Culture: to explore the extent to which cultural

Culture:

1Culture has been defined as “the collective
programming of the mind which distinguishes the members of one human group from
another”. (Hofstede, 1983). Culture is a key element of this framework, on
which depends:

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·        
Understanding
changes in the rules and accounting systems

·        
The behaviour of
groups in interaction with others.

2In 1988
a methodological framework is proposed by Gary in which
culture can be used to explain differences in international accounting systems
and possible models in reconciling international accounting. Gary focus is to
explore the extent to which cultural influences identified by Hofstede and how
they explain international differences in accounting systems. Gray analyses the
Hofstede’s approach and at the starting point if the values and culture are
related to the development of accounting systems at organizational level then
there must be close link between national culture and has its impact in
developing different accounting systems. To find the cultural connection it is
necessary to identify the approach by which the values in society are related
to organization values of subculture accounting and to which degree they affect
the development of models of accounting practices.

The
model proposed by Gray is basically an adaptation and further extension of Hofstede
model, the social values are determined by the influence of the environment and
it is also modified by external factors such as international trade, investment.
While, social values determine legislative and institutional changes and
address the issues such as legal system, political system and professional
associations etc. The model extension proposes social values that are
expression of accounting values at subculture level.

Dimensions:

It
is argued that countries with high uncertainty avoidance and efforts are made
to minimize this uncertainty and same way individualism affects the accounting
in terms of practices and income measurement rules. This means in accounting
that accounting rules should be detailed and rigid. As discussed earlier Gray
used Hofstede’s cultural dimensions to define four accounting values which are
discussed below;

3Professionalism
versus Statutory Control:

Professionalism
versus statutory control refers to professional judgement and self regulation
and in contrast tries to oppose its compliance with rigid legal requirements and
legislative control. In certain countries, people prefer individual
professional judgment and the maintenance of professional self-regulation and while
in other countries, people simply prefer to stay in compliance with the legal
requirements and statutory control.

Example:

·        
Professionalism
preference countries are UK and USA.

·        
Statutory
control preference countries are France, Japan and Germany.

Uniformity versus Flexibility:

It
indicates the level of enforcement of standardized accounting practices. In
different countries the focus of management is the enforcement of standardized
and uniform set of accounting practices in order to be consistent while on the
other hand management prefer flexibility in accounting practices and depending
on the needs of situation.

Example:

·        
Uniformity
enforcing countries like UK, US.

·        
Flexibility is preferred
by Egypt, Indonesia, China and many other emerging countries.

Conservatism versus Optimism:

Conservative
versus aggressive accounting is not a new concept in accounting while Gray
change the concept and wordings and Gray refer to morenagressive accounting practices
a a value of optimism.

Conservative
accounting practices versus aggressive accounting practices is nothing new in
the accounting field. However, Gray change the wordings, and refer to the more
aggressive accounting practices as a value of optimism.it opposes the risk
taking approach

Aggressive
accounting practices means more optimistic approach to revenue recognition,
inventory accounting practices as well as restatement of assets value. In
contrast, estimates are more conservative when the society is perceived as
having conservatism values.

Example:

·        
Optimism – UK,
US

·        
Conservative –
France, Japan, Germany.

Secrecy versus Transparency:

The
society with secrecy values prefers confidentiality and the restriction of
disclosure of information about the business only to specific executives
involve in the management of the company; while in contrast, transparency
argued for more open and publicly accountable approach.

Example:

·        
Transparency –
UK, US

·        
Secrecy –
France, Japan, Germany.

1 Book:
Culture’s consequences  international
differences in work-related values, author: Geert Hofstede, page no 21

2

3 Comparative
International Accounting by Christopher Nobes and Robert Parker Tenth Edition
page no 26-27
http://businessessays.net/accounting/effects-of-cultural-differences-on-accounting-differences/

 

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