What is it about?
This article explores the findings of five studies on the topic of how national culture impacts the application of financial reporting guidance -- especially with respect to the application of International Financial Reporting Standards.
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Why is it important?
One of the strongest arguments in favor of IFRS adoption on a worldwide basis is that there are enormous benefits associated with having financial statements prepared on a single set of accounting standards regardless of the country of domicile of the underlying businesses. However, there is a growing body of academic research providing evidence that simply adopting IFRS, by itself, is not sufficient to result in an enduring improvement in financial reporting quality within IFRS-adopting countries. National culture, for instance, how the potential to affect accountants' judgments in applying financial accounting standards -- regardless of those standards' origin -- and to impact national institutions which further influence national accounting.
Perspectives
Collectively, I believe the findings of the studies outlined in this article cast serious doubt on the assumption that IFRS adoption will result in enhanced financial statement comparability on a worldwide basis. Accounting is predicated in no small manner on the judgment of those tasked with preparing financial statements as well as those who audit those statements. There are a myriad of factors which influence the judgment of the individuals involved with the financial reporting process. National culture is only one of those factors. After reading these studies as well as others, I question whether the goal of cross-border financial statement comparability will ever be achieved.
Gregory Prescott
University of South Alabama
Read the Original
This page is a summary of: The Effects of National Culture on Financial Statement Comparability: A Survey of Research Findings, Journal of Corporate Accounting & Finance, August 2015, Wiley,
DOI: 10.1002/jcaf.22078.
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