·
ACCOUNTING
FOR INTERNATIONAL DEVELOPMENT
Accounting standards
and practices in each country are the result of complex interactions between
economic, historical, and cultural institutions. Predictably be the difference
between countries. Factors affecting the development of national accounting may
also help explain the differences in accounting between nations.
International
Accounting is accounting for international transactions, comparisons between
countries of different accounting principles and harmonization of accounting
standards in the areas of tax authorities, auditing and other accounting areas.
Accounting must be developed in order to provide the required information in
decision-making in the company on any changes in the business environment.
Here are the characteristics of the era
of the global economy:
1.
International business
2.
The loss of boundaries between the
State's global economy it is often difficult to identify the country of origin
of a product or company, it is going to multinational companies
3.
Dependence on international trade
There are eight (8) factors that
influence the development of international accounting:
1.
Sources of funding
In
countries with strong equity markets, accounting has focused on how well the
management runs the company (profitability), and is designed to help investors
analyze future cash flows and related risks. Instead, the credit-based system
in which the bank is a major source of funding, accounting has focused on
creditor protection through conservative accounting measurement.
2.
Legal System
The
western world has two basic orientations: the legal code (civilian) and the
common law (case). In code law countries, law is a comprehensive group that
includes provisions and procedures thus accounting rules incorporated in
national laws and tend to be very complete. In contrast, common law develops on
a case by case basis without any attempt to cover all the cases in the complete
code.
3.
Taxation
In
most countries, the tax code is effectively set the standard because the
company had record revenue and expenses in their accounts to claim it for tax
purposes. While a separate tax and financial accounting, tax rules sometimes
require the application of certain accounting principles.
4.
Association of Political and Economic
5.
Inflation
Inflation
causes distortion of the historical cost accounting and influencing trends
(tendencies) of a State to apply the changes to the company accounts.
6.
Level of Economic Development
This
factor affects the types of business transactions conducted in the economy and
determine which are most important.
7.
Level of Education
Standard
accounting practices are very complex would be useless if misunderstood and
misused. Disclosures about derivative securities risk would not be informative
unless it is read by the competent authorities.
8.
Culture
The
four dimensions of national culture, according to Hofstede: individualism,
power distance, uncertainty avoidance, masculinity.
Dimension Value Accounting Accounting
Practices Affecting:
1.
Professionalism versus control mandatory
preference to the implementation of the balance of individual and professional
self regulation among professional compared to compliance with specified
provisions of law.
2.
Uniformity versus flexibility preference
for uniformity and consistency than flexibility in reacting to a particular
situation
3.
Conservatism versus optimism
4.
Confidentiality versus transparency
preferences and restrictions of confidentiality of business information on the
basis of need to know than the willingness to disclose information to the
public.
Reasons Go International companies:
1.
Theory pf comparative advantage
2.
Imperfect market theory
3.
Product cycle theory
4.
Technology transfer and Strategic
Alliance
The challenge for the profession of
accountants in the development of accounting:
1.
Skill and competence
2.
Understanding Cross Functional Linkages,
accountants are not only quite adept in the techniques, procedures and
accounting standards but should also look at the business as a common
integrated form. Such as: product quality, production flexibility and the ability
to produce and export quickly to win the global competition bias
3.
Financial analysis and comparison
·
INTERNATIONAL
ACCOUNTING CLASSIFICATION
Classification is
fundamental to understand and analyze why and how the national accounting
system is different. We can also analyze whether these systems tend to converge
or differ. The purpose of classification is to group financial accounting
system according to particular characteristics. The classification reveals the
basic structure in which the group members have in common and what
distinguishes the groups varied from each other. By identifying similarities
and differences, our understanding of the accounting system would be better.
International accounting
classification can be done in two ways: With consideration and empirically.
Classification of the considerations depend on knowledge, intuition and
experience. Classification empirically using statistical methods to collect
data accounting principles and practices around the world.
There are four classifications Approach
The initial
classification was proposed by Mueller mid-1960s. He identified four approaches
to the development of accounting in Western countries with market-oriented
economic system.
1.
Based approach to macroeconomics,
accounting practices derived from and designed to enhance national
macroeconomic objectives. The company's goal is generally to follow and not
lead the national policy, as business enterprises mengordinasikan their
activities with national policy. Therefore, for example, a national policy in
the form of stable employment with avoiding major changes in the business cycle
will result in a leveling of income accounting practices. Or, to encourage the
development of a particular industry, a State may permit rapid removal of
capital expenditure on some of these industries. Accounting in Sweden developed
from macroeconomic approach.
2.
based approach to microeconomics,
accounting evolved from the principles of microeconomics. The focus lies on the
individual company has a goal to survive. To achieve this goal, the company
must maintain physical capital owned. It is equally important that the company
clearly separates capital from profits to evaluate and control business
activities. Accounting measures that are based on the replacement cost was
strongly supported by most suited to this approach. Accountancy in the
Netherlands developed from microeconomics.
3.
by an independent disciplinary approach,
derived from accounting and business practices developed on an ad hoc basis,
with the base slowly from consideration, trial and error. Accounting services
regarded as a function of the concepts and principles taken from the executed
business processes, rather than a branch of science like economics. Businesses
are facing real-world complexity and uncertainty that always happens through
experience, practice and intuition. Accounting evolved in the same way. For
example, profit is simply the most useful thing in a pragmatic and disclosure
practices in response to the needs of the users. Accounting evolved
independently in the United Kingdom and the United States.
4.
based approach to a uniform,
standardized accounting and is used as a tool for administrative control by the
central government. Uniformity in the measurement, disclosure and presentation
of accounting information makes it easy to control all types of businesses. In
general, a unified approach is used in countries with large government
ketelibatan in perncanaan economy in which accounting is used among others to
measure performance, allocate resources, collect taxes and control prices.
France, with a uniform chart of national accounting is a major supporter of a
uniform accounting approach.
Accounting can also be classified by the
legal system of a State.
1.
Accounting in common law countries have
a character-oriented presentation, transparency and full disclosure and the
separation between financial and tax accounting. The stock market is dominating
the financial resources and financial reporting needs infrmasi shown to outside
investors. Accounting law commonly referred to as Anglo-Saxon.
2.
Accounting in code law countries have
the characteristics oriented, legalistic, do not allow the disclosure of the
amount is less, and the fit between the financial and tax ankuntansi. Bank or
financial ksumber dominated government and financial reporting and financial
reporting aimed at creditor protection. Accounting is also called continental.
Providing accounting parallelize the character referred to as a model of
shareholders and other interested parties kelila corporate governance role in
state common law and code law.
Many differences in national accounting
is becoming increasingly lost. There are several reasons for this
a. Hundreds
of companies today recorded its shares on a stock exchange outside of their
home country,
b. Some
State law code, in particular Germany and Japan to transfer responsibility
establishment of accounting standards from the government to the private sector
and independent professionals,
c. The
importance of the stock market as a source of funding is growing around the
world.
Classification is based Padada fair
presentation versus legal compliance pose a major influence on many accounting
issues, such as
1) depreciation,
where the load is determined by a decrease usability of an asset over the
useful economic (fair presentation) or the amount allowed for tax purposes
(legal compliance),
2) leases
that have substance purchases of fixed assets are treated as such (fair presentation)
or are treated as operating leases usual (legal compliance),
3) pension
costs are accrued at the time generated by the employee (fair presentation) or
charged by the basic pay at the time of stopping work (legal compliance).
CLASSIFICATION
OF ACCOUNTING AND REPORTING SYSTEM
There are two approaches to the
classification of the accounting system are:
1)
Deductive Approach
In
connection with this deductive approach, there are four approaches in the
development of accounting:
I.
Macroeconomic Pattern
In this approach can be seen that
in fact the accounting for business is closely linked to national economic
policy. The company's goal is usually to follow the national economic policy.
Some countries are using this approach is Swedish, French, and German.
II.
icroeconomic
Pattern
In this approach is seen as a
branch of economics accounting business. The concept of accounting is
derivation of economic analysis. The main concept is how to maintain a capital
investment in a business entity.
III.
Independent Discipline Approach
Accounting is seen as a function
derived from the services and business practices. The United States and Britain
embraced this approach.\
iv.
Uniform Accounting Approach
Accounting is seen as an efficient tool
for the administration and control. In this case, the accounting is used to
facilitate the use and good uniformity measurement, disclosure and presentation
as well as a means of control for all types of businesses and consumers,
including the manager, government and tax authorities.
Classification is done G. G. Mueller,
published in The International Journal of Accounting (Spring 1968), who used an
assessment of economic development, the complexity of business, political and
social situation of the legal system, dividing countries into 10 groups based
accounting system are:
• United States / Canada / Netherlands
• British Commonwealth Countries
• Germany / Japan
• Mainland Europe (not including West
Germany, the Netherlands and Scandinavia)
• Scandinavian
• Israel / Mexico
• South America
• Developing Countries
• Africa (excluding South Africa)
• Communist Countries
2.
Inductive Approach
While
Nair and Frank in The Accounting Review (July 1980) divides countries into
large Group 5: (1) a model British Commonwealth, (2) model Latin America / South
Europe, (3) model of Northern and Central Europe, (4 ) model of the United
States and (5) Chile based on differences in the practice of disclosure and
presentation. Nair and Frank also assess the relationship of grouping countries
by a number of variables such as language, economic structure and trade.
Apparently there is a difference between disclosure and measurement in each
group State.
While Nobes in the Journal of Business
Finance and Accounting (Spring 1983) identified factors that distinguish accounting
system are:
•
Type of users of financial statements
published
•
The level of legal certainty.
•
tax rules in the measurement.
•
The level of conservatism.
•
The level of rigor in the application of
historical cost.
•
Adjustment of replacement cost.
•
Practice consolidation.
•
Ability to obtain provisions.
•
Uniformity among companies in
implementing regulations
SOURCE
(REFERENCE)
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