International Accounting Diversity and Frameworks Ch. 2

Vocabulary flashcards summarizing key concepts, cultural dimensions, accounting values, and classification models of international accounting diversity.

Common Law

A legal system characterized by fewer statutes, reliance on court interpretation and precedent, and nonlegislative sources for detailed accounting rules.

Code Law

A legal system featuring legislated accounting rules with general statutes, predominant in non-English-speaking countries.

Individualism versus Collectivism

A cultural dimension contrasting a loose social fabric (individualism) with a tight social fabric (collectivism).

Power Distance

A cultural dimension representing the extent to which hierarchy and unequal power distribution are accepted in a society.

Uncertainty Avoidance

A cultural dimension measuring the degree to which individuals feel uncomfortable with uncertainty and ambiguity.

Competitiveness versus Cooperativeness

A cultural dimension contrasting an emphasis on performance and achievement with an emphasis on relationships, caring, and nurturing.

Long-term versus Short-term Orientation

A cultural dimension contrasting an emphasis on persistence with a focus on quick results.

Indulgence versus Restraint

A cultural dimension contrasting the free satisfaction of human needs and desires with the curbing and withholding of pleasures.

Professionalism versus Statutory Control

An accounting value contrasting reliance on individual professional judgment with compliance with prescriptive legal requirements.

Uniformity versus Flexibility

An accounting value contrasting the enforcement of uniform accounting practices with flexibility based on individual company circumstances.

Conservatism versus Optimism

An accounting value contrasting a cautious approach to measurement to handle uncertainty with a more risk-taking, optimistic approach.

Secrecy versus Transparency

An accounting value contrasting the restriction of business disclosures with openness and transparent financial reporting.

Framework for the Development of Accounting Systems

A framework illustrating how external and ecological influences lead to cultural dimensions, institutional consequences, accounting values, and accounting systems.

Fair Presentation/Full Disclosure Model

An accounting model oriented toward the decision needs of large numbers of investors and creditors, widely used in English-speaking countries.

Legal Compliance Model

A legalistic accounting model used primarily to provide information for taxation and government planning, prevalent in Continental Europe and Japan.

Inflation-Adjusted Model

An accounting model that resembles the legal compliance model but incorporates extensive adjustments for high inflation rates, commonly used in Latin America.

Nobes's Judgmental Classification of Financial Reporting Systems

A hierarchical classification scheme categorizing developed countries' financial reporting into Micro-based and Macro-uniform classes, subclasses, families, and species.

Micro-based Accounting Systems

Accounting systems geared toward equity investors that feature heavy disclosures, a weak link between accounting and tax, and origins in business economics or pragmatic practice.

Macro-uniform Accounting Systems

Accounting systems aligned with government tax rules or national economic policies, featuring less disclosure and strong legal influence.

Class A Accounting Systems

Accounting systems in Nobes's simplified model characterized by strong equity-outsider financing, extensive disclosure, lower conservatism, and separation of tax rules from accounting practice.

Class B Accounting Systems

Accounting systems in Nobes's simplified model characterized by weak equity financing, high conservatism, limited disclosure, and accounting practice following tax rules.