The Impact of National Cultures on Accounting Differences and Classification

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Assess to what extent differing national cultures are relevant to an understanding of the reasons for accounting differences, and therefore to the process of classification of countries.


Culture was broadly ignored and was flooded in the concept of environmental factors influencing the accounting changes. However, research has shown that culture had a huge role in accounting development and changes. In this essay, we are going to develop Gray’s theory about the relationship between culture and accounting. This essay is mainly based on Gray’s theory as Gray was one of the first authors to explore the culture’s way to explain the changes in accounting. Prior to that demonstration we will define the concept of culture as it is seen by Geert Hofstede, as we judged that his definition of the concept of culture was the most acceptable in our analysis. Finally, we will show some exception to the Gray’s framework to criticize the real influence of culture on accounting systems. Assess to what extent differing national cultures are relevant to an understanding of the reasons for accounting differences, and therefore to the process of classification of countries?

I. A definition of “culture” is important to assess its influence on accounting differences. a. Culture definition based on Hostede’s work.
As there are as definitions of culture as there are authors who have worked on this topic, we chose along this essay to deal with Hofstede’s definition of culture. Thus Hofstede (1980, page 25) defines culture in that way: “the collective programming of the mind which distinguishes the members of one group to another”.

Culture is collective because it is shared at least by all the people from the same social environment and derives from it, that’s why culture is “learned” and not inherited.

In its Onion diagram (Hofstede, 1994, figure1.2, page 9), Hofstede differentiates the manifestations, shared by a group of people, of cultural differences. [pic]
These manifestations are defined as symbols, heroes, rituals and values (from the most superficial to the deepest level of culture). In this essay, we will only focus on values, the core of culture. As they are learned from childhood in an implicit way, children are not expressively aware of these values, for instance concepts of right vs. wrong, irrational vs. rational, ugly vs. beautiful are part of their cultural values. According to Hofstede, cultural values have an effect on social systems and on institutions in every country and describe its theory in the following diagram.

(Hofstede, 1980, figure 1.4, page 22)

This model underlines that the societal norms (cultural values), influenced by ecological factors, influence themselves the institutions, which, in return, support the societal norms: it is a cycle where both institutions and societal norms support each other.

b. The dimensions of national cultures defined by Hofstede. To identify these dimensions, Geert Hofstede (1987) submitted a survey to 53 subsidiaries of a big multinational (I.B.M) in order to study the interactions between the corporate culture, more current, and the more specific national cultures, dependent on longer past. This study of Hofstede aimed at demonstrating that the corporate culture could not be the same in all the subsidiaries because it removed by no means the national culture; in the best case, it juxtaposed to it. And most of the time, it was rather the national culture which remodelled, at least partially, the corporate culture. The IBM survey, mentioned previously, produced a total of 116 000 questionnaires. Based on the respondents’ answers in the questionnaires, Hofstede first revealed 4 dimensions (later an extra dimension was added in order to deal with Asian countries: short term vs. long-term orientation) illustrating basic problems that human culture has to deal with. The dimensions are the following: power distance,...
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