Many surveies have demonstrated that civilization diverseness had influenced accounting pattern within national and international boundary lines. Accounting can hence be said to hold been influenced by its environment, which includes the civilization of the state in which it is being operated ( Nobes & A ; Parker, 2008 )
Mueller et Al. ( 1994 ) , cited in Alexander.et Al, besides stipulate that each accounting system is a merchandise of its specific civilization and environment, and that different forms of accounting are associated with a scope of cultural factors such as social values, faith, political systems and historical values. It is nevertheless no idea that those states with same or similar cultural values or background are practising accounting likewise.
The intent of this paper is to critically analyze the extent to which these cultural values act upon the pattern of accounting and how the apprehension of the function of civilization in accounting can assist us understand international accounting criterions. The work of Hofstede ‘s cultural value differences and Gray ‘s accounting values will be the major focal point of this paper. The relationship that exists between cultural values, accounting values and fiscal coverage will be examined every bit good.
Cardinal words: Cultural values ; Accounting Values ; Financial Reporting
Differences IN CULTURAL VALUES
Culture is a manner of life of a group of people, which includes the behavior, beliefs, values, and symbols that they accept, by and large without believing about them, and that are passed along by communicating and imitation from one coevals to the following. The place that the thoughts, significances, beliefs and values people learn as members of society determine human nature.
To back up this definition, Hofstede, one of the greatest research workers of civilization differences, defined civilization as the corporate scheduling of the head which distinguishes members of one human group from another, ( cited in Nobes & A ; parker 2008. P 25 )
For the intent of comparison, this paper will establish its analysis on Hofstede ‘s work on cultural value difference and grey ‘s work on accounting values to see their impact on accounting pattern and coverage. ( Hofstede, 1984 p. 83, 84 ) defined and summarized four Cultural dimensions as, individuality and Collectivism, Large versus little power distance, Strong versus weak uncertainness turning away, maleness versus muliebrity. He besides stipulates that there exist specific relationship in these cultural dimensions.
Individualism versus Bolshevism is how in a society one group will prefer a much closed household system while the other group prefer belonging to an expanded household system. This cultural dimension looks at how society handles mutuality among persons.
The 2nd cultural dimension, big versus little power distance seeks to split a society between those few powerful groups of people who prefer power to be distributed unevenly through establishments and organisations and those who feel that power should be distributed every bit. This dimension addressed how a society handles inequalities amongst a people when they occur.
The 3rd cultural dimension by Hofstede, is the strong versus weak uncertainness turning away which is, the extent to which members of a society feel uncomfortable with uncertainness and ambiguity.This feelings leads them to believing in promising certainty and to keep establishments protecting conformance. He explained that a society with strong uncertainness turning away maintained stiff codifications of belief and behavior and are intolerant of aberrant people and thoughts. The weak uncertainness maintain a more relaxed ambiance in which pattern counts more than rules and aberrance is more tolerated.
Masculinity and muliebrity, which is the last but non the least of the four cultural dimensions, describes maleness as the penchant, in a Society for accomplishments, gallantry, assertiveness, and material success. Femininity on the other manus was said to stand for a society where penchant for relationships, modestness, caring for the weak and the quality of life is high.
Accounting VALUES AND CULTURAL VALUES
It is based on these Hofstede ‘s categorization of cultural dimensional differences that Gray ( 1988 ) besides proposed a connexion between those cultural dimensions and accounting values by specifically placing four accounting values which includes ; professionalism ( implies self-regulation by the accounting profession itself ) versus statutory ( implies control by the authorities ) , uniformity ( attachment to consistence and elaborate ordinances ) versus flexibleness ( implies able to amend or set to suite a state of affairs ) , conservativism ( implies the inclination to under province net income and assets ) versus optimism and secretiveness ( implies a penchant for confidentiality ) versus transparence ( implies revelation of true province of personal businesss ) . The first two relates to authorization and enforcement of accounting pattern at a state degree while the 2nd two relates to the measuring and revelation of accounting information at a state degree as ( cited in Nobes and Parker, 2008 ) .
Gray ‘s accounting values and Hofstede ‘s cultural difference can be group into two classs. This paper will wish to mention to these two groups as ”the Bolshevism class ” and ”the individuality class ” . The individuality class is made up of Professionalism, flexibleness, transparence, optimism, individuality, little power distance, weak uncertainness turning away and muliebrity. This class has the feature of autonomy or opportunism and hence in a society where individuality, little power distance, weak uncertainness and muliebrity dominate, accounting pattern and fiscal coverage is likely to be professional, flexible, crystalline and optimistic. Second the person ‘s quest for information to do determination on investings to fulfill his/her personal demands will prefer elaborate study of a fiscal statement. This paper will wish to tie in this class to that of a capitalist society where the accounting ordinances are non portion of the common jurisprudence but instead are in the custodies of professional administrations of the private sector as stipulated in Alexander et Al. ( 2009 p. 28 ) . For case in the UK, accounting Torahs and ordinances are control by professional organic structures such as the ACCA, CA, CIMA, and IASB. It can once more be said that states that pattern the common jurisprudence are besides likely to pattern accounting the same manner. They are considered to be capitalist economy states since they raises financess from the capital. They include, United Kingdom, Ireland Canada, Australia and the United States of America
The 2nd class of Hofstede cultural value difference and that of grey ‘s accounting values ”The Bolshevism class ” is made up of Bolshevism, big power distance, strong uncertainness turning away maleness and grey ‘s accounting values of statutory control, uniformity, conservativism and secretiveness. This class has the features of being control from a common beginning or being centrally planned. Countries or societies found to be dominant with these cultural and accounting values are more likely to pattern accounting in the same manner. The pattern of accounting in this society or state is control by statutory establishments with elaborate regulations and ordinances. The pattern of accounting and coverage in these societies or states will be geared towards the dictates of those in powers or in control. No elaborate accounting is required and secrecy and conservativism dominates in the fiscal coverage ( Kosmala-Maclullich, 2003 ) . Here once more this paper will tie in this class of a society or a state to that of a socialist state where accounting Torahs and ordinances are enshrine in the coded Torahs of the state. Governments in these states use fiscal studies for their ain intent.
The Democratic Republic of Germany adopted the Soviet Union ‘s socialist political orientations after the Second World War. This version included a methodological counsel in planing accounting information systems ( Berry, 1982: 1890 ) . Bailey ( 1990 ) besides stipulates that the Marxism Theoreticians view the western-style accounting as an instrument for the development of workers by the capitalists, accounting and fiscal coverage was hence geared towards the dictates of those in authorization. Young and David ( 1999 ) argued that Accounting activities at the endeavor degree were focused entirely on the readying of studies required by the planning bureaucratism, and during this period, accounting was merely seen as a primary beginning of information for the proviso of fiscal statistics for the usage in the readying of budget ; it was hence a list of measures alternatively of values. Accounting was more or less reduced to a clerical occupation ; there was no professionalism in the pattern. Judgement of studies ( true and just ) was non entertained ; standardization was non-existence and so was the construct of net income, in short accounting criterions and processs were non in being.
Accounting in China
Another state worth looking at is china which has a long history of cultural value which is characterise with Bolshevism, high in power distance, strong uncertainness turning away and muliebrity. The Chinese will non mind giving himself for the good Bolshevism or state ( Yao F. 2007 ) .
The pattern of accounting and coverage is control by the province under the protections of the ministry of finance and the purpose of this control is to pitch the pattern towards the general benefit of the planned economic system. The user of accounting information is chiefly the authorities, because most endeavors in China are owed by the province. The few person who try to make some investings do non cognize much about accounting and finance. ( Yao F. 2007 ) . Although the province had accounting criterions for Business Enterprises, they were merely mere basic regulations which were issued in concurrence with basic criterions, as argued by Lin et Al. ( 2001 ) . There where nevertheless limitations on some of import accounting rules such as doing proviso for bad debts and disused stock lists, acknowledgment of damages of assets, revelation of fiscal information and many more. Secrecy and conservativism was dominant in fiscal coverage. Professionalism, transparence and flexibleness were non-existence. Accounting profession was reduced to a really low position.
The kineticss of cultural values brought about a alteration in fiscal coverage by these states with strong cultural values. As a consequence of the universe going a little small town and the growth of Multinational companies across the universe, there is the demand for comparison of fiscal Reports since its intent is to assist investors make informed and sound determinations. Based on the fact that the universe is going a little topographic point and states need each other for their endurance, most of the socialists ‘ states like the East Germany, Portugal, Poland, Italy, and France have all adopted the capitalist economy system of fiscal coverage. The Chinese authorities, besides have realise the demand for following the international fiscal describing criterion ( IFRS ) which is being title-holder by the International Accounting Standard Board ( IASB ) , but yet it merely talked about the convergence of the accounting criterion and non a wholly credence. ( Yao F. 2001 )
It is rather obvious that cultural values have influenced the pattern and coverage of accounting and states with similar cultural values practising accounting likewise. With the universe going a planetary small town and the fast cultural alterations across the universe, the demand for harmonisation and convergence of accounting criterions was given a serious consideration by centrally planned states, but a state like China, although have made attempts to encompass international fiscal coverage system, is still keeping on to some of its cultural accounting patterns. This is an indicant that so far as cultural values remain different, accounting pattern will be affected and the lone manner out is the harmonisation and convergence of accounting criterions.