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Chap 4

The document discusses how culture and religion can influence accounting practices and financial disclosure. Secrecy, individualism, and uncertainty avoidance are cultural dimensions that may impact disclosure levels in financial reporting. Religion is also explored as a factor, as Islamic cultures have been slow to adopt Western accounting practices due to different views of stewardship and prohibitions against interest.

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35 views

Chap 4

The document discusses how culture and religion can influence accounting practices and financial disclosure. Secrecy, individualism, and uncertainty avoidance are cultural dimensions that may impact disclosure levels in financial reporting. Religion is also explored as a factor, as Islamic cultures have been slow to adopt Western accounting practices due to different views of stewardship and prohibitions against interest.

Uploaded by

najane
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Secrecy

The degree of secrecy preferred in an accounting sub-culture would influence the


extent of the information disclosed in accounting reports.
The higher the degree of secrecy, the lower the extent of disclosure
Perera(1989) considered both Hofstedes cultural dimensions and Grays accounting
sub cultural value dimensions and uses them to explain apparent differences in
accounting practices adopted in continental European countries and AngloAmerican countries.
According to Perera, many countries in continental Europe are characterized by
relatively high levels of uncertainty avoidance where rules or social codes tend to
shape behavior, while the opposite applies in Anglo-American countries.
Zarzesk
Zarzeski (1996) provides evidence that supports a view that entities located in
countries classified as relatively more individualistic and Masculine and relatively
less in terms of UA provide greater levels of disclosure.
Zarzeski also considered issues associated with international profile and found that
those entities with a relatively higher international profile tend to less secretive
than other entities.
Baydour and Willett (1995) used the Hofstede-Gray theory to investigate the use of
the French United Accounting System (which was ranked lowly in terms of
Professionalism and highly in terms of Uniformity as well as being considered as
quite conservative) in Lebanon.
However, Lebanon was considered to rank lower in terms of UA and higher in terms
of Masculinity. On this basis, Baydour and Willett conclude that it would appear
that Lebanons requirements are for less Uniformity, Conservatism and Secrecy in
financial reporting practices.
Religion
Hamid, Craig and Clarke (1993) considered the influence of one cultural input or
factor, religion, on accounting practices.
As they indicate, religion transcends national boundaries. They consider how
Islamic cultures, which exist in numerous countries, have typically failed to
embrace Western accounting practices and they reflect upon how issues of
religion had previously occupied minimal space in the accounting literature.
Hamid, Craig and Clarke (1993) point out that the Islamic tradition does have
notions of stewardship-but to God rather than to suppliers of equity or debt
capital. That is, Muslims believe that they hold assets not for themselves, but in
trust for God.
Hence Hamid, Craig and Clarke (1993) appear to provide a logical argument that
religion can have a major impact on the accounting system chosen.
Religion can potentially, affect how people do business and how they make
decisions.
E.g. the conceptual framework projects developed by the IASB are based on the
underlying objective that financial report users require financial information as the
basis for making rational economic decisions.
Such rational economic decisions also take into account the time value of money,
which necessarily requires consideration of appropriate interest or discount rates.

For some societies such as Islamic states, this may not be a relevant objective.
Further, any claims that particular frameworks of accounting are superior to others
should only be made after considering the environments in which the frameworks
are to be utilized.

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