Cultural Elements Of Accounting

There are several elements concerning the external environment which include: political elements, economic elements and the cultural elements as well as a variety of other factors that would influence the accounting system along with the accounting reporting system.
Influence of Political Elements: Political elements are often associated with government rules and regulations that have a deeper impact on the accounting statement itself. Any alteration that may occur in the rules and regulations of the government would directly affect the financial reporting. Consider the case of the improvements of the tax rate of the earnings of the companies which would certainly have an affect on the financial reporting. Another case that should be considered

The Hofstede Cultural dimensions elaborates the cross cultural differences of several different countries which demonstrates how one country is different from the other in regards to cultural dimensions that influence the financial reporting. There are six dimensions that are described which are: Power Distances that explain the involvement of the workers in the business decisions, Masculinity versus Femininity which elaborates the desire for materialistic achievements as opposed to real achievements, Collectivism versus Individualism explaining the level of both selfishness or selflessness, the Uncertainty Avoidance Index which analyses the abilities of a country to dispose of any unexpected situations, Indulgence versus Restraints that refers to the ability of the country to participate in the fun loving events opposed to the countries who give less priority to these types of events, the final dimension included is the Long Term Orientation versus Short Term Normative Orientation that that explains the ability of the country to make associations with the past, present and future and those countries who fail to do so. These six elements represent the fact that different countries have different cultural dimensions which have different influences on the financial statements. When looking into Islamic countries where Zakat deduction is necessary due to

The IFRS was introduced to ensure that there would be similar standards used all around the world with full public disclosure of the financial information explaining the financial position of the companies. These standards make the comparison of different companies in different parts of the world easier, due to having the same accounting standards one can compare the financial position of one company with another and it would also significantly save time and money as well as ensuring an efficient allocation of the capital. It provides a comfort zone to the corporations that are operating globally that were struggling before the introduction of the International Financial Reporting Standards. These companies must have a decent level of understanding the accounting system of different countries, which was the main obstacle that stood in the way of globalization in the past however thankfully due to the International Financial Reporting Standards this obstacle is now taken care of. In conclusion we can point out that the homogenization of the accounting standards greatly supports globalization and provides a proper comfort zone for international corporations. (Katherine