The influence of culture on accounting

The influence of culture on reportIntroductionMany studies pull in demonstrated that culture diversity had influenced explanation pattern within subject field and international borders. be can therefore be said to withdraw been influenced by its environment, which includes the culture of the democracy in which it is being operated (Nobes Parker, 2008)Mueller et al. (1994), cited in Alexander.et al, to a fault stipulate that each account statement system is a product of its limited culture and environment, and that different patterns of score are associated with a range of heathenish factors such as societal determine, religion, political systems and historical prises. It is however no thought that those countries with same or similar ethnic values or background are practicing write up similarly.The purpose of this paper is to critically envision the extent to which these cultural values influence the formula of chronicle and how the collar of the role of culture in method of chronicle can succor us understand international accounting standards. The work of Hofstedes cultural value oddments and hoars accounting values volition be the major focal point of this paper. The consanguinity that exists between cultural values, accounting values and monetary report go fall out be examined as well.Key words Cultural values Accounting Values Financial ReportingDIFFERENCES IN cultural VALUES elaboration is a way of life of a radical of people, which includes the behaviours, beliefs, values, and symbols that they accept, generally without sentiment about them, and that are passed along by communication and imitation from one and moreover(a) generation to the next. The position that the ideas, meanings, beliefs and values people learn as members of hostelry determine benevolent nature.To support this definition, Hofstede, one of the greatest researchers of culture differences, defined culture as the collective programming of the mind w hich distinguishes members of one human group from an otherwise,( cited in Nobes parker 2008. p 25)For the purpose of comparability, this paper allow for stem its analysis on Hofstedes work on cultural value difference and grays work on accounting values to see their impact on accounting practice and inform. (Hofstede, 1984 p. 83, 84) defined and summarized four Cultural places as, individualism and Collectivism, larger-than-life versus vitiated power distance, Strong versus weak un demonstration avoidance, masculinity versus femininity. He also stipulates that there exist specific relationship in these cultural dimensions.Individualism versus communism is how in a fraternity one group exit prefer a much closed family system duration the other group prefer belonging to an expanded family system. This cultural dimension looks at how society handles interdependence among individuals.The second cultural dimension, large versus elegant power distance seeks to divide a socie ty between those some powerful groups of people who prefer power to be distributed unequally by dint of institutions and organizations and those who discover that power should be distributed equally. This dimension addressed how a society handles inequalities amongst a people when they occur.The third cultural dimension by Hofstede, is the stiff versus weak perplexity avoidance which is, the extent to which members of a society feel uncomfortable with uncertainty and ambiguity .This feelings leads them to believing in promising certainty and to maintain institutions protecting conformity. He explained that a society with strong uncertainty avoidance maintained rigid codes of belief and behaviour and are strict of deviant people and ideas. The weak uncertainty maintain a to a greater extent(prenominal) relaxed atmosphere in which practice counts more than principles and deviance is more tolerated. masculinity and femininity, which is the last but not the least of the four cult ural dimensions, describes masculinity as the gustation, in a Society for achievements, heroism, assertiveness, and material success. Femininity on the other hand was said to represent a society where preference for relationships, modesty, caring for the weak and the quality of life is game.ACCOUNTING VALUES AND CULTURAL VALUESIt is based on these Hofstedes classification of cultural dimensional differences that Gray (1988) also proposed a connection between those cultural dimensions and accounting values by specifically identifying four accounting values which includes professionalism(implies self-regulation by the accounting profession itself) versus statutory (implies delay by the government), uniformity (adherence to consistency and flesh out regulations) versus tractableness (implies able to amend or adjust to suite a situation), conservatism (implies the tendency to under state profit and assets) versus optimism and secrecy (implies a preference for confidentiality) versu s transparency ( implies disclosure of true state of affairs). The first cardinal relates to authority and enforcement of accounting practice at a arena train while the second ii relates to the measurement and disclosure of accounting cultivation at a country level as (cited in Nobes and Parker, 2008).Grays accounting values and Hofstedes cultural difference can be group into two categories. This paper leave alone like to refer to these two groups as the collectivism category and the individualism category. The individualism category is made up of Professionalism, flexibility, transparency, optimism, individualism, humbled power distance, weak uncertainty avoidance and femininity. This category has the characteristic of self-confidence or self-interest and therefore in a society where individualism, small power distance, weak uncertainty and femininity dominate, accounting practice and pecuniary account is plausibly to be professional, flexible, transparent and optimistic . Secondly the individuals quest for study to make decision on investments to satisfy his/her personal collects will prefer precise report of a financial statement. This paper will like to associate this category to that of a capitalist society where the accounting regulations are not part of the common law but quite a are in the hands of professional organisations of the private sector as stipulated in Alexander et al. (2009 p. 28). For instance in the UK, accounting laws and regulations are control by professional bodies such as the ACCA, CA, CIMA, and IASB. It can again be said that countries that practice the common law are also likely to practice accounting the same way. They are considered to be capitalism countries since they raises finances from the capital. They include, United Kingdom, Ireland Canada, Australia and the United States of AmericaThe second category of Hofstede cultural value difference and that of grays accounting values The collectivism category is mad e up of collectivism, large power distance, strong uncertainty avoidance masculinity and grays accounting values of statutory control, uniformity, conservatism and secrecy. This category has the characteristics of being control from a common denotation or being centrally planned. Countries or societies free-base to be dominant with these cultural and accounting values are more likely to practice accounting in the same way. The practice of accounting in this society or country is control by statutory institutions with detailed rules and regulations. The practice of accounting and reporting in these societies or countries will be geared towards the dictates of those in powers or in control. No detailed accounting is required and secrecy and conservatism dominates in the financial reporting (Kosmala-Maclullich, 2003). Here again this paper will associate this category of a society or a country to that of a socialist country where accounting laws and regulations are enshrine in the co ded laws of the country. Governments in these countries use financial reports for their own purpose.The Democratic Republic of Ger some adopted the Soviet Unions socialist ideologies by and by the Second World War. This adaptation included a methodological counsel in designing accounting information systems (Berry, 1982 1890). Bailey (1990) also stipulates that the Marxism Theoreticians view the western-style accounting as an instrument for the exploitation of workers by the capitalists, accounting and financial reporting was therefore geared towards the dictates of those in authority. Young and David (1999) argued that Accounting activities at the initiative level were focused exclusively on the preparation of reports required by the planning bureaucracy, and during this period, accounting was only seen as a primary source of information for the render of financial statistics for the use in the preparation of reckon it was therefore a list of quantities instead of values. Acco unting was more or less reduced to a clerical job there was no professionalism in the practice. Judgement of reports (true and fair) was not entertained standardisation was non-existence and so was the imagination of profit, in short accounting standards and procedures were not in existence.Accounting in ChinaAnother country worth looking at is china which has a long history of cultural value which is characterise with collectivism, high in power distance, strong uncertainty avoidance and femininity. The Chinese will not mind sacrificing himself for the good collectivism or country (Yao F. 2007).The practice of accounting and reporting is control by the state under the protection of the ministry of finance and the aim of this control is to gear the practice towards the general advantage of the planned economy. The user of accounting information is mainly the government, because most enterprises in china are owed by the state. The few individual who try to do some investments do not know much about accounting and finance. (Yao F. 2007). Although the state had accounting standards for Business Enterprises, they were just mere basic rules which were issued in conjunction with basic standards, as argued by Lin et al. (2001). There where however restrictions on some important accounting principles such as making provision for bad debts and obsolete inventories, recognition of impairments of assets, disclosure of financial information and many more. Secrecy and conservatism was dominant in financial reporting. Professionalism, transparency and flexibility were non-existence. Accounting profession was reduced to a very low status.The kinetics of cultural values brought about a change in financial reporting by these countries with strong cultural values. As a issuing of the globe becoming a small village and the growing of transnational companies across the demesne, there is the need for comparability of financial Reports since its purpose is to help investor s make informed and sound decisions. Based on the fact that the world is becoming a small place and countries need each other for their survival, most of the socialists countries like the East Germany, Portugal, Poland, Italy, and France have all adopted the capitalism system of financial reporting. The Chinese government, also have realise the need for adopting the international financial reporting standard (IFRS) which is being champion by the International Accounting Standard Board (IASB), but yet it only talked about the convergence of the accounting standard and not a all told acceptance. (Yao F. 2001)ConclusionIt is quite obvious that cultural values have influenced the practice and reporting of accounting and countries with similar cultural values practicing accounting similarly. With the world becoming a global village and the fast cultural changes across the world, the need for harmonization and convergence of accounting standards was given a sedate consideration by centr ally planned countries, but a country like China, although have made efforts to embrace international financial reporting system, is still holding on to some of its cultural accounting practices. This is an property that so far as cultural values remain different, accounting practice will be affected and the only way out is the harmonization and convergence of accounting standards.