SOTE TWAWEZA 2012

CONTEMPORARY ISSUES IN ACCOUNTING

THE DEVELOPMENT AND EVOLUTION OF NATIONAL ACCOUNTING REGIEMES

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Overview


We will consider the reasons why accounting regimes vary from country to country throughout the world and the factors that impact upon their ongoing development and evolution. The impact on the development of national accounting systems of the increasingly important role played by the IASB in defining global accounting norms

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Classification


Identification of similarities and differences Quantification of similarities and differences Grouping together of countries with more similarities than differences Ordering accounting systems

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Why are Accounting Systems Different?

     

The Political and Economic System The Legal System The Taxation System The Corporate Financing System The Accountancy Profession Other Influences
 

Accidents of History Export/Import of Accounting

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

The Influences on an Accounting System Grays Model 1988

ternal Influences

Societal ulture

Accounting Su culture

Accounting System olitical egal Ta ation or orate inancing Accountancy rofession

Accounting egulations

omestic/ cological Influences

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Cultural Influences on Accounting



Cultural Dimensions Identified by Hofstede (1984)

   

Individualism v. Collectivism Large power distance v. Small power distance Strong uncertainty avoidance v. Weak uncertainty avoidance Low nurture v. High nurture

  

Culture and leadership style Culture and motivation Culture and organisational structures

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Organisational Types as Identified by Hofstede (1984)

A Power Distance Uncertainty avoidance Organisation Type Implicit model of organisation Countries
Low

B
High

C
Low

D
High

Weak

Weak

Strong

Strong

Implicitly structured Market

Personnel bureaucracy Family

Workflow bureaucracy Well oiled machine Germany Finland Israel

Full bureaucracy Pyramid

Anglo/US Nordic Holland

South East Asia

Latin Med. Islamic Japan

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Accounting Subculture (1)



Accounting is set up and run by and for various groups of people

    

Accountants Managers Auditors Owners Accounting Regulators

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Accounting Subculture (2)



Each of these groups may be thought of as as a distinct subcultural group with

  

Shared values Common education Links to other countries

The unique factors influencing accountants will not normally be strong enough to completely override or obliterate society wide cultural differences.

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Accounting Values Identified by Gray (1988)

   

Professionalism v. Control Uniformity v. Flexibility Conservatism v. Optimism Secrecy v. Transparency

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Is Culture an Important Influence on Accounting?



  

Culture in the sense of how people think and feel and their values - affects behaviour Accounting Regulations are an outcome of human behaviour Therefore culture affects accounting But not easy to prove this relationship Empirical studies have not found a perfect match between culture and accounting Some empirical support for a relationship

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Differences between Accounting Systems



Differences in the rules of different countries Differences in the way in which the rules are interpreted or implemented Differences in preferred practices including voluntary disclosure practices

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Differences in Information Disclosure

  

Number of disclosures Environmental and Social disclosures Other types of disclosure

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Internationalization
  

Bigger Companies Less Companies Companies

 

Large Investment Requirement Need Large Markets Large Portfolio Want to Maximize Returns

Investors
 

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Harmonisation


Harmonisation is a process by which accounting moves away from total diversity of practice. Practice clusters around one of the available methods accounting. Standardization is a process by which participants agree to follow the same or very similar accounting practices D state of uniformity.

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

What Drives the Process?

    

Institutions Market (Users) Preparers Profession Culture

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

IASC Foundation 1973



To formulate and publish in the public interest accounting standards to be observed in the presentation of financial statements and to promote their world wide acceptance and observance; and To work generally for the improvement and harmonisation of regulations, accounting standards and procedures relating to the presentation of financial statements.

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

The Development of IAS



1973-1979


Issue of general standards Development of more detailed standards Reduction of flexibility IOSCO core standards project Convergence and global implementation

1980-1989


1990-1995


1995-1999


From 2000


SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

IASC Foundation 2000



To develop in the public interest, a single set of high quality, understandable and enforceable global standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the worlds capital markets and other users to make economic decisions; To promote the use and rigorous application of those standards; and To bring about the convergence of national accounting standards and International Accounting Standards to high-quality solutions

SOTE TWAWEZA 2012

SOTE TWAWEZA 2012

Flower The future shape of harmonization



A major problem is identified as being that the IASC is dominated by the AngloAmerican approach to financial reporting which is fundamentally different from the Continental European approach followed in the EUs directives.

SOTE TWAWEZA 2012