International Accounting and Multinational Enterprises 5e By Lee
International Accounting and Multinational Enterprises 5/e By Lee H. Radebaugh and Sidney J. Gray 12/4/2020 Power. Point Presentation by Kent W. Meyer, Ph. D
Copyright © 2002 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her use only and not for distribution or resale. The publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.
Comparative International Financial Accounting Chapter Three
Introduction A growing awareness that global environmental factors affect accounting development. Also recognition that systematically different patterns of accounting behavior may apply to groups of countries. Identification and classification of these different systems can help describe, analyze, and predict accounting system development. 1
Classification of Accounting and Reporting Systems 1. Deductive Approach (Gerhard Mueller): Macroeconomic pattern Accounting development follows national economic policies (I. e. Sweden, France, Germany). 2. Microeconomic Pattern: Accounting is viewed as a part of business economics with accounting principles derived from economic analysis (I. e Netherlands). 3. Independent Discipline: Accounting viewed as a service function derived from business practice (I. e. United States, United Kingdom). 4. Uniform Accounting Pattern: Accounting viewed as efficient means of administration and control. Common in centrally-controlled economies: (I. e. Germany, France, Sweden). 2
Nobes Adapted and extended Mueller’s concepts, u Used a hierarchical classification scheme and evolutionary approach to identification of measurement practices in western nations, u Basic distinction between macro and micro economic systems: -Further disaggregations were developed under each system to provide u increased discrimination, u Recent updating to reflect strong and weak equity markets and shareholder orientations. 3
Inductive Approach u u u Identification of accounting patterns begins with analysis of individual accounting practices. Using this Approach, Nair and Frank identified five measurement groupings using Price-Waterhouse (PW) data: 1. British Commonwealth 2. Latin American 3. Continental European 4. United States 5. Chile Their results suffered from lack of reliability and relevance of PW’s data. 4
Cultural Influences on Accounting Development u u u The role of culture in accounting systems has been largely ignored in the past but this is changing. Culture is an essential element for understanding social systems. Gray proposed incorporating cultural factors in a framework to explain and predict international differences in accounting systems and identify international development patterns of accounting systems. 5
Culture, Societal Values, and Accounting u u u Flexibility versus uniformity are most relevant to professional versus statutory authority, Combining these relationships allows for relevant culture areas to be hypothesized, Accounting values most relevant to measurement practices and the extent of information disclosure are the conservatism and secrecy dimensions, These factors can be combined and culture areas hypothesized, Classification of countries by culture area can provide a means for further assessing the relationship between culture and accounting systems. 6
Comparative Accounting Systems: Anglo-American Accounting United States u u u Accounting based on U. K. traditions, Securities markets a dominant influence, SEC recognizes the authority of FASB, FASB uses an open approach to standard setting, and U. S. accounting system is probably most comprehensive in the world. 7
Comparative Accounting Systems: Anglo-American Accounting (Cont. ) United Kingdom u u u Importance of company law, Profession is self-regulated through accounting standards board (ASB) guided by Financial Reporting Control (FRC), and Primacy given to information needs investors. 8
Comparative Accounting Systems: Nordic Accounting The Netherlands u u Company law and accounting profession are major influences, Government role is minimal, Overriding criterion are “generally acceptable accounting principles, ” and Novel Feature -- Interested parties may complain to the Court of Justice if financial statements do not comply with the law. 9
Comparative Accounting Systems: Nordic Accounting (Cont. ) Sweden u u Accounting strongly influenced by legal and tax requirements, the profession (FAR), and stock exchanges, Government has a strong role (BFN) to accomplish macroeconomic planning and to make policy, Accounting Council is new standard setting body, and Traditionally, information preference was given to creditors and the government -- Now a shift to investors. 10
Comparative Accounting Systems: Germanic Accounting u u Differs significantly from Anglo-American and Nordic, and Company and/ or tax laws govern accounting practice. Germany u u u Company law and tax laws predominate, Accounting practice must follow tax laws, Accounting profession is small and lacks influence, Stock market is small but growing in influence, and Information needs of creditors and tax authorities take precedence. 11
Comparative Accounting Systems: Germanic Accounting (Cont. ) Switzerland u u u Swiss accounting is among the most conservative and secretive in the world, Accounting practice is dominated by company law and tax regulations, Accounting profession is small, Legal requirements relating to accounting are minimal and secret reserves are allowed, Accounting rules are conservative and focus on the needs of creditors, and New laws are changing accounting information orientation and presentation to benefit shareholders. 12
Comparative Accounting Systems: Latin Accounting France u u u Company law predominates, A standardized code of accounting provides uniformity of practice, Tax law is also a major influence and override accounting rules, Accounting profession is small and lacks status, The stock market is small, and Information preference to tax authorities and creditors. 13
Comparative Accounting Systems: Latin Accounting Brazil u u u Government, Company Law, and Tax Regulations predominate, Information needs of creditors and tax authorities predominate -changing to include shareholders, and Accounting profession not well developed. 14
Comparative Accounting Systems: Asian Accounting u u Asian countries quite distinct from all other groupings, Many have strong colonial histories. 15
Comparative Accounting Systems: Asian Accounting China: u u u Accounting rules are strongly influenced by the government and Communist Party; The accounting law of the People’s Republic established general principals concerning nature and rule of accounting (1985, revised 1993); The People’s Republic State Council issued Financial Accounting and Reporting Rules (FARR): u u Represent new era in Chinese accounting, Based on market approach, Fund accounting has been abolished, and Users of information beyond government are now recognized; u Government has led reforms along with accounting organizations. 16
Comparative Accounting Systems: Asian Accounting (Cont. ) Japan: u u u Government is the major accounting influence; Commercial code, securities and exchange law, and corporation tax law are also influential; Government institutions are directly involved in standard setting: u Ministries of Finance and Justice have joint jurisdiction, u Dual jurisdiction results in lack of unified approach; Accounting profession is small and lacks influence; “Secretive” approach is common; (Continued next slide) 17
Comparative Accounting Systems: Asian Accounting (Cont. ) Japan (Cont. ): u u Many companies provide courtesy financial statement translations; Creditors and tax authorities have information preference; Immediate write-off is widely accepted; and Capitalization and amortization is allowed to varying degrees. 18
- Slides: 21