This study is chiefly concerned with the cultural and linguistic issues that need considerations before harmonisation of accounting criterions and pattern takes topographic point. In fact, there is a batch of research that has been investigated demoing that cultural and linguistic communication oriented factors impact on the harmonisation of accounting map both positively and adversely.
This study has a figure of aims. It aims to among other things:
Analyze the function of civilization and linguistic communication in harmonisation of accounting criterions and pattern
Assess the viability of the proposed harmonisation in a multicultural environment
To measure the economic chances and benefits available to organisations upon harmonisation of accounting criterions and pattern, sing the altering cultural, societal, political, economic, and technological factors
Analyze the presence, or otherwise, of support houses, every bit good as engineerings that support harmonisation of accounting policy amidst cultural fundamentalism
An scrutiny of the available information sing harmonisation of accounting criterions and pattern was important for the digest of this study. It was besides necessary to do consideration of the available information sing the function of civilization and linguistic communication in harmonisation of accounting criterions and pattern. This study has besides established that there are monetary benefits ensuing from harmonisation of accounting among states.
In many scholarly subjects at that place have been a batch of probes on the relationship between linguistic communication and civilization and their impact on, say, moralss, selling, human resources, finance, concern, faith and significantly, accounting profession. As the reader may be cognizant such an probe bases itself on demographic facets of a community. There is one hypothesis that this survey believes in ; as in, civilization and linguistic communication are windows that affect the manner professionals go about their concern, where comptrollers are non an freedom. The hypothesis would be better phrased as follows: civilization and linguistic communication influence the harmonisation of accounting criterions and pattern. There can be no uncertainty about this. It is besides the instance that accounting in concern is non a thing for Americans or Britons or Africans merely to advert a few. In this respect harmonisation of accounting criterions and pattern would do sense if it has the potency of universalism and internationalisation. This is precisely what this survey seeks to research ; it seeks to asseverate that linguistic communication and civilization in the accounting profession should be a agency or, a channel, through which accounting criterions are adaptable in the universe over. To repeat, the kernel of this survey is to look into the extent in which civilization and linguistic communication contributes to the catholicity or internationalisation of accounting criterions and pattern. This is what the reader should hold in head when he thinks about the facet of harmonisation. Therefore, it will be really of import to analyze in deepness what civilization is all about, slightly, give its definition and its deductions. It would besides be of import to look at linguistic communication and its elaboratenesss thereof and eventually the necessities in accounting criterions and pattern. The study shall besides give a compendious theoretical account of the theoretical model that will regulate this survey all through.
Cardinal Wordss: Internationalization, Universalism, a Window, Harmonization, Content Objective, Praxis, Communication, Conscious and Unconscious Motivations
Purposes, Objectives & A ; Report Procedure
This study has been prepared with a motivation to look into the function of civilization and linguistic communication in the harmonisation of accounting criterions and pattern. The study will besides give an analysis of civilization, linguistic communication and accounting criterions and pattern and handle them as subjects in their ain right. This study will besides set up whether the three elements can unify to bring forth a consonant execution of accounting criterions and pattern to accommodate the planetary demands in the fiscal domain of many organisations.
Earlier on, a batch has been said, in that, civilization of a community, linguistic communication of a community and so on and so away has a function to play in the harmonisation of accounting criterions and pattern. May be to divert a spot, does the reader think about the extent in which he has judged other civilizations as good or bad ; non because they are good or bad, but because he views them in the window of his ain civilization. Are at that place non cases when the reader might hold come across a text in a different linguistic communication and as a consequence brushed it off? As in, “ the text is non in a linguistic communication that can be understood, so it can non be read! See the point? Why would one so ignore a text in Italian linguistic communication or Italian civilization if it fails to sate his cultural outlooks or linguistic outlooks as an American ; why? Is this a psychological issue, emotional issue or is it a bias?
Specifically, when would an Italian comptroller, for case, fail to follow with the accounting criterions and pattern of Americans? Is it because of the inability to construe them due to the fact that the Italian can non read or talk English or is it because his civilization is anti-American so that anything American becomes irrelevant? What precisely is this study conveying away? That linguistic communication and civilization whether as a witting motivation or as an unconscious motivation act as a barrier to harmonisation of accounting criterions and pattern. Conscious motor harmonizing to this study merely means calculated usage of civilization and linguistic communication to stamp down the harmonisation of accounting criterions and pattern. On the contrary, unconscious motivation is when the topic accidentally, uses his civilization and linguistic communication to stamp down the harmonisation of the same. Harmonization is the ability to mix differing forces or criterions so that they can hold a integrity of intent.
That said this study develops a theoretical theoretical account in signifier of a diagram illustration as follows.
Accounting Standards & A ; Practice ( Praxis )
As can be seen the illustration above gives a procedure among the three major facets and how they take topographic point in the comptroller ‘s psychological science. Notably, civilization and linguistic communication converge to accounting criterions and pattern and so becomes the window through which praxis take topographic point. This is why ; from the oncoming, this study set aside cardinal words where practice means execution by the comptroller while window means the medium of focal point ; merely as how a individual in green spectacless will see world as green is the same thing that will happen when an accountant positions accounting criterions and pattern through the window of his civilization and linguistic communication every bit good. As in, he will see such criterions as to accommodate his civilization and linguistic communication outlooks.
Without much bustle, it wound now be worthwhile to immerse into bing research on this topic. However, the theoretical model discussed so far has non yet demonstrated how civilization and linguistic communication can be utile in the harmonisation of accounting criterions and pattern ; but, it has shown that civilization and linguistic communication can non be ignored whenever comptrollers seek to harmonise the assorted accounting criterions and patterns in their profession. That in title, civilization and linguistic communication can destruct efforts to internationalise the criterions. Internationalization is merely the ability to upgrade an thought or political orientation to accommodate many nationalities, for case, international accounting criterions.
The construct of civilization has had many intensions over the old ages. This survey will look at some of them with an purpose to associate this apprehension with harmonisation of accounting criterions and pattern. Harmonizing to Birukou et Al. ( n.d. ) civilization means the entirety of behaviour in the traditional context where the human race is the chief histrion. By this it means that they are the chief developers of civilization where subsequent coevalss come to larn about it. They go in front to province that civilization lacks a precise intension. This is because it points to behavior in the traditional context or what can besides be referred to as “ traditional behaviour ” . In this respect, traditional behaviour is manifested in a peculiar society, or given groups of societies, a race, an country and this takes topographic point in a specific period of clip.
Another definition has it that people learn their civilization ( Axelrod, 1997 ) . Furthermore civilization relates to groups of people and it besides captures a broad scope of phenomena, say, values, norms, shared significances, and patterned manner of behaving ( Hofstede, 2001 ) . In anthropological footings, civilization has been used to mention to societies with regard to their national or cultural footings ; the construct of civilization of civilization has besides been used to depict cognition and behavioural forms of other groups, for case, impressions in corporate civilization or organisational civilization ( O’Reilly, 1989 ) .
It is believed that globalisation procedure has impacted on civilization both positively and negatively ( Harrison and Carroll, 2006 ) . In the first topographic point, the trouble of interaction of civilization has been associated to it. It is these interactions that conveying about barriers or integrating among communities. This is the ground why there is a great demand to hold directors and professionals who are well-acquainted with the behavioural patterns that constitute their organisations.
Other research workers have defined civilization as the familial cognition and behaviour in the societal mainstream. In add-on, such cognition and behaviour becomes a shared strong belief or political orientation by a group of a people ( Peoples and Bailey, 1998 ) . Culture has besides been defined as a entire manner of life of a people that they have either acquired or learnt. It besides refers to the ways of thought, feeling and moving with regard to members of a given society ( Harris, 1975 ) .
Majorly, the reader can bear this survey informant that the definitions discussed so far accent one key point in that civilization is shared or learnt although its content varies from one group to the following. Acerate leaf to state, this study does non mean to speak about civilization but the chief purpose is to demo how civilization can be used to harmonise accounting criterions and pattern. So far it has developed several definitions where through tax write-off it can be shown how civilization leads to this terminal. This survey believes that “ civilization is an acquired or learnt or shared manner of life by a given group of people which subsequently becomes a window through which they view world. This is really of import as it straight points to this survey.
Analysis of Culture
This portion of the study will supply the reader with some critical points on the definitions of civilization given above in order to associate civilization to harmonisation of accounting criterions and pattern. Besides the reader will come across some of the cardinal words emphasized in the beginning of this study. Their use is really cardinal since it will assist to understand the affair in inquiry.
So, what is all this about civilization and what is all this about civilization being a channel to harmonisation of accounting criterions and pattern? As the reader may be cognizant, civilization entails a people ‘s manner of life through shared significances, experiences, political orientations and facts merely to state the least. Therefore, when one considers civilization as a window through which, say, an accountant professional positions world so it can be argued and justifiably so that it is in the same civilization that the comptrollers understand and implement accounting criterions and pattern. One of the cardinal words referred to was that of “ content aim ” . This is a philosophical term used in the modern period when philosophers sought to work out the job of cognition. Content nonsubjective merely means that the head takes its content and imposes it on world. See the point? The head can be taken as to intend the accountant professional with all his cultural and linguistic beliefs and strong beliefs while world can mention to accounting criterions and pattern.
That said it can be argued that every comptroller has got his ain cultural values and patterns. So, an comptroller in Asia, for case, may hold troubles in following accounting criterions and patterns in America or Japan. Assuming that Asia believes in “ endurance for the fittest ” and in title is a value in their civilization and it is besides the instance that their accounting criterions do non forbid comptrollers from stealing from the immense net incomes realized by the concern so opportunities are that they will non entertain an accounting criterion that is anti-fraudulent. See that the facet of endurance for the fittest is a cultural value and as such it has been transferred to go an accounting criterion. What is go oning hear is that the Asiatic qualify it on the footing of their civilization.
Already, one job is apparent ; when this study talks about civilization, what civilization does it mention to? Second, when this study talks about accounting criterions and pattern what criterions does it mention to? This is because there seems to be a contradiction between harmonisation of accounting criterions and pattern with civilization particularly when covering with merely one peculiar group. Harmonization would do sense if speaking about accounting criterions in the planetary point of view.
Anyhow, if an Asiatic accountant professional discoveries it difficult to get by with American accounting criterions and pattern on cultural footing how so would the same civilization of the two entities be used to harmonise such a criterion where deceitful behaviour is condemned every bit good as appreciated. So, does it mention this study to multi-culturalism or inter-culturalism? It is really complicated. Meanwhile, why non expression at the facet of linguistic communication where in bend, more contemplation will be given to consolidate the treatments advanced so far.
When it comes to linguistic communication what is nucleus is communicating. Language, as such, is for communicating intents and non needfully to make with when two or more people talk to each other. But it covers any phenomenon that is characterized by a topic and an object in communicating procedure. This means that for there to be a linguistic communication at that place has to be a communicator and a receiver of the intended message, see the point? The reader can presume that the communicator refers to the accounting criterions and pattern while the receiver refers to the accountant professional. So, how precisely can linguistic communication be used to harmonise accounting criterions and pattern?
By definition linguistic communication is a system of communicating through the use of words and symbols ( conventional symbols ) ; a instructor, for case, can be said to learn foreign linguistic communications ( Smith, 2007 ) . More significantly, a linguistic communication used becomes a criterion through out the subject and besides the effectivity of the execution of a given plan depends on the linguistic communication in which it is written ( Smith, 2007 ) . Gratuitous to state, linguistic communication can be expressed through words, write-ups, wordss et cetera ( Mores, 2008 ) .
Another definition states that linguistic communication is a model through which an entity ‘s ideas and feelings are communicated through signals, for case, sounds, voice, gestures, or symbols. This is a system that is used across different states, people, and other diverse communities ( Balzer, 2005 ) .
Even in common idiom, an mean individual will speak of linguistic communication as that which he uses to make his co-workers. Furthermore, he can specify linguistic communication as that which he uses to absorb constructs, regulations, set of criterions and conventions. So far this study has touched on the facet of universalism and now it is high clip to speak about it in deepness. When one thinks about “ universalism ” and “ harmonisation ” with regard to accounting criterions and pattern what comes into head is the component of globalisation or internationalisation? Whenever an accounting criterion is declared universal it means that its adaptability applies across the many states without trouble or resistance. Language is a cardinal factor to such harmonisation and internationalisation.
Literally, if linguistic communication is non comprehendible so the full content intended to be communicated will besides be inexplicable. See the undermentioned illustration: it is the instance that under the GAAP principles one of the demands is consistence ( Paghare, 2010 ) .This requires that professionals should garner and present information in the same manner over the subsequent periods ( Koen, 2010 ) . Company X, for case, should non change how it accounts for stock list now and so. If so, it has to observe it in the fiscal statements and besides supply a sound and valid principle for such a alteration. Now, this is an accounting criterion and it falls under linguistic communication in the written format. Practically, this criterion as presented in this study is in English, US English for that affair. What does the reader think would do if the criterion was presented to a Lusitanian accountant professional who does non cognize English? Absolutely, he will see it as Grecian! Now, between the Portuguese professional and American professional how can one harmonise this criterion? Is it by interlingual rendition?
One thing should be clear though that harmonisation does non merely intend to do an entity autumn for another entity ‘s involvement. It does non intend to show a policy in a linguistic communication that another entity can understand. Harmonization is beyond all that so that it can be regarded as the effort to synthesis a organic structure of cognition so that it meets the undermentioned specifications:
Comprehensibility by all parties
Volitional conformity by all parties
Valuable part to all parties
Emancipation from uneffective province of personal businesss
Promotion of organisational good in the planetary range
This study will be reexamining this in deepness subsequently when it will be looking at the subject of harmonisation of accounting criterions and pattern. Meanwhile it will dig into the planetary tendencies in accounting criterions and pattern in the following subdivision.
Global Trends in Accounting Standards and Practice
In a study conducted in Middle Eastern Countries ( MEC ) the purpose was to analyse the challenges of IFRS in the accounting universe of Islam. Harmonizing to this study, among 21 Middle Eastern Countries merely 15 of them allow their companies to implement the international fiscal coverage criterions ( IFRS ) . In the same vena, among 21 counties, merely three of them have developed their ain by and large accepted accounting rules ( GAAP ) at the national degree. Notably, the three states do non accept other accounting criterions ( Razik, n.d ) .
Harmonizing to Askary ( 2006 ) Middle East states do play a important function in universe policy, capital markets and investings. It is for this ground why it would be worthwhile for them to accommodate IFRS. However, this research worker goes in front to asseverate that the deliberations as to which criterions to take for a state boils down to civilization. Culture, hence, becomes the step of the revenue enhancement system in topographic point, concern organisation and direction, including accounting profession every bit good.
It is besides believed that despite the fact that IASB efforts to accomplish planetary convergence of accounting criterions and pattern, it should non pretermit the fact that other parts of the universe are sing vibrant and germinating markets. So, Europe or North America can non be regarded as an absolute step ( Razik, n.d. ) . So, in the pursuit for the IASB to accomplish a globalisation and a concern model where merely one set of accounting criterions are implemented it can non ignore the turning tendencies of economic system all over the universe and civilization so to talk.
Actually, MEC has non been left behind in the acceptance of IAS but it is reportedly said that they have some troubles with some of the commissariats. In peculiar, they have a job with IAS 24 that demands that dealing information sing household members and where the party portions some relationship should be disclosed consequently. However, due to cultural differences and signifiers of household bonds, MEC accountants happen it hard to stay by such criterions ( Razik, n.d. ) .
Arguably, patterns in accounting have had historical fluctuations from one state to another ( Nobes, 2000 ) . Harmonizing to Bloom ( 1997 ) accounting pattern is deemed as a map embedded in the civilization of a state. It is due to the fact that each state has a alone civilization that it will besides hold a alone accounting system. This in bend makes it really hard to transport out informed investing determinations in the planetary model since GAAP rules lack uniformity.
There were concerns expressed by other counties as to whether China ‘s accounting criterions upheld the IFRS criterions or non ( Dinging & A ; Su, 2008 ) . It is due to this that its Ministry of Finance whose map is to modulate accounting pattern tried to deter the IASB organic structure into subscribing a memoranda that would back China ‘s effort to encompassing IFRS. Sir David Tweedie, a representative of IASB and another representative of China signed the memoranda on 8 November 2005 to asseverate that China was to the full compliant to IFRS but with three freedoms as follows ( Ding & A ; Su, 2008 ) :
If it involves dealing to make with related party and besides revelation
If it involves rejected depreciable assets
The other challenge confronting the regulative organic structure in Chinese is the fact that it needs to obtain acknowledgment amidst its foreign opposite numbers in that their criterions are effectual, sound, and to the full IFRS compliant. In this respect, such acknowledgment would render other states that are IFRS ailment respect Chinese fiscal studies straight acceptable. The acknowledgment of Chinese GAAP as compliant to IFRS was foremost asserted by Hong Kong Institute of CPAs and the European Union was expected to follow suit ( Wang, 2007 ) . In the same context, there have been on traveling dialogues where states like Australia, Japan, Russia and other states are expected to follow the same way. It is besides believed that despite the fact that the new accounting criterions in China are as per the criterions set out in IFRS their manner of execution is still really alone and different ( Ding & A ; Su, 2008 ) .
As can be seen from the few penetrations and illustrations advanced in this portion of the study the content aims to supply the reader with some of the tendencies that underlie acceptance of accounting criterions ( GAAP or IFRS or IAS ) in assorted states. The reader can research farther beyond the few states discussed supra. Anyhow, one of the most of import issues is that civilization has been supposedly regarded as an influential factor towards the acceptance of accounting criterions. Second, despite the willingness of a state to meet their accounting patterns into IFRS there are still some elements of it that remain unchanged and curious to the state itself. This must be the major trouble in harmonisation of accounting criterions and pattern in a planetary model. This and more signifier the last subdivision of this study under the subject “ harmonisation of accounting criterions and pattern ” .
Harmonization of Accounting Standards and Practice
It would be worthwhile to take into consideration some of the factors that lead to differences in accounting at the international degree. Some research workers assert that Accounting Practices depend mostly on the environment in which a state is in ( Nobes et al. , 1997 ; Radebaugh and Gray, 1997 ) . Analogically, merely as how different provinces have different histories, political orientations and political systems so does the same happen when fiscal accounting is concerned. It is believed that there are no two states that portion the same Accounting Standards and Practices ( Roberts et al. , 1998 ) . Robert goes in front to asseverate that there are certain variables that generate differences in Accounting Practices. They can be outlined as follows:
Supplier of Capital
The above mentioned elements, in one manner or another, influence the National Accounting Practices of a state. Legal system, for case, takes into consideration the fact that some states carry out their accounting patterns through a legal model and responsibility whereas there are states whose accounting patterns have nil to make with the legal system ( Nobes & A ; Parker, 2000 ) . States that use common jurisprudence do non use jurisprudence in the Accounting Practice where the comptrollers are the 1s who make or develop their ain regulations. In this respect, the private sector punctuates the “ how ” of Accounting and non the jurisprudence ( Choi et al. , 2002 ) . On the contrary, states that use statute jurisprudence slightly inter-relate the Accounting Practice with the jurisprudence. Therefore, jurisprudence becomes the chief histrion in specifying Accounting Practice so to talk. The tabular array below gives a concise presentation of states that use common jurisprudence and those that use statute jurisprudence.
States utilizing Common Law
States utilizing Codified Law
England and Wales
Japan ( Commercial Law )
Beginning: ( Nobes and Parker, 2000 )
This study will non brood much on all the factors but it can non go forth out demoing how national civilization can be a cause of differences in accounting. It has been said mostly in the earlier treatments that national civilizations of states have a great impact on Accounting Standards and Practices. Hofstede ( 1991 ) carried out an empirical probe in an American Company and went in front to asseverate that the mode in which comptrollers behave and the nature of Accounting Practices depends on the national civilization. He states that individuality in some civilizations affects accounting when affairs on revelation and income measuring regulations are concerned.
The valuable thing as to why there is a demand to understand the factors that contribute to differences in Accounting Practice are that it will assist interested parties to cognize where precisely to make harmonisation. In a prosaic linguistic communication one can non cognize the best manner to harmonise arbitrary differences in Accounting Standards and Practice if he does non cognize the causes for such differences. Inasmuch as the IASB efforts to harmonise these criterions and patterns it must, foremost of all, set up the causes for the same. The chief inquiry should be: where party A seeks to follow IFRS in order to suit party B for investing intents, it must inquire “ where do we differ ” , “ What is the cause of these differences ” . In general, the harmonisation procedure should be a inquiry of “ why ” and non of “ what ” or “ how ” or “ when ” . This is the first measure where everything else follows suit.
That said the following of import thing would be to look at some of the benefits of harmonisation of accounting criterions and pattern.
One of the benefits associated with harmonisation of Accounting Standards and Practice is that it fosters an environment where the planetary economic system to the full realizes its additions. It besides facilitates international minutess and reduces exchange costs due to the handiness of appropriate information ( Shil, 2009 ) . The other benefit is the fact that harmonisation of accounting criterion and pattern occasions a “ flat playing field ” in the planetary procedure. In this context, it makes it easy and safe for states to merchandise without embezzlements of duties or quotas and other conflicting mechanisms involved in trade. It is hence the instance that harmonisation of accounting policy rescues different economic systems from malicious motivations that would non happen in a free trade.
Organizational internationalisation and battle in international trade is another factor that benefits mostly from harmonisation of accounting criterions. Due to this phenomenon, enterprisers and concern communities need a standard linguistic communication that can be understood by all ( Memani, 2006 ) . This is what harmonisation of accounting criterions and pattern does. If this study turns a spot scriptural where it is said that what led to the prostration of the Tower of Babel was due the many linguistic communications spoken and unluckily, no one understood the other. This is a scriptural myth but can be used to enrich this survey. In the same manner, this is what would go on if different economic systems failed to hold a incorporate manner of making accounting pattern. This is what civilization and linguistic communication would make in instance there was no convergence point.
Cross-boarder amalgamations and facilitation of acquisitions is the other benefit that would accrue from planetary convergence of accounting policy. By extension, such harmonisation strengthens the quality of fiscal coverage globally ( Srkant, 2005 ) .
Last but non least, the other benefit would be that harmonisation makes comparison of fiscal information at the international degree possible. Comparability eliminates current misinterpretations related to dependability of foreign fiscal statements and as a consequence to smoothen the flow of international investing ( Diaconu, 2009 ) .
However, harmonisation of accounting criterions and pattern has got several restrictions. This study will non detail them but it hopes that the reader gets to research on them. It is besides portion of the grounds why the findings of this study should be improved in the hereafter. On the other manus, the findings established are evidently the most critical as they form the footing of this survey. This means that failure to province the negative facets of harmonisation of accounting criterions and pattern will non impede this survey from recognizing its purpose and aims. This besides applies to other phenomenon that might originate.
On the footing of the reported findings, this study further recommends that:
The quest for internalisation of accounting criterions and pattern become a authorities undertaking and a legal demand. This manner, most organisations and companies will see reexamining their accounting map to accommodate international accounting criterions.
Business course of study plans be such that they educate the concern pupils on the consequence of civilization on effectual concern environment. It is high clip accounting classs introduce cultural surveies in the faculties.
IASB can see educating the public both internationally and domestically on the benefits of harmonisation of accounting criterions and pattern through the media. This can be through concern magazines or newspapers.
Governments should educate their citizens on the importance of foreign investing and how they can lend to it through cultural emancipation.
Further to recommendation ( four ) above the authorities can straight nail on those cultural facets that do non add value to accounting pattern across organisations and extinguish them through instruction and affirmatory action.
The demand for this study arose out of the demand to measure the implicit in effects of civilization and linguistic communication in the harmonisation of accounting criterions and pattern. The purpose was to set up whether civilization and linguistic communication do hold any important deductions on sound accounting criterions and pattern. This study has established that civilization and linguistic communication do impact the range of harmonisation of accounting policies across the lodgers. It has besides been established that there are several monetary benefits that come with the move. The cultural environment has been pointed as an country where a batch needs to be done if sound accounting criterions and patterns are to be realized. However, possible steps have besides been proposed to this terminal. The political every bit good as the economic governments have been shown to be rather influential to this terminal.