1. Session 02 Development and Classification
Matakuliah : F0142/Akuntansi Internasional
Tahun : September 2006
Session 02 Development and Classification

2. Development
Eight factors that have a significant influence on accounting development
Sources of Finance
Legal System
Taxation
Political and Economic Ties
Inflation
Level of Economic Development
Education Level
Culture

3. Development
Four accounting value dimensions that affect a nation’s financial reporting practices (Gray)
Professionalism versus Statutory Control
The exercise of individual professional judgment and professional self regulation as opposed to compliance with prescriptive legal requirements.
Uniformity versus Flexibility
Uniformity and consistency over flexibility in reacting to circumstances.
Conservatism versus Optimism
Cautious approach to measurement to cope with the uncertainty of future events instead of a more optimistic, risk taking approach.
Secrecy versus Transparency,
Confidentiality and the restriction of business information on a need to know basis versus a willingness to disclose information to the public.

4. Classification Two ways of international accounting classification
Judgmentally
Empirically
Four approaches to accounting development :
Under the macroeconomic approach
Accounting practices are derived from and designed to enhance national macroeconomic goals
Under the microeconomic approach
Accounting develops from the principles of microeconomics.
Under the independence discipline
Accounting derives from business practices and develops on an ad hoc, piecemeal basis from judgment and trial and error
Under the uniform approach
Accounting is standardized and employed as a tool for administrative control by central government.

5. Classification Legal Systems : Common Law versus Code Law Accounting
Accounting may also be classified by a nation’s legal system.
Accounting in common law countries
Characterized as oriented toward “fair presentation”, transparency and full disclosure, and separation between financial and tax accounting
Accounting in code law countries
Characterized as legalistic in its orientation, opaque with low disclosure and an alignment between financial and tax accounting.

6. Classification
Practice Systems : Fair Presentation versus Legal Compliance Accounting
Many accounting distinctions at the national level are becoming blurred. These are several reason for this :
Hundreds of companies are now listing their shares on stock exchanges outside their home countries.
Some code law countries, in particular Germany and Japan, are shifting responsibility for accounting standard setting from the government to independent professional, private sector groups.
The importance of stock markets as a source of finance is growing around the world.

7. Classification
Practice Systems : Fair Presentation versus Legal Compliance Accounting
The distinction between fair presentation and legal compliance has pervasive effects on many accounting issues such as :
Depreciation
Where the expense is determined based on the decline in an asset’s usefulness over its economic useful life
Leases
That are in substance a purchase of property are treated as such (fair presentation).
Pensions
With costs accrued as earned by employees (fair presentation).