A hot subject of the recent old ages in the facet of accounting has been the international accounting harmonisation. The birth of this subject is due to the diversenesss of accounting systems in different states. Harmonizing to the past literatures, there is a big list of possible factors which can do the differences in accounting systems. As accounting is influenced by the environment in which it operates, a state ‘s accounting system would be affected by its cultural, economic and institutional factors. Several influential factors have been found by old research workers ( Nobes, 1998 ) , and these factors can be summarised as a list: ( 1 ) Nature of concern ownership/Financing and stock markets, ( 2 ) Legal systems, ( 3 ) Political systems/Government influence, ( 4 ) Tax, ( 5 ) Profession, ( 6 ) Culture, ( 7 ) Degree of instruction, ( 8 ) Phase of economic development, ( 9 ) Geography, ( 10 ) Other causes: rising prices, theory, ‘accidents ‘ , faith, and colonialism, etc, while the list would be thorough. The accounting system for a peculiar state would be affected by some factors which are merely effectual in this state. Therefore there are some factors which play a prevailing function on the development of accounting systems. In the followers we will take the United States as an illustration to exemplify three chief influential factors which are prevailing on the development of the U.S. accounting system.
To get down with the ground that why we use the United States as our observation, it is said that the development of the U.S. economic system have a dominant influence on the planetary fiscal state of affairs today. This can be testified by tracking back to the fiscal crisis happened in this twelvemonth. Consequently, it is deserving to discourse which factors have an effectual impact on the development of accounting system in the United States.
1. Capital markets
Harmonizing to Nobes ( 2006 ) : ‘This difference in suppliers of finance ( creditors/insiders ) versus ( equity/outsiders ) is the cardinal cause of international differences in fiscal coverage. ‘ In add-on old surveies have indicated that accounting systems are important influenced by corporate fiscal construction and the nature of entities ownership and capital markets ( e.g. La Porta and Lopez-de-Silanes, 1998 ; La Porta et al. , 1996 ) . These statements can be proved right when see our observation – United States.
In the U.S. , a big figure of companies rely on the external stockholders to raising their financess. It has been defined as ‘strong equity market ‘ by comparing with the ‘weaker equity markets ‘ which the companies ‘ finance more relied on recognition loans from Bankss or other fiscal establishments ( Nobes and Parker, 2004 ) . There are more than 11,000 houses in the United States which are listed on the stock exchange markets ; these companies raise financess chiefly by publishing securities. Consequently, it can be said that the construction of the economic system of the United States are chiefly composed by the listed companies from the position of the proportion of the listed houses in the state. Having said that, it is sensible to believe that this economic construction would has a important impact on the design and development of the U.S. accounting system. It can be examined that the fiscal coverage system in the U.S. is straight towards or focal points on the information demands of the investors, irrespective of whether they are investors in stocks or bonds ( A?erne, 2009 ) . This is because the investors treat the fiscal studies as a important beginning of information about the public presentation of the concerns. Therefore, the accounting system in the U.S. is designed to supply crystalline fiscal studies which contain a sufficient sum of information to bespeak how the concerns runing. It is besides deserving to advert that the transparent of the fiscal revelation in the U.S. accounting system has going more and more of import after the Enron dirt.
2. Culture value
In 1988, Gray ( 1988 ) developed a theoretical account which associates with accounting sub- cultural values and cultural dimensions developed by Hofsede ( 1980 ) . This theoretical account illustrates that a state ‘s accounting system would be influenced negatively by cultural dimensions of uncertainness turning away and power distance, positively by individuality and maleness. More specifically, cultural diversenesss between states are recognised as an of import influential factor on fiscal coverage and revelation with respect to fiscal statements ( Alexander, 2007 ) .
Based on the Hofsede ‘s theoretical account, it can be identified that the features of the U.S. civilization are illustrated as followers: ( 1 ) recommending individuality ; ( 2 ) little social power distance, people in the United States have more demand of equality than that of in the other states ; ( 3 ) weak uncertainness turning away, more easy to accept divergences ; ( 4 ) masculine society, people live in this state are more regard to the sense of accomplishment and hero sense and the success in the stuff. Therefore, these belongingss of the U.S. civilization have a important influence on the development of the U.S. accounting system.
First, the constitution and the implement of the accounting criterions emphasise Professional orientation and flexibleness. Because of the feeling comfy with uncertainness and ambiguity in the whole American society, and the economic activities more advocator to the individuality, but less rely on the authorities intervention. As a consequence, the accounting in the United States emphasises the professional orientation and flexible direction, and less depend on the statute laws.
Second, the fiscal revelation in the U.S. accounting system tends to be more crystalline. This is caused by the regard of individuality in the U.S. civilization. Most companies in the U.S. raising their financess by publishing securities and bonds to persons in the society. That will coerce the companies to supply comprehensive accounting information to the investors and creditors. And the accounting governments besides encourage the companies to print more information about their public presentation to the society.
Last, the accounting measuring in the U.S. is partial to optimism. The ground behind this is that the weak reaction to the uncertainness in the U.S. society and the accent on the true contemplation of the companies operation and fiscal state of affairs in the accounting facet of the United States. In add-on the invention of the accounting methods and low conservativism besides led to this consequence.
3. Legal system
In add-on to the above, Gray ‘s theoretical account besides pointed out that state ‘s development of accounting system would be strongly affected by its legal system ( common jurisprudence V codification jurisprudence ) . The trait of the common jurisprudence is that is developed from instance by instance and does non order general regulations that could be applied to several instances ( Alexander, 2007 ) . In states which are classified as using common jurisprudence, so their accounting ordinances are non a portion of their jurisprudence. Furthermore, the right of the scene of accounting ordinance is in the custodies of professional organisations of the private sector. The FASB ( Financial Accounting Standards Board ) is a standard puting board that creates and publishes accounting criterions for foreign and domestic houses in the United States to promoting the equality of fiscal statement demands in their utilizing of U.S. capital markets. Therefore the accounting criterion in the United States is the U.S. GAAP ( General Accepted Accounting Principles ) . Consequently, there are several differences exist in the U.S. accounting fiscal coverage. For case, the U.S. tends to hold some accounting elements such as assets are shown on the left side of a horizontal balance sheet ; or the intervention of good will in the U.S. is normally capitalised and amortised by charges to net incomes by comparing with the UK where companies ‘ good will are permitted to compose off straight against grosss instead than holding to capitalize and amortize it against net incomes. In general, the chief difference between the U.S. GAAP and the IAFSs ( International Accounting Financial Standards ) is that the former one is based on regulations and specific detailed, whereas the ulterior one is tend to be more loosely based on rules. In add-on, theoretically the FASB works as an independent organisation. But, if a new criterion issued by FASB has a negative impact on the net incomes of an entity, so some powerful large companies or groups normally exert improper force per unit area through the Congress to the FASB. Unfortunately, it is inevitable for the U.S. to alter this state of affairs.
Although there are many other factors which may play an of import function in the influence of the accounting system development that are non addressed supra. Such as rising prices, instruction, and revenue enhancement, etc. Some of them are excessively obscure to be illustrated.
However, the differences in the capital markets and the cultural value and the legal system which are discussed in this paper extremely relate to the development of U.S. accounting system. While, because these three factors have strong representative to reflect the differences and features of the American accounting system. While it is necessary to advert that it is impossible to accomplish a consensus that which factors have prevailing influence on the development of a state ‘s accounting system, because some of factors will interdependence with other factors.
Finally, the international accounting harmonisation will go on to be a unrecorded issue because of the advantages it will convey. Consequently, the globalization of accounting will go clearer along with the integrating of planetary economic system. For illustration, in the U.S. , collaborative convergence attempts have started between the FASB ( Financial Accounting Standards Board ) and the IASB ( International Accounting Standards Board ) . But there are many complications exist in the meeting the IFRSs and the U.S. GAAP, so this will be a long term procedure to accomplish the concluding solution. Furthermore, during the procedure, the factor of civilization may move as a negative component, as some states may decline to accept the accounting globalization by utilizing the support of cultural diversenesss, and some others may popularize obsessively their accounting system for the interest of accounting globalization. Therefore, it is necessary to see the causes of the differences in accounting systems, and future surveies will supply a deeper account to this issue.