ACCOUNTING

International Accounting Standards

International Accounting Standards

Introduction

The influence of culture on accounting systems in different countries has been a research subject for more than three decades. Different values of cultures preventing unified accounting practices globally are perceived to have influenced accounting values nationally and internationally (Fechner and Kilgore, 1994; Goodridge, 1991; Gray, 1988; Perera, 1989, 1994; Perera and Mathews, 1990). In this context, culture in different societies can strongly impact national accounting systems - a likely causal factor of different national accounting practices in accord with differing national cultures. The cultural environment is generally acknowledged to be a national (or regional) system comprising language, religion, morals, values, attitudes, law, education, politics, social organisation, technology, and material culture. The interactions of these cultural elements on accounting are expected to be exceedingly complex.

A feature of that debate has been the connections posited between national social values and the values that drive national accounting systems. Those connections have been initiated in Gray's (1988) extension of Hofstede's (1980) social value dimensions - individualism versus collectivism, strong versus weak uncertainty avoidance, large versus small power distance, and masculinity versus femininity, to develop the related contrasting accounting values - professionalism and statutory control, uniformity and flexibility, conservatism and optimism, and secrecy and transparency, for the countries included in Hofstede's experiment.

Theoretical Development

Hofstede (1997, p. 5) defined culture as, “The collective programming of the mind which distinguishes the members of one group or category of people from another.” He had defined cultural differences at four different levels - symbols, heroes, rituals, and values and argued that values are the most difficult part to explain. “Values are broad tendencies to prefer certain states of affairs over others” (Hofstede, 1997, p. 8). Thus, values are specific modes of conduct that are preferred by individuals and the society of which they are members. Thus, different values, or shared values within national boundaries, have the potential to promote and sustain significant differences in social behaviour and in social artifacts such as accounting practices.

Differences in accounting practices are manifestations of nationally different social systems. By virtue thereof, culture and accounting are inextricably linked. This is the foundation upon which most of the discussion of how accounting functions in different cultures has proceeded. Hofstede (1980) had identified four distinct contrasting (opposite) sets of dimensions of cultural mores: individualism versus collectivism, strong versus weak uncertainty avoidance, large versus small power distance, masculinity versus femininity. It is to be noted that Hofstede's study has enjoyed considerable attention by different fields of study. Indeed, it has been cited in nearly six hundred studies between 1981 and 1992 (Sudarwan and Fogarty, 1996). Thus, its use in the context of accounting research is quite justified, and for purpose of the study is justifiable. Table I shows the scale of national cultures in Hosftede's study for the developing countries.

Gray (1988) converted Hofstede's cultural and societal values into accounting values and posited a relation between them. Gray's model proposed that all accounting policy decisions, at a national level, are made in response to cultural ...