study of how workplace values are influenced by culture from 1967 to 1973, art object working at IBM as a psychologist. He analyzed selective knowledge from over 100,000 individuals from 40 countries. In 1980 he identified four evident contrasting sets of dimensions of culture which has enjoyed considerable attention. They are (1) Power distance, showing throwaway of interpersonal power mingled with people, (2) Individualism versus collectivism showing prize of personal autonomy amid individuals and collectives, (3) uncertainty avoidance showing concern level of society members towards the future and (4) Masculinity-allocation of roles between sexes. In 2007, he added a fifth dimension that is not too relevant for our study which is long-term Orientation LTO which is associated with perseverance. His study was seen as a catalyst in internationalist story seek which later accounting researchers like ancient 1988, Perera 1989, Wuthnow 1994 follow into accounting context. According to Sudarwan and Fogarty (1996, p.2), his work has been cited in 583studies from 1981-1992 and this justifies its use in accounting research.Gray (1988) developed significant accounting hypotheses using cultural values as developed by Hofstede to establish relationship to accounting values. He addressed cultural influence on accounting of different countries from the evident societal values perspective. He identified the possibility of significantly relating accounting values, at the level of the accounting subculture, to societal values, by giving the interest accounting values for consideration(1) Professionalism meaning preference on individual professional judgment and self polity as opposed to normative legal requirements and statutory control. It linked Hofstedes high individualism, weak uncertainty avoidance, masculin ity, given the concept of assertiveness, and small power distance.(2) Uniformity He shows preference for coherent accounting practices between companies as against flexibility of unique circumstance of a company. It reflects societies with high uncertainty-avoidance and large power-distance indexes of Hofstede.(3) Conservatism here(predicate) there is preference for reprove to measurement, as it helps one to cope with future uncertainty. It contrasts with a more optimistic, try taking approach. This links high uncertainty-avoidance, individualism, and masculinity dimensions by Hofstede.(4) Secrecy Here information is shared amongst the close managers and financiers as against more open, transparent, publicly responsible approach. This is associated with societies that flip strong uncertainty-avoidance and power-distance dimensions.Chua 1988 (cited in Askary p.5) like Gray said that determine and beliefs play a fundamental role in the constitution of accounting knowledge.ther efore, culture and accounting are inextricably linked.Perera 1989 (cited by Askary p.6) sees dickens associated ways of analyzing the cultural influences on accounting practices determining a set of specific societal values/cultural factors likely to be promptly linked with accounting practice and verification of any association between societal values and specific accounting practices. To him accounting practices/systems of different countries are influenced by their cultural values that, in turn, shape their accounting practices. pertinency of Hofstedes framework has been questioned in accounting context. Critics see his cultural dimension in accounting research as causing misleading dependence on cultural indices. Gernon and Wallace 1995 (cited in Ding Y., Jeanjean T., Stolowy H.p.9) described his cultural studies in international accounting research as trapped by a look-alike myopia by its reliance on the framework suggested by Hofstede partly because his survey was of one organization therefore do not leave reliable information on the cultural values of an entire nation. Baskerville 2003(cited in Ding Y., Jeanjean T., Stolowy H.p.9) in like manner criticizes him for equating culture with nation. From the Encyclopedia of World Cultures OLeary Levinson, 1991 (cited in Baskerville 2002) identified that in the Middle East the Human Relations compass Files identify 35 different cultures in 14 nations.Grays indices are too criticized. Willett et al. 1997 (cited in Chanchani Willett, 2004)while criticizing Gray identifies culture as most clearly touching those parts of the accounting environment that are essentially social and overly stated that culture influences disclosure practices more than measurement practices.Despite these criticisms, the models shake up some uses. According to Ding et al. (2005), Hofstedes model, though strongly criticized, is quiesce wide used because of its extensive international coverage, and robust results have been g enerated. His result is still used to explain national diversities in accounting though the research sample was designed and selected to avoid diversity. Chanchani Willett (2004) noted that Grays guess continues to be referred to in on-going research, and a number of recent studies have related accounting popular opinion on various matters to cultural influences.Hofstede/Grays analysis have attempted to understand the differences in national accounting standards from cultural background view-point, and has been useful in establishing a link between accounting and cultures. Analyses here further reinforce the argument that culture plays a major role in organisation a countrys accounting standards.CULTURAL INFLUENCE AND ACCOUNTING HARMONIZATION pagan influence in accounting environments has been a subject in accounting research and has been examined by umpteen scholars (Violet (1983), Belkaoui (1990, 1996 1997), and Doupnik and Salter (1995) Harrison and Mckinnon (1986), Belkao ui and Culture and international accounting systems by Gray (1988), Perera (1989)and Fechner and Kilgore (1994) (all cited by Askary pp.2-3). They mostly established a native facie case that culture influences accounting practices.Accordingly, Perera 1989 (cited by Askary p.2) sees each accounting system as a product of its specific environment. Mueller, Gernon and Meek 1994 (cited by Askary p.2) also noted, Accounting is shape by the environment in which it operates. Even in reporting practice, Radebaugh and Gray (1997) through a comparative study cerebrate that each country reporting practice is influenced by culture contempt existence of standard.Jaggi 1975 (cited by Askary p.3) appreciated that the cultural environment was an independent shifting that could influence financial disclosure practices in response to value orientations. Violet 1983a (cited by Askary p.3) perceived accounting as a product . . . of its culture. bid and Abdel-Karim 1986 (cited by Askary p.3) reason ed that. . . accounting theory is part of the personality and accordingly part of the culture. If theindividuals are Muslims, their personalities are Islamic and their culture is Islamic.Therefore, their accounting theory is Islamic.From the foregoing, one can conveniently say that accounting theory and practices is a product of individuals who are influenced by their beliefs.Some cultural factors that influence accounting include language, religion, morals, values, attitudes, law, education, politics, social organization and technology. The question now is how do culture influence accounting? One cannot underestimate the power of culture. Beliefs most clock guide what you do and accounting is not an exception. Moral judgment, value system, attitude towards anything, legal system, Religion or even educational background are powerful forces underlying behaviours. It is therefore not questionable that the above factors shapes accounting value, therefore impacts the accounting envi ronment internationally. A good example is Islamic culture that does not encourage borrowing as against western culture that is anchored on borrowing.This cultural influence has proved to have made accounting harmonization difficult. A major harmonization attempt is the setting up of the International Accounting Standards Board (IASB), under the oversight of the International Accounting Standards Committee (IASC) through an agreement made by professional accountancy bodies from developed countries. Its objective is to develop a set of global accounting standards that require high quality, transparency, and comparability of financial statements of different countries (iasplus 2007). But its efforts have been frustrated by constraints like culture, education, taxation, political climate, and economic development of many countries.Comparison of Canada and France accounting modelsHofstedes cultural dimensions as applied in accounting by Gray (1988) will be used to classify Canada and Fr ance. Canada and France expend different accounting systems and operate within socio-economic environments which have many distinguishing features that may influence accounting.Canada has Anglo-American accounting and auditing tradition therefore flexibility and professionalism prevails. Her system and values safeguards shareholder interests. In contrast, French accounting system as in most Continental European countries relies upon the course of study Comptable and codified rules that satisfy stakeholders information needs and it is characterized by values of equivalentity and statutory control (Gray, 1988).Canada and France recognised International Accounting Standards (IAS, called International Financial Reporting Standards, IFRS) since 2001 but Gray and Street 2001(cited by Othman H. B and Zeghal. D 2006) still find differences between them in terms of IAS/IFRS implementation. Leuz, and Wysocki 2000 (cited by Othman H. B and Zeghal D. 2006) argue that it is because IASC stan dards possess no enforcement rules and rely on local auditors and country-specific legal remedies to enforce standards.Applying Grays four accounting values as discussed above, Canada is viewed to have higher professionalism, flexibility, optimism and transparency which have shaped the finance mode and shareholder corporate-governance model. There is also lack of fundamental interaction between financial reporting because of its high individualism, low uncertainty-avoidance and power-distance index. France has higher statutory control, uniformity, conservatism, and high uncertainty avoidance which in contrast show strong government influence in accounting regulation. France has a stakeholder corporate-governance model, which is dominated by banks, government, or families.Canada has a common-law accounting system which includes the accounting standards used to prepare financial information. The provincial and federal law left the regulation of accounting standards to the Canadian Ins titute of Chartered Accountants (CICA). There is no uniform plan of accounts rather standards evolve by becoming commonly accepted in practice, but with a considerable degree of uniformity which the CICA regulates. Accordingly, accounting and tax rules are kept separate. Financial reports are drawn up according to accounting standards.In France, Plan comptable general which Governmental oblige on accounting have strongly influenced accounting practices (Perera, 1989). This Accounting Plan is typically prescriptive, detailed, and procedural. Financial accounting is very much a public-sector activity, administered by governmental (or quasi-governmental) bodies.CONCLUSIONThis essay has looked at how culture influences the accounting standards and sees that culture indeed shapes the accounting standards of any particular country. Many countries place immense emphasis on their own accounting standards, because of the societal values and norms on which these standards have been designed . The definition of culture and how it affects national/international accounting standards were provided, citing the analyses of Hofstede and Gray. Our analyses using Canada and France as sample countries establish the much ignored link between culture and accounting. The essay also looked at international accounting harmonization efforts of the IASB, and how culture has affected its goals. Although there are other factors affecting national accounting standards, culture indeed plays a pivotal role in determining national accounting standards. With the analyses, it is hoped that culture and accounting will be considered side-by-side when decisions are being made globally.