Learning Objectives
Choi/Meek, 7/e
Development
Classification
Choi/Meek, 7/e
Development
Equity markets
Banks
Choi/Meek, 7/e
Development (contin)
Legal system
Code law
Common law
Choi/Meek, 7/e
Development (contin)
Taxation
Inflation
Choi/Meek, 7/e
Development (contin)
Educational level
Affects the types of transactions and which ones are most prevalent in the
economy which, in turn,
Affects the accounting issues that are faced.
Affects the capability for professional accounting training.
Where education levels are low, countries import accounting training or send
citizens elsewhere to get it.
SUMMARY
Common law legal system, strong equity markets, and separation of financial
and tax accounting.
Code law legal system, credit-based financing, and accounting rules that
conform to tax law.
Choi/Meek, 7/e
Fair presentation
Legal compliance
7
Development (contin)
Culture (Hofstede)
Individualism vs. collectivism
Power distance high vs. low
Uncertainty avoidance high vs. low
Masculinity vs. femininity
Accounting values (Gray)
Professionalism vs. statutory control
Uniformity vs. flexibility
Conservatism vs. optimism
Secrecy vs. transparency
Choi/Meek, 7/e
Development (contin)
Linking
Choi/Meek, 7/e
the two:
Classification
Macroeconomic approach
Microeconomic approach
Uniform approach
Choi/Meek, 7/e
Classification (contin)
Choi/Meek, 7/e
11
Classification (contin)
Choi/Meek, 7/e
Helps judge managerial performance and predict future cash flows and
profitability
Extensive disclosures
Classification (contin)
Conservative measurements
Income smoothing
Will persist in code law countries for individualcompany financial statements
Choi/Meek, 7/e
13
Choi/Meek, 7/e
14