International Accounting and Harmonization

Muhammad Bahrul Ilmi, S.ELecturer of Accounting Economic Faculty

Solo Business School STIE Siurakarta

Cultural Influences on Accounting

One of the major objective of financial reporting is to provide information user for making economic decisions. Since environment differ from country to country, the types of decision that need to be made and their information requerments are also different. This explains why there are different accounting system in different countries : Accounting provides information for making economic decision in the Uniqe environment of Each country, therefore, the accounting systems are necessarily environment-specific.

There are Five major environmental influences that collectively cultural or societal values :1. The Economic system2. The Political system3. The Legal system4. The Educational system5. Religion

religion

Economic system Legal systemPolitical

systemEducational

system

CULTURAL (societal) VALUES

Accounting Profession’s Value

Accounting System

The Economic System

The Degree of Economic development and the level of technologhy in a country determine, to a great extant, the level of complexity of its accounting system. The accounting system of an aconomicallay country with a high –technology economy would be different from accounting system of a country with primarily an agrarian economy.

The Political System

The Political system of a country, its philosophy, and its objectives determine board economic policies such us as centrally planned versus market-driven economies, and private ownership versus public ownership of property

The Legal System

“ In many countries, including some Westren Europen contries, the legal system has a direct impact on a accounting … “

Laws contain detailed accounting regulation specifying comprehensive accounting rules and procedures. In such countries, accounting rules are based on legislative requirement. The government, therefore, determines and enforces these requirement through accounting rules

The Educational System

The educational system and the level of literacy in a country impact

the country’s accounting system in two ways :

• Well-educated user accounting information can be understand

sophisticated accounting information

• The accounting in a country that has high educational standards are

usually better trained and possess the necessary competencies and

skill to satisfactorily complete their professional assignments.

In sum, educational backgrounds of both users and

prepares of accounting information strongly affect the degree of

development and level of sophistication of a country’s accounting

system

Religion

Religion, in the broad sense of term, affect basic accounting concept. In many Muslim country’s, e.g., Pakistan, the idea of interest on loans is country to widely held religious belief. The female owner of a business cannot deal directly even with her own male employess.