Differences in Accounting Systems across Countries
Introduction
Accounting is a form of financial reporting that details the figures of resources owned by any individual or business entity in a systematic manner for future, reference, planning, budgeting, auditing or as a matter of conformity where laws dictate that such accounting should be carried out. This is a practice carried out by virtually all organizations, by accounting professionals (Riahi-Belhaoui, 2004).
Interestingly, accounting is conducted in different styles and formats in different countries round the globe and these differences reduce conformity in accounting records. Perhaps the first origin for the differences can be found in the manner in which the profession evolved. The profession of accounting has evolved over along time under different localities and regulations (Riahi-Belhaoui, 2004). This independent evolution and development under varied regulations and practice is cited as the first major cause of differences. Other causes of the differences in accounting systems include the differences between taxation regimes and the connection between accounting and taxation. The source of an organization’s funding, the existent legal system and cultural differences are also cited as major causes of the differences in accounting systems (Sale, 2007).
These differences are significant and important because they help cater for the differences encountered under various circumstances. For example variations in taxation systems are well catered for by adjusting the accounting methodologies applied. These differences also enhance uniformity in localized environs and thus enabling easier communication of accounting information. The differences also help cater for differences that arise from the type of fund sources. The differences help in making the customization of accounting procedures possible to fit different taxation environments, legal systems, funding structures and cultures (Irena, n.d).
However, it is good to note that from an international view this may be a source of challenge where standardization is necessary, because the various systems pose a challenge to harmonization and standardization (Jorissen, Britton & Alexander, 2007).
References
Irena, J. (n.d),. International Differences in Accounting: The Birth of an Accounting Harmonization Process? Univerzita Karlova v Praze; Anglo-American University v Praze. Retrieved on 26th April, 2011 from http://www.svses.cz/skola/akce/konf/ucto04/texty/jindrichovska.pdf
Jorissen, A. Britton, A. and Alexander, D. (2007),. International financial reporting and analysis, 3rd edition, Cengage Learning EMEA
Riahi-Belhaoui, A. (2004),. Accounting theory, 5th edition, Cengage Learning EMEA
Sale, T. J. (2007),. Advances in international accounting, Volume 20, Elsevier
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