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Accounting 6570

Worldwide Accounting Diversity

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Accounting Diversity

• Differences exist everywhere! –  Language

 –  urrency –  er"inology

 –  #e$orts re%uired

 –  #e$ort for"ats

 –  &easure"ent $ractices –  Disclosure $ractices

 –  A$$lication of accounting rules

 –  Level of detail

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&agnitude of Accounting Diversity

• 'ray(s onservatis" )ndex

• * + ,#A+#D-.#A./

• #A ad1usted earnings

• #D original earnings

• )ndex 2 *3004 riginal earnings are less

conservative than ad1usted earnings• )ndex *3004 riginal earnings are "ore

conservative than ad1usted earnings

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&agnitude of Diversity

• 'ray(s onservatis" )ndex –  383 least conservative

 –  9a$an "ost conservative –  ontinental :uro$ean countries "ore conservative than

3;3

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#easons for Accounting

Diversity• Accounting reflects characteristics of its

national environ"ent

• :nviron"ental varia

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:nviron"ental )nfluences

• Legal syste" –  ivil versus co""on law

• #ules

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:nviron"ental )nfluences

• >roviders of =inancing –  BanCs and fa"ily "e"

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:nviron"ental )nfluences

• >olitical and :cono"ic ies – >olitical syste"s

• entral $lanning versus $rivate enter$rise – Accounting regulation

• :nforce"ent of standards

 – )nternational factors• rade )nfluences

• olonial influences

• #egional trade

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:nviron"ental )nfluences

• ;ocial cli"ate –  Attitudes toward worC "anage"ent e"$loyee

involve"ent wealth –  Ealue syste"s and attitudes

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>ro

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lassification of Accounting

;yste"s• Deductive a$$roach

 – )dentifies relevant environ"ental factors and

linCs the" to national $ractices

 – Descri

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lassification

)nductive A$$roach• Descri

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ultural )nfluences

@ofstede(s ;tudy• ;tudy conducted in *GI0s

• LooCed at the structural ele"ents of culture

that affect

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ultural )nfluences

@ofstede(s ;tudy• Basic Ealue ;yste"s

 – )ndividualis" vs3 ollectivis"

 – >ower Distance ,Large vs3 ;"all/

 – ncertainty Avoidance ,;trong vs3 weaC/

 – &asculinity vs3 =e"ininity

 – ;hort+ter" vs3 Long+ter" orientation

• htt$?--www3geert+hofstede3co"

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ultural )nfluences

'ray(s Accounting Ealues• >rofessionalis" vs3 statutory control

• nifor"ity vs3 flexi

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Divisions of )nternational

lassifications• &ore+develo$ed Latin + =rance )taly Brail ;$ain

• Less+develo$ed Latin – &exico hile Eeneuela

• &ore+develo$ed Asian + 9a$an

• Less+develo$ed Asian – )ndonesia >aCistan )ndia

•  Fear :astern – Ara< countries 'reece urCey )ran

• African – :ast Africa West Africa

• Asian olonial – @ong 8ong ;inga$ore

• 'er"anic – 'er"any Austria )srael and ;witerland

• Anglo+A"erican + 3;3 383 anada Australia

•  Fordic – Fetherlands Den"arC =inland ;weden