Finance, Economics & Accounting
Due to globalization and expanding international business, it has become necessary for companies in various countries to communicate through a universal language of accounting. International Financial Reporting Standards (IFRS) were developed and issued to serve as a uniform set of accounting standards. A proposed advantage of global implementation is the improved comparability of financial statements. However, due to variations among cultures, it is unrealistic for a single set of standards to be accepted and implemented in a wholly uniform manner to produce innately comparable financial statements. Because of cultural differences, there are varying degrees of IFRS acceptance: some countries adopt the full set of IFRS, while others only accept certain standards. The application of the standards in various countries could adversely impact the comparability of financial statements. Hofstede's cultural dimensions aid in understanding the differences among cultures, the impact this can have on financial reporting, and therefore the comparability of financial statements prepared using IFRS. Through a series of independent t-test analyses, this study finds that two of Hofstede's cultural dimensions--power distance and individualism--are found to be significant, suggesting that these values influence a country's acceptance of IFRS as issued by the International Accounting Standards Board (IASB).
Ward, C.L. & Lowe, S.K. (2017) Cultural impact of international financial reporting standards on the comparability of financial statements. International Journal of Business, Accounting, and Finance, Vol. 11 (1), 46-56.