contemporary issues in accounting
TRANSCRIPT
CONTEMPORARY ISSUES IN ACCOUNTING
THE DEVELOPMENT AND EVOLUTION OF NATIONAL ACCOUNTING REGIEMES
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
Journal Articles (1) Gray S.J - Towards a theory of Cultural
Influences on Development of Accounting Systems Internationally
Flower J. - The future shape of harmonization: the EU versus the SEC verses the SEC
Howieson B - Accounting practice in the millennium: is accounting education ready to meet the challenge?
Journal Articles (2) Whittington G - The Adoption of International
Accounting Standards in the European Union Brown P. & Tarca A - A Commentary on
Issues Relating to Enforcement of International Financial Reporting Standards in the EU
Classification Identification of similarities and
differences Quantification of similarities and
differences Grouping together of countries with
more similarities than differences Ordering accounting systems
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
The Influences on an Accounting SystemGray’s Model 1988
ExternalInfluences
Domestic/EcologicalInfluences
PoliticalLegal
TaxationCorporate Financing
Accountancy Profession
SocietalCulture
AccountingSubculture
AccountingRegulations
AccountingSystem
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
Organisational Types as Identified by Hofstede (1984)
A B C D
Power Distance Low High Low High
Uncertainty avoidance Weak Weak Strong Strong
Organisation Type Implicitly structured
Personnel bureaucracy
Workflow bureaucracy
Full bureaucracy
Implicit model of organisation
Market Family Well oiled machine
Pyramid
Countries Anglo/US
Nordic
Holland
South East Asia
Germany
Finland
Israel
Latin Med.
Islamic
Japan
Accounting Subculture (1) Accounting is set up and run by and for
various groups of people Accountants Managers Auditors Owners Accounting Regulators
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.
Accounting Values Identifiedby Gray (1988)
Professionalism v. Control Uniformity v. Flexibility Conservatism v. Optimism Secrecy v. Transparency
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
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
Differences in Information Disclosure Number of disclosures Environmental and Social disclosures Other types of disclosure
Internationalization Bigger Companies Less Companies Companies
Large Investment Requirement Need Large Markets
Investors Large Portfolio Want to Maximize Returns
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 state of uniformity.
What Drives the Process? Institutions Market (Users) Preparers Profession Culture
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.
The Development of IAS 1973-1979
Issue of general standards 1980-1989
Development of more detailed standards 1990-1995
Reduction of flexibility 1995-1999
IOSCO core standards project From 2000
Convergence and global implementation
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 world’s 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
The Vision of International GAAP The vision is based on an approach to
company financial reporting that has been developed over the past several years by a group of Anglo Saxon accounting standard setters
It is based on a balance sheet oriented, fair value model
This approach is not necessarily particularly widely known or understood
The Development of International GAAP “Generally Accepted” will refer to accounting
practices that are regarded as permissible by the accounting profession and regulators internationally
A broad consensus will come to exist between users, preparers, auditors, regulators and the markets, across what is currently regarded as national boundaries
Will mirror the way UK GAAP developed
FlowerThe future shape of harmonization
The paper analyses the implications of the EUs proposal to permit large multinational corporations (global players) to present their consolidated accounts in accordance with the IASs of the IASC.
FlowerThe future shape of harmonization
A major problem is identified as being that the IASC is dominated by the Anglo–American approach to financial reporting which is fundamentally different from the Continental European approach followed in the EUs directives.
Brown & Tarca – A Commentary on Issues Relating to Enforcement of International Financial Reporting Standards in the EU
Goals not likely to be achieved without regulatory oversight that promotes rigorous and consistent use of IFRS.
Review ongoing activities in France, Germany, the Netherlands and the UK in setting up and modifying enforcement bodies before 2005.
Brown & Tarca – A Commentary on Issues Relating to Enforcement of International Financial Reporting Standards in the EU
Principles for effective enforcement proposed in CESR Standard No. 1 on Financial Information.
Presents the views of the IASB, FEE and EFRAG about the challenges of achieving effective uniform enforcement.
Whittington – The Adoption of International Accounting Standards in the European Union
The IASB’s process of developing accounting standards for adoption by listed companies within the European Union.
The structure of the IASB, its role as a global standard setter and its programme.
Particular attention is given to two topics: accounting for financial instruments; and reporting financial performance.
Howieson - Accounting practice in the millennium: is accounting education ready to meet the challenge?”
Trends suggest that so-called ‘compliance’ work will form a diminished portion of accounting firms’ revenues as technology means that even small businesses become more empowered with respect to their recordkeeping needs.
Accounting educators need to anticipate the expected shift in accountants’ skills and develop courses and teaching methods that are far more interdisciplinary and analytical in their orientation