Professional Documents
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Chapter 4 International accounting Slides written by Craig Deegan and Michaela Rankin
Copyright 2006 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting Theory 2e by Deegan
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Learning objectives
In this chapter you will be introduced to
an appreciation that there are many differences between some countries in the accounting policies and practices adopted various explanations about why countries adopt particular accounting practices in preference to others some of the arguments that suggest that it is appropriate that there are international differences in accounting practices
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Power Distance
Power Distance is the extent to which members of a society accept that power in institutions and organisations is distributed unequally
Large Power Distance societies accept a hierarchical order in which everyone has a place Small Power Distance societies strive for power equalisation
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Uncertainty Avoidance
The degree to which the members of a society feel uncomfortable with uncertainty and ambiguity
Strong Uncertainty Avoidance societies maintain rigid codes of belief and behaviour Weak Uncertainty Avoidance societies maintain a more relaxed atmosphere where practice counts more than principles
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Grays hypotheses
H1: The higher a country ranks in terms of Individualism and the lower it ranks in terms of Uncertainty Avoidance and Power Distance, the more likely it is to rank highly in terms of Professionalism H2: The higher a country ranks in terms of Uncertainty Avoidance and Power Distance and the lower it ranks in terms of Individualism, then the more likely it is to rank highly in terms of Uniformity
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Legal systems
Can be broadly divided into common law and Roman law systems
in Roman Law systems the law tends to be very detailed in Common Law systemswhich is how Australia can be classifiedlaw typically evolves from the ruling of judges
In Common Law countries accounting practices tend to rely relatively heavily on professional judgment
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Taxation systems
Differences in accounting methods internationally have also been linked to differences in taxation systems Where there are insider systems of finance (common in continental European countries) financial accounting practices have typically been linked to taxation law
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Obstacles to standardisation
Effects on standard setting of different
business environments legal systems cultures; and political environments in different countries
IASs and IFRS are strongly Anglo-American influenced Relevance of IAS/IFRS to some countries is questioned Economic implications of adopting a new set of accounting standards
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Objectives of IASB
To formulate and publish accounting standards and to promote their worldwide acceptance To work on the improvement and standardisation of regulations, accounting standards and procedures The IASB does not appear to believe that the many reasons provided as to why different nations should have different accounting standards (e.g. tied to differences in culture, religion and so forth) outweigh the benefits of international standardisation
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Aims of IASC/IASB
Short-term aimfor national accounting standards and IASs to converge Long-term aim of global uniformitya single set of accounting standards for all listed and economically significant business enterprises around the world
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