Chapter 5

Question 1

Harmonisation =

Answer 1

a process of increasing the compatibility of accounting practices by setting bounds to theirs degree of variation

Question 2

Standardisation =

Answer 2

appears to imply the imposition of a more rigid and narrow set of rules (IASB)

Question 3

Some perceived benefits with international standardisation

Answer 3

• international investors gets bigger understanding
• easier for local companies to list on foreign securities exchanges
• only need to produce one set of financial statements
• cost saving the in the accounting-standard setting function

Question 4

2 Objectives of the IASB

Answer 4

• seeks to formulate and publish accounting standards and to promote their worldwide acceptance
• seeks to work on the improvement and standardisation of regulations, accounting standards and procedures

Question 5

Reasons to why differences in accounting practice will survive beyond the introduction of IFRS

Answer 5

• difference in taxation systems
• difference in economic and political influences on financial reporting
• modifications made to IFRS at a national level
  -Issue of translation
• differences in implementation, monitoring and enforcement

Question 6

Reasons to why differences in accounting practice will survive beyond the introduction of IFRS - “Difference in taxation systems”

Answer 6

Tax-driven accounting choices, which are domestic, might flow through to IFRS statements

Question 7

Reasons to why differences in accounting practice will survive beyond the introduction of IFRS - “Differences in economic and political influences on financial reporting”

Answer 7

(Ball) Sceptical to uniformity since the incentives of preparers (managers) and enforcers (auditors, courts, regulators) remain primarily local

Question 8

Reasons to why differences in accounting practice will survive beyond the introduction of IFRS - “Modifications made to IFRS at a national level”

Answer 8

The IASB has no ability to enforce the use of the standards in countries which have adopted them.

Question 9

Reasons to why differences in accounting practice will survive beyond the introduction of IFRS - “Issues of translation”

Answer 9

IFRS are in english than translated, how accurate are such translations?

Question 10

Reasons to why differences in accounting practice will survive beyond the introduction of IFRS - “Differences in implementation, monitoring and enforcement”

Answer 10

IASB can not enforce application, enforcement and monitoring is done by local corporate regulators. Some might only apply the standards in order to get legitimacy.

Question 11

Historic international financial accounting method - Anglo-American Model

Answer 11

• Influenced by professional accounting bodies rather than government.
• In theses environments funds were generally sourced from capital markets and there was a reliance on general purpose financial reports

Question 12

Historic international financial accounting method - Continental European Model

Answer 12

• Has a small input from accounting profession, little reliance on qualitative concepts such as true and fair, and strong reliance on government
• Funder sourced from government, banks or family members and interested parties were able to obtain information through special purpose financial reports

Question 13

On aspect with big influence on accounting systems differences

Answer 13

Cultural

Question 14

Cultural definition

Answer 14

“an expression of norms, values and customs which reflect typical behavioural characteristics”

Question 15

Classifying a country´s culture - Hofstede´s 4 underlying societal cultural dimensions

Answer 15

• Individualism vs Collectivism
• Large vs Small power distance
• Strong vs Weak uncertainty avoidance
• Masculinity vs Femininity
  Without the intervention of organisations such as the IASB, these societal values will in turn impact on the development of accounting standards at a national level

Question 16

Hofstede - Individualism vs Collectivism

Answer 16

Addresses the degree of interdependence a society maintains among individuals.
- Individualism - loosely knit social framework where individuals care for themselves
- Collectivism - tigthly knit social framework where you look after each other

Question 17

Hofstede - Large vs Small power distance

Answer 17

The extent to which members of a society accept that power in institutions is distributed unequally.
- Large - societies accept a hierarchical order where everyone has a place and need no further justification
- Small - societies strive for power equalisation and demand justification

Question 18

Hofstede - Storn vs Weak uncertainty avoidance

Answer 18

The degree to which the members of a society feel uncomfortable with uncertainty and ambiguity. Control the future or not?
- Strong - maintains rigid codes of belief and behaviour
- Weak - more relaxed atmosphere

Question 19

Hofstede - Masculinity vs femininity

Answer 19

Addresses the way in which a society allocates social roles.
- Masculinity - preference for achievement, heorism, assertiveness and material reward. More competitive society.
- Femininity - preference for relationships, modesty, caring for the weak and quality of life.