WHY ACCOUNTING PRINCIPLES AND PRACTICES DIFFER AMONG NATIONS

Prof. REIDY HERRERA 
Dpto. Socio-Humanístico/Sección de inglés

Reading # 3 /unit:3 /Comparison-Contrast
PERIODO: I-2018

                                                                                                         Maturín,09-07-2018

1.- In today's world we do not find it surprising to discover a British bank in Atlanta, Coca-Cola in Paris and French airplanes in Zaire. German auto parts are assembled in Spain and sold in the United States. Japan buys oil Saudi Arabia and sell cameras in Italy. Soviet livestock eat American grain, and the British sip tea from Sri Lanka and China. Business has become truly international, but accounting, often described as the language of business, does not cross borders so easily. Accounting principles and reporting practices differ from country to country, and international decisions making more difficult by the lack of a common communication system. But since business is practiced at an international level, accounting must find a way to provide its services at that level.

2.-The problem is that accounting reflects the national economic and social environment in which it is practiced, and this environment is not the same in Bankok as in Boston. Some econimics, for example, are mainly agricultural. Others are based on manufacturing, trade, or service industry. Still others export natural resources, such as oil or gold, while a few derive most of their income from tourism. Accounting techniques, and methods of foreign currency translation have a different orientation, emphasis, and degree of refinement in these different economics.

3.-Other accounting differences stem from the various legal or political systems of nations. In central controlled economics,for instance, the state owns all or most of the properties. It makes little sense to prescribe full disclosure of accounting procedures to protect investors when no private ownership of property exists. Some of these countries satndarize their accounting methods and incorporate them into law. But in most market-oriented economics, the development of accounting principles and reporting practices is left mainly to the private sector. On the contrary, where uniformity exists, it occurs more by general agreement or concensus of interested parties than by governamental decree. In countries where business firms are predominately family owned, disclosure practices usually are less complete than in countries where large, publicly held corporations dominate. The requirement in many countries that the financial statements must conform to the tax return contribute to diversity in accounting practices among countries.

4-The degree of development of the accounting profession and the general level of education of a country also influence accounting practices and procedures. Nations that lack a well-organized accounting profession may adopt almost wholesales the accounting methods of other countries. Commonwealth countries, for example, tend to follow British accounting standards; the former French colonies of Africa use French systems; Bermudas follows Canadian pronouncements; and the influence of the United States is widespread. At the same time, levels of expertise vary. In countries that have little knowledge or understanding of statistics, nothing is gained by advocating statistical accounting and auditing techniques. Accounting systems designed for electronic data processing are not helpful in countries where few or no business use computers.

5.-Even in advanced countries, genuine differences of opinion exist regarding accounting theory and appropiate accounting methods. American standards, for example, require the periodic amortization of goodwill to expense, but British and Dutch standards do not. The lack of agreement on the objectives

of financial statements and lack of any effort in most countries to articulate objectives also contribute to diversity. Accounting methods also differ within nations. Most countries, including the United States, permit several depreciations methods and two or more inventory costing methods.

READING ANALYSIS

.-Answer the following questionaire.

.-Give an explaination or examples to support your answers if necessary.(use only Spanish).

1.- Why do accounting principles and practices differ among nations ? (explain)

2.- Why is accounting called the language of business? (explain)

3.- Why does accounting not cross borders easily like business does?

4.- Describe the geographical, political and economic differences that contribute to diversity in accounting practices among nations.

5.-What happens to the accounting principles and practices in those countries where their economics are centrally controlled or market-oriented ? (explain briefly).

6.- What happens to the principles and practices of accounting in countries where business are predominately family owned?

7.- Taking into consideration our country, explain quickly the political differences apply to the economy and the currency translation system.

8.- HOW do the degree of development of the accounting profession and the level of education of a country affect accounting practices and procedures ? (give examples)

9.- What do those nations that lack a well-organized accounting profession to practice accounting ? (explain)

10.- Which solution will you suggest to solve the differences about the accounting principles and practices among nations? ( use your own words to explain it )