Factors Affecting the Development of Accounting World
Practices and accounting standards are the result of a complex interaction of institutional factors, environmental factors, and economic factors of a nation. Changing needs of these factors requires the development of accounting (theory, principles, and standards). If the result of the development of accounting in a country adopted by other countries then there is the development of accounting. This means that there is a development of accounting systems of a country to another.
Factors that influence the development of the accounting world, among others:
Institutional factors
Institutions/agencies play an important role as a driving factor accounting development. Banks, governments, corporations, hospitals, and universities are examples of institutions/organizations in need of accounting. An institution/organization is located within an organization. This organization gives the name of the agency/institution which in its enclosed. Thus, the agency/organization with the organization referred to above bank organizations, governmental organizations, corporate organizations, hospital organizations, and university organizations.
Environmental Factors
History shows that the development of accounting standards and accounting practices of each is the result of a complex interaction of economic factors, institutional history, and cultural thought to differ in the buffer between the nations. According to a number of essays, ed. Choi (2005:49-52) there are eight factors that are considered to have a significant effect on the development of accounting. The first seven of which have attracted the attention of many authors is the economic accounting, socio-historical, and which by their nature or institutional. Now the relationship between culture (factor eight) with accounting being studied. The eight factors were described by the following examples:
1. Sources of Finance
Accounting in the State with a strong capital market, which means that the company obtained financial resources from capital markets like the U.S. and the UK is focused on how to manage the company’s management with a good (profitable) and how management is designed to help investors obtain cash flow information with the risks. Conversely country that adheres to the accounting system based on credit, such as Japan and Switzerland (also Indonesia) with the bank as the dominant source of finance, focused on the protection of creditors through conservative accounting measurements.
2. Legal System
Legal system to determine how individuals and institutions interact. In the West there are two runways on which the orientation, the code (civil) law and common (case) law. Code law originated mainly from the Roman law and the Code Napoleon. Code is also called legalistic law (law and civil law) and the common law called non-legalistic (customary law). In a country where law-oriented laws, accounting rules embedded in national legal and procedural tend to be prescriptive. In state-oriented common law, accounting regulations made by the private sector professional organizations so that they are more adaptive and innovative.
3. Taxation
In many countries such as Germany and Sweden, the maker of the tax laws set accounting standards. In this standard the companies are required to record income and expenses in their books for taxation purposes. Dutch country, financial accounting with a separate tax accounting. Although financial accounting with a separate tax accounting, but sometimes in the tax accounting required the application of certain accounting principles.
4. Economic and Political Relations
At first the idea of accounting and technology moved (transferred) from one country to another through conquest, trade, and other forces are essentially the same. Political & Economic factors influence the development of international accounting because of government policy and the current economic situation in a country that can make the accounting difficult to develop.
5. Inflation
Inflation and historical cost accounting change affects the tendency to record something country into account changes in stock prices and cost of goods sold, as well as monetary gains and losses.
6. Levels of Economic Development
These factors influence the shape of business transactions conducted in the economy and determine which one is more prevalent. Forms of transactions, in turn, determine the accounting issues faced.
7. Level of Education
Accounting standards and practices that date is not useful if used deviate because misunderstood. Disclosures about the risks of derivative securities is not informative unless the readers are competent (authorities) about this. Adequate accounting education is the best solution within the existing problems.
8. Culture
Here culture means the values and attitudes that are used by local communities. Hofsted (in Choi, 2002:45 and 2005:52) says that there are four dimensions of national culture, namely individualism, power distance, uncertainty avoidance, and masculinity.
Approach Accounting Developments in Market-Oriented Economy
Economic factors into factors accounting approach in the development of market-oriented economy. There are four approaches to the development of accounting that can be observed in Western countries with market-oriented economic system (market oriented economic system) as proposed by Mueller in the mid 1960′s: (1) Macroeconomic pattern, (2) microeconomic patterns, (3 )-Free approach to discipline, (4) Uniform Accounting Approach.
Macroeconomic pattern. Based on corporate accounting principles macroeconomic pattern is designed to advance the goals macroeconomic. Macroeconomic pattern with emphasis on economic stability and the business is based on three propositions:
- trading company is an essential unit in the national economy
- trading company achieve its goal through the coordination of activities with national economic policy
- public interest is better served if the accounting firm trade is closely linked to national economic policy
so, the national policy of stable employment to avoid the business cycle shocks will result in the accounting practice of leveling income growth (income smoothing). Or to enhance the growth of certain industries, the government may permit the elimination of capital costs. The example in the 1970′s in Indonesia is required accelerated depreciation on fixed assets of investors as the driving force to accelerate the expansion of capital investment. Sweden has implemented the accounting according to the pattern of development with a complete macroeconomic.
Microeconomic patterns.
Accounting framework is developed based on microeconomic principles include:
- Individual company is the focus of business activity
- The company’s main goal is to survive to continue to live
- The best strategy is the company to survive the economic optimization
- As a branch of business economics, and application of accounting concepts derived from economic analysis
most supporters of microeconomic concluded that the best system of accounting measurement is replacement cost (entry value). It is based on the notion that microeconomic focus is a private company whose main goal is to survive. To achieve this goal needs to maintain the continuity of physical capital through replacement cost method.
Discipline-free approach.
Judgment and estimates are an integral part of business. It is necessary to solve real-world complexity and uncertainty even ever experienced. Successful business owners to use intuition and trial (trial and error) are often the only way to handle changes in business environment. Businesses generate their own concepts and methods from the experience and practice. Developing countries accounting as a discipline is free to the United Kingdom and the United States.
Accounting Uniformity approach.
This approach is based on standardized accounting and administrative controls are used as tools by the central government. Uniformity in the measurement, disclosure and presentation of accounting produces reliable accounting information primarily for surveillance. Uniform approach is commonly used in State government involvement in economic planning and accounting is used to measure the implementation, resource allocation, tax collection and supervision of such strong prices. France with the uniformity of national accounting (national uniform chart of accounts) is a leading exponent of this approach.
The dominant state in the Development of Accounting Practices
Some countries are dominant on the development of accounting include:
French
France is a major supporter of national accounting in the world. Ministry of National Economy approved the General Plan Comptable (national accounting code) is the first official in September 1947. Code revision was done in 1957. Revision occurred in 1982 by the Fourth Directive of the European Union (EU). In 1986, the plan expanded to implement the provisions of the EU Seventh Directive on consolidated financial statements and further revised in 1999.
Comptable General Plan contains:
- The purpose and principles of accounting and financial reporting
- The definition of assets, liabilities, shareholders equity, revenues and expenses
- Recognition and valuation rules
- A list of standard accounts, provision for its use, and provisions of other books
Japan
Accounting and financial reporting in Japan reflects a combination of domestic and international influences. Two separate government agency responsible for the regulation of accounting and corporate income tax law in Japan have more influence as well. In the first half of the 20th century, reflecting the effect of German accounting thought; in the second half, the ideas of the influential U.S.. Lately, the influence of the International Accounting Standards Board began to be felt and in 2001 major changes occurred with the establishment of private sector organizations as a maker of accounting standards.
Japan is a traditional society with strong cultural roots danagama. Group consciousness and interdependence in personal relationships and independent firms as opposed to a reasonable relationship between individuals and groups in western countries. The Japanese company has an equity stake together with each other, and often jointly own other companies. These investments are interlocked industrial conglomerate that produces called keiretsu.
United States
Accounting in the United States governed by the Private Sector (Financial Accounting Standards Board, or the Financial Accounting Standards Board-FSAB), but a government agency (Capital Market Supervisory Commission or the Securities Exchange Commission – SEC) also has the power to applying his own standards. Until 2002 the American Institute for Certified Public Accountants, other private sector entity, define Auditing Standards. In that year the Public Company Accounting Oversight Body established with broad powers to regulate the audit and the auditors of public companies. U.S. companies formed under the laws of the state, not federal law.
In the progress the countries France and Japan are less dominant than the United States. It can be seen from the development of Japanese accounting in its development is currently based on existing IFRS.
Basic knowledge of Accounting Classification
Classification of the International Accounting basis of international accounting classification can be done in two ways, namely:
Deductive approach
Which identifies the relevant environmental factors and linking it with national accounting practices, an international grouping or pattern of development proposed.
Inductive Approach
Accounting practices were analyzed individually, the pattern of development or grouping identified and at the end of the explanation is made from the standpoint of economic, social, political and other factors.
While Nair and Frank in The Accounting Review (July 1980) divide countries into 5 major Group: (1) model of the British Commonwealth, (2)model of Latin America / South Europe, (3)model of Northern and Central Europe, (4 ) model of the UnitedStates and (5) Chile based on the difference in the practice of disclosure and presentation. Nair and Frank also assess the level of grouping relations with these countries a number of variable ssuch as language, economic structure and trade. Apparently there are differences between the disclosure and measurement in each group that State.
There are two ways that the empirical classification of business conducted in international accounting, namely: (1) classification judgmental (subjective) carried out based on the knowledge, intuition, and experience of researchers and (2) classification based on the use of statistical methods to the database principles and accounting practices around the world.
Classification judgmental
Judgmental classification is a classification based on the consideration of researchers. In a study conducted by prof. G. G. Mueller (1968), he classifies prakek accounting practices in the world based on their place of business operating environment into 10 groups: United States / Canadian / Dutch, the British Commonwealth, Germany / Japan, mainland Europe, Scandinavia, Israel / Mexico, South America, Developing countries in the Far East / Near, Africa (except South Africa), the Communist countries.
Then the American Accounting Association (1976) classify patterns into five zones of the world accounting influence (zone of influence). This division is based on their historical sources, cultural, economic and social principles is considered to have influenced the measurement of financial accounting and reporting in different countries and regions, the zone of influence: the United States, Britain, German / Dutch, French / Spanish / Portuguese , and the Communists.
After classification in 1980, back in 1998 Nobes proposed new klaifikasi. In the first classification there are two classes, micro and macro-based uniform. Basically this classification in 1980 suggested that at least in countries where the United States, Australia, Holland, Belgium, Indonesia, England, Ireland, Japan, West Germany, Canada, France, New Zealand, Spain, and Sweden, the legal system is dominant factor in the development of accounting as well as the starting point for classifying storage accounting method. Nobes new classification proposal focuses not on the State but the company’s financial statements.
Empirical Classification
Empirical classification is a classification based on the results of research conducted by RD Nair and Werner G. Frank (1975). They divided the accounting practices used in various countries in the world into 7 groups. Earlier, in 1973, Nair and Frank has made a classification of the accounting group. Grouping measurements of the same when using the data in 1975 but the disclosure of different groups when using the data of 1973.
Elixir For Life 