Professional Documents
Culture Documents
Worldwide Accounting
Diversity
McGraw-Hill/Irwin
2-3
Learning Objective 1
2-5
Learning Objective 1
2-6
Learning Objective 1
2-7
Learning Objective 1
2-8
Learning Objective 2
2-9
Learning Objective 2
2-10
Non-comparability of financial
statements
Accounting rules often differ between countries.
International investors need to make their own
reconciliations or adjustments to financial
statements.
International investors also must face differing
levels of disclosure, quality of accounting
standards, and quality of auditing.
Learning Objective 2
2-11
2-12
Learning Objective 3
2-13
Taxation
U.S. -- taxable income and book income are
generally quite different.
Germany -- rules governing taxable and book
income tend to be the same, which generally
results in more conservative accounting.
Learning Objective 3
2-14
Providers of financing
In many countries major sources of capital are
families, banks, and the government.
Accounting and disclosure in those countries
tend to be less important.
In the U.S. and UK the providers of financing are
diverse shareholders, so accounting and
disclosure are more important.
Learning Objective 3
2-15
Inflation
Some countries have historically high rates of
inflation.
Accounting in these countries often requires
adjustments to offset the impact of inflation.
This is common in Latin American countries.
Given extended periods of low inflation in the
U.S., inflation accounting is not required.
Learning Objective 3
2-16
Correlation of factors
2-17
Accounting Clusters
Environmental factors related to accounting
diversity have been used to identify three broad
based clusters:
Fair presentation / full disclosure
Gives primacy to the information needs of
investors.
Most descriptive of the UK and U.S.
Learning Objective 4
2-18
Accounting Clusters
Legal compliance
Accounting heavily influenced by tax rules and
needs of government.
Commonly found in continental Europe.
Learning Objective 4
2-19
Accounting Clusters
Inflation-adjusted
Similar to the legal compliance approach.
Is distinguished by the requirement for
adjustments to mitigate the effects of inflation.
Learning Objective 4
2-20
Learning Objective 4
2-21
Learning Objective 5
2-22
Learning Objective 5
2-23
Learning Objective 5
2-24
Learning Objective 5
2-25
Learning Objective 5
2-26
Learning Objective 5
2-27
Learning Objective 5
2-28
Learning Objective 5
2-29
Learning Objective 5
2-30
Learning Objective 5
2-31
Nobes model
Describes international differences as a function
of culture and the system of financing.
Culture influences the development of the
system of financing which influences the
development of accounting.
Uses two classifications, A and B.
Learning Objective 6
2-32
Class A Accounting
Learning Objective 6
2-33
Class B Accounting
Descriptive of continental Europe.
Less widespread outside shareholder equityfinancing.
Conservatism.
Secrecy.
Learning Objective 6
2-34
Learning Objective 7
2-35