Harmonisation of International Accounting Standards Essay

Harmonisation of International Accounting Standards - Essay Example The cultural environment of a country plays a significant role in determining the development of its accounting standards and financial reporting system. Infact, it is supposed to have acted as the foundation stone upon which the origin of accounting rests. As Baladouni (1979, p326-327) points out that "the origin, content, or mode of being of accounting was found to be based on cultural and social forces". The accounting structure of a country depends upon social and cultural values prevailing in a society and hence the environment plays an essential role in the diversification of accounting standards among different countries. Mueller (1968) illustrated that the social and environmental conditions the development of accounting standards and principles are the currency composure and balance, legal and political pressures, segregation of ownership and control, economic development and literacy status etc. Nair and Frank (1980) said that the accounting principles and techniques of a c ountry are influenced by its cultural and economic environment. Baladouni (1979) further commented that the â€Å"cultural framework† specifies a group of institutions in the society, representing the most important part of its culture and the feature of general social activities that influence the development of accounting functioning. To assess the basis of distinctness and contrariness lying amongst various cultures, the research carried out by Hofstede is significant as it studies different dimensions.... y depends upon social and cultural values prevailing in a society and hence the environment plays an essential role in the diversification of accounting standards among different countries. Mueller (1968) illustrated that the social and environmental conditions the development of accounting standards and principles are the currency composure and balance, legal and political pressures, segregation of ownership and control, economic development and literacy status etc. Nair and Frank (1980) said that the accounting principles and techniques of a country are influenced by its cultural and economic environment. Baladouni (1979) further commented that the "cultural framework" specifies a group of institutions in the society, representing the most important part of its culture and the feature of general social activities that influence the development of accounting functioning. To assess the basis of distinctness and contrariness lying amongst various cultures, the research carried out by Hofstede (1980, 1983 and 1987) is significant as it studies different dimensions of drawing a comparison and distinction between different cultures prevailing in different nations influencing upon their accounting standards. The four dimensions pointed out by Hofstede (1987, p4-5) best illuminate the ground on which we can rest the reasons behind major cultural differences among various countries. These dimensions are as follows: Power Distance: This refers to the distance or balance of power between the giant and the small dwelling in the society. It is about how responsible a society evaluating the distribution of power among different members of the society. This aspect may vary form nation to nation as not every nation equally distributes the power among its members. Uncertainty