Answer 4.1: Chapter 4 has provided a number of factors which have been suggested to explain why different countries use different systems of accounting. These include: oThe extent of economic development within a country. It is argued that as countries become more ‘wealthy’ they tend to develop their own accounting standards (which can be costly). Less developed countries often adopt accounting standards issued by the IASC (which may, or may not actually be relevant to the information needs of the local people). oIt has been argued that the nature of the domestic business ownership and financing systems can influence the accounting methods being used within a country. For example, in countries which have companies that rely relatively more on equity capital (funds from many ‘outsiders’) there will be a tendency to provide greater disclosures than in countries with companies that rely relatively more on debt capital. oIt has been argued that the colonial inheritance or history of a company will impact the accounting methods employed. oInvasion is another factor that can affect accounting practices. A country invaded by another may have a particular method of accounting imposed upon it. oA commonly mentioned reason for international differences in accounting is tied to the broad notion of ‘cultural difference’. Culture itself could be expected to influence other things (some already discussed above), such as legal systems, tax systems, and how businesses are formed and financed, which will in turn influence the types of information demanded. oSources of aid or finance might also influence the accounting methods used. For example, an international funding organisation (such as the World Bank) might require that particular accounting rules be used as a condition of providing funds to a country. oReligion, which is obviously linked to culture, has also been found to provide explanations for differences in accounting methods. Because religion can extend across national boundaries, religion has been used to explain why some different countries show similarities in accounting methods.
Answer 4.2: Firstly, society values are deemed to represent a system of values collectively held by all members of a particular society, values which in turn affect an individual’s behaviour. Accounting values can be considered to be the values of a particular ‘subculture’ of that society. Different subcultures within a particular society are expected to have some common characteristics. According to Gray (1988), it is necessary to identify the mechanism by which values at the societal level are linked to values at the sub cultural level, as it is these latter values which are likely to influence directly the development of accounting systems in practice. For example, Gray considered the four cultural value dimensions developed by Hofstede (Hofstede’s cultural values included the dimensions of individualism versus collectivism; large versus small power distance; strong versus weak uncertainty avoidance; masculinity versus femininity) and then related them to values that he expected were in place within the accounting subculture (professionalism versus statutory control; uniformity versus flexibility; conservatism versus optimism; secrecy versus transparency). The hypothesised relation between the societal values and accounting values is summarised in Table 4.2 within Chapter 4. The accounting subculture values could then be used to explain international differences in accounting practices. The relationship between society values, accounting values and accounting practice is summarised in Figure 4.1 within Chapter 4.
Answer 4.3: The argument is that different religious beliefs (which are considered to transcend national boundaries) would conceivably influence how people do business, how they make decisions, and as a related issue, the information they need to make...