Professional Documents
Culture Documents
DETAILS OF STUDENTS
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Table of Content
5 Conclusion 9
6 Recommendation 10
7 Reference 11
Definition of Harmonization
There has been a thoughtful measure of writing being done in respect with universal
harmonization. Harmonization as a procedure of expanding the similarity of bookkeeping
rehearses by setting limits on the amount they can change and normalization implies the
inconvenience of an unbending and tight arrangement of rules, and even a solitary standard
guideline or rule might be applied in all circumstances. On another hand, harmonization as,
"making the administrative necessities or legislative approaches of various wards
indistinguishable, or possibly increasingly comparative. Perceived the degree of bookkeeping
harmonization in three distinct advances, to be specific complete disharmony, local
agreement and worldwide congruity.
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wipes out contrasts between bookkeeping rehearses, while normalization is firm which
doesn't really order in all the circumstances. Furthermore the outline of the harmonization
happens when diverse government approaches and wards help out one another so as to shape
an indistinguishable arrangement, fundamentally in regards to universal understanding, while
then again taking out the national contrasts.
South Africa have been using SA-GAAP (South African Statement of Generally Accepted
Accounting Practice) since 1973. SAICA (South African Institute of Chartered Accountants)
was established in 1984 and they set up Accounting Practices Board (APB) in 1973.
Eventually the Accounting Practice Board started to develop generally accepted accounting
principles with the help of Accounting Policies Committee (APC) which act as the advisory
board to APB. From this development they finally issued SA-GAAP and in year 1990 South
Africa had adopted the conceptual framework developed by International Accounting
Standard Committee (IASC) which was used as a basis for revising existing statements and
producing new ones.
In the year 1993, Accounting Practice Board of South Africa initiated the process for
harmonization and improvement projects by amending the GAAP standards to be in
compliance with International Accounting Standard Board. This was carried out as this
process avoids from any duplications to happen and also helps in giving direct advantages in
facilitating the comparability process of different financial statements from different
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countries around the world. But however, the IASB standards must be only adopted and
amended whenever it is necessary to be applicable according to South African circumstances.
Moving on, IASB then produced the International Financial Reporting Standards in 2001
which were established to create a similar language for accounting which can be understood
by companies from different countries. Meanwhile the harmonization process in South Africa
later on was completed in June 2004 where the Accounting Practice Board decided to issue
International Financial Reporting Standards (IFRS) in the replacement of SA-GAAP without
making any amendments. This had ensured that there were only minor differences when
compared SA-GAAP with IFRS and all the companies such as listed, unlisted and private
companies in South Africa are required to use this. Despite that, the Johannesburg Stock
Exchange (JSE) stand in need of all listed companies to employ IFRS Standards instead of
following the harmonized SA-GAAP which became effective in 1 January 2005. This had
improved the quality of the reported financial data. In 2011, South Africa permitted the use of
either IFRS Standards or SA-GAAP for specific purpose but later since SA-GAAP was
almost identical with IFRS Standard, the APB decided to withdraw the use of SA-GAAP on
1st December 2012. South Africa institutes then called companies with a public interest score
below 350 which were using SA-GAAP previously to convert into IFRS or IFRS for SMEs.
The effect of culture on the social institutions like accounting cannot be thought little of.
Before the expansion in migration and cross-border organizations, culture has been in the
domain of anthropology and archaeology. This work thinks about whether culture influence
bound together worldwide accounting practices and whether an understanding of cultural role
in accounting can help to understand international accounting standards. In 1980 Hofstede
distinguished four particular differentiating sets of measurements of culture which has
appreciated impressive consideration. Gray (1988) created huge accounting theories utilizing
cultural values s as created by Hofstede to build up relationship to accounting esteems. He
recognized the chance of fundamentally relating accounting esteems, at the degree of the
accounting subculture, to cultural qualities, by giving the accompanying accounting values
for consideration.
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feeble vulnerability shirking, manliness, given the idea of confidence, and little force
separation. Besides that, uniformity. He shows inclination for uniform accounting practices
between organizations as against adaptability of one of a kind situations of an organization. It
reflects social orders with high vulnerability shirking and huge force distance indexes of
Hofstede. conservatism. Here there is inclination for alert to estimation, as it causes one to
adapt to future vulnerability. Lastly is secrecy. Here data is shared among the nearby
directors and lenders as against progressively open, straightforward, freely responsible
methodology. This is related with social orders that have solid vulnerability shirking and
force separation measurements.
South Africa was the only African country to be considered separately in Hotsfede’s study
although his results made clear that there were significant differences between the West and
East African regions. It is difficult to correlate developments in accounting in South Africa
with the predictions from these models. Although Government is taking a greater role, this is
not significantly different measures taken in development countries in response to the
corporate collapses and consequent mistrust in accountants, corporate management and
auditors of recent years, The harmonisation project and alignment with IFRS all but
eliminates any cultural vestiges. Despite these difficulties, Hofstede and Gray’s models
provide both useful dimensions through which local accounting practices and institutions, and
changes in these, can be examined and an alternative lens through which the globalisation of
accounting can be viewed.
A more successful indication of how culture may impact on accounting systems is found in
the locally developed Kin II report on Corporate Governance in South Africa. The King II
report attempts to extend the philosophy of interdependence into the corporate environment
in that it advocates an inclusive stakeholder approach to corporate governance, in contrast to
the more individualistic shareholder approach more evident in Western countries. The report
requires that the directors act in the best interest of the company as a separate legal person
and thereby rejects the typically Western notion that the shareholder’s interests are
paramount. It appears then that in contrast to Gray’s model, a collective approach is not
inconsistent with less secrecy. The introduction to the report closes by mentioning certain
aspects of African culture including collectiveness, an inclination towards consensus,
humility and helpfulness and co-existence with others. It is possible to conclude that, given
room, culture may have a role to play in determining preferred accounting practices and that
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the one size fits all approach of IFRS may not be appropriate when the values and concerns
of specific cultural groups are considered.
In a nutshell, how culture influences the accounting standards norms and sees that culture
surely shapes the accounting principles of a specific nation. Numerous nations place
incredible accentuation on their own accounting measures, on account of the cultural qualities
and standards on which these norms have been structured. The meaning of culture and how it
influences national/universal accounting norms were given, referring to the investigations of
Hofstede and Gray. In spite of the fact that there are different variables influencing national
bookkeeping principles, culture in fact assumes a vital job in deciding national accounting
norms.
Archambault & Archambault (2009) examined countries that have decided to permit
the use of IFRS for their listed firms. The results showed that the political systems do not
influence a country’s decision to permit the use of IFRS. In contrast, according to Assenso-
Okofo et al (2011), the political systems have an important influence on financial reporting
and disclosure practices.
South Africa has been a multi-party democracy since 1994. Its president acts as both
head of state and head of government. Since the end of white-majority rule, the African
National Congress has been the main political party. South Africa had suffered from civil war
like many other African countries. However, South Africa was not only an early adopter of
IFRS, but also South Africa was one of the first countries to implement IFRS in 2004. South
Africa was already using accounting standards identical to IFRS when the country adopted
IFRS (South African Institute of Chartered Accountants, 2006).
The issue is that the diversity exists in local practice. However, one of the effects of
converting to IFRS is many of these divergent practices have been eliminated. By adopting
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IFRS, companies have had to evaluate their existing accounting policies and procedures. The
adoption of IFRS has enhanced consistency of the application of IFRS and has further
confirmed the need for a local technical body that will contribute to the IASB due process
and resolve specific local issues and divergence in practice. Consistency has been
strengthened by industry experts coming together and resolving related issues. However,
local issues and diversity in practice that cannot be resolved through the above structures
such as operating leases and black economic empowerment (BEE) transactions are channeled
to the Accounting Practices Committee.
A country’s legal tradition is one of the factors that influence a country’s institutional
environment. The countries are either classified as common law or code law countries. IFRS
was mostly developed by countries with a common law tradition and it is generally expected
that enforcement of these accounting standards is stronger in common law countries than in
code law countries. Common law countries are more conservative, requiring more timely
recognition of accounting income and losses (Ball et al, 2000).
South Africa has a mixed legal system which was strongly influenced by Roman-
Dutch law and British law. Customary law as applied in the various African cultures in the
country continues to co-exist in areas governed by local Traditional Authorities. Both Dutch
law and British law used in South Africa is classified as common law and its legal system and
government is strongly influenced by British law (Prather-Kinsey, 2006).
The effect of the harmonization of accounting practices in South Africa is that the
financial statements of IFRS adopters are more likely to show improved comparability
(Smith, 2017). Comparability is the level of standardization of accounting information that
allows the financial statements of multiple organizations able to be compared to each other.
This is a fundamental requirement of financial reporting that is needed by the users of
financial statements. Financial statements are more comparable when the same accounting
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policies and standards are applied across multiple reporting periods, as well as across
multiple entities within an industry.
CONCLUSION
The conclusion is, Political system South Africa is a multi-party majority rule
government since 1994. The issue is that the assorted variety exists in local practice. In any
case, nearby issues and assorted variety by and by that can't be settled through the above
structures, for example, working leases and black economic empowerment (BEE) exchanges
are diverted to the Accounting Practices Committee. A nation's legitimate custom is one of
the elements that impact a nation's institutional condition. South Africa has a blended
legitimate framework which was unequivocally impacted by Roman-Dutch law and British
law. Moving on, Financial statements are more comparable when the same accounting
policies and standards are applied across multiple reporting periods, as well as across
multiple entities within an industry.
The impact of culture on the social organizations like bookkeeping can't be barely
cared about. Culture has been in the area of human studies and paleontology. This work
ponders whether culture impact bound together overall bookkeeping practices and whether a
comprehension of social job in bookkeeping can assist with understanding worldwide
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bookkeeping guidelines. Gray (1988) made enormous bookkeeping speculations using social
qualities s as made by Hofstede to develop relationship to bookkeeping regards. He watched
out for social impact on bookkeeping of different countries from the obvious social
characteristics perspective. There are really 4 sorts of social quality which is Professionalism,
consistency conservatism, secrecy. The prologue to the report closes by referencing certain
parts of African culture including aggregation, a tendency towards agreement, lowliness and
support and conjunction with others. Various countries place mind blowing complement on
their own bookkeeping measures, by virtue of the social characteristics and gauges on which
these standards have been organized.
RECOMMENDATION
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REFERENCE
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