ACCOUNTING IN ASIA-PACIFIC
REGION:
HOFSTEDE-GRAY THEORY
Abdullah Taman
Yogyakarta State University,
Indonesia
Presented in APCEMaL 2011, UPSI Malaysia
29th - 30th Nov. and 1st Dec. 2011
ABSTRACT
The objective of this paper is to describe that
culture and social-economy can affect financial
accounting in Asia-Pacific region. Explanation is
based on Hofstede-Gray Theory which associates
between accounting values and cultural dimension.
The Hofstede-Gray Theory has been used by a
number of writers as the basis of a framework
trying to understand why national accounting
INTRODUCTION
Asia Pacific region is a promising area. For instance,
Asia Pacific Economic Cooperation (APEC) is a region
group consisting twenty one countries that have
objective to develop its economic community to
increase welfare in the region.
COUNTRIES “ATTRIBUTES OR ENVIRONMENT”Hongkong, Sing, Jpn,
Korea “Tiger” of Asia Peoples’s Republic of
China Massive restructuring of its socialist economy Vietnam Rapid economic and social change
Philippines Long history of Spanish and latterly US colonial
Malaysia and Indonesia Populous Muslim countries in the world Brunei An oil rich Sultanate
Papua New Guinea Adjusting to the demand of modern commerce
Macau Portuguese dependency Australia and New
Zealand
Developed economies with European culture
OBJECTIVE OF THIS PAPER
Given the issue under discussion, the
question should be posed as to whether one
would expect environment affect
accounting practice. So that, the objective
of this paper is to describe that culture and
social-economy can affect financial
accounting in Asia-Pacific region.
RELATED LITERATURES
Several theories of their more immediate
causes have been proposed, particularly in
the international accounting literatures. The
trait of strong governmental interference
has been variously explained in term of
weak professionalism, e.g. France (Nobes,
1990); type of political system, e.g. China
(Chan, 1995), and pattern of funding
RELATED LITERATURES (cont’d)
Cooke and Parker (1994) describe and
classify financial reporting practices in
some the West Asia Pacific Rim countries
with drawing relationship fairly direct
based upon the perceived affects of
quite narrow economic factors.
Probably the most well-known exponent
of cultural approach to understanding
RELATED LITERATURES (cont’d)
Gray attempted to relate a number of
accounting values (preferences for
conservatism, uniformity, secrecy, and
professional judgment) to Hofstede’s (1980)
dimensions of culture (power distance,
uncertainty avoidance, individualism, and
masculinity), so that, I called “The
Hofstede-Gray Theory”. The theory has been used by a
number of authors, such as Parera (1989),
Gerhardy (1990), and Baydoun and Willet
CULTURAL EFFECTS
The existing literatures on the effects of
environment on accounting practices referred
to above may be divided into three
categories:
1. The common sense analysis of the links
between immediate economic and political
causes and their perceived effects on
accounting practices
2. “Cultural based” using theHofstede-Gray
Theory
CULTURAL EFFECTS (cont’d)
With respect to category 1), examples have
already done by Muller (1967, 1968), Siedler
(1967), and Nair and Frank (1980) using single
factor determining the specific characteristics of
financial reporting. In Asia-Pacific region, the
influence of Anglo-American accounting in
countries such as Malaysia, Hong Kong, the
Philippines, Australia, and New Zealand is
obvious. The obvious characteristics of
accounting practices seem to be primarily
CULTURAL EFFECTS (cont’d)
With respect to category 2), it can be
seen how this involves quite naturally
from (1). Gray’s theory (1988) took as
its subject matter the preferences of
account’s users and prepares. These
preferences will be formed under the
CULTURAL EFFECTS (cont’d)
Gray’s accounting values and its effect
on accounting systems/practices are
shown below:
Source: Radebaugh and Gray (1996)
SOCIETAL VALUES ACCOUNTING VALUES
ACC.
SYST/PRACTS
Individualism/Collecti
vism ProfessionalismUniformity/Flexibilit y
Authority and enforcement
Power Distance Conservatism/Opti
CULTURAL EFFECTS (cont’d)
Actually societal values in left-hand
side column are values introduced by
Hofstede, and accounting values in
middle column are values introduced
by Gray, meanwhile right-hand side
SOCIETAL AND ACCOUNTING VALUES
Societal Values: (Hofstede, 1980)
1. Individualism vs Collectivism
2. Power Distance (Large vs Small)
3. Uncertainty Avoidance (Strong vs
Weak)
SOCIETAL AND ACCOUNTING (cont’d)
Accounting Values: (Gray, 1988)
1. Professionalism vs Statutory
control
2. Uniformity vs Flexibility
3. Conservatism vs Optimism
4. Secrecy vs Transparency
RELATIONSHIP BETWEEN SOCIETAL AND
ACCOUNTING VALUES
Source: Baydoun and Willet (1995)
Hofstede’s Societal Values
Gray’s Accounting Values
Professl
n Uniform Consrvt Secrecy
Power Distance Negativ e
Positiv
e n/a
Positiv e
Uncertainty Avoidance Negativ
e Positive Positive Positive Individualism Positive Negati
ve
Negativ e
Negati ve
Masculinity n/a n/a Negativ
POSITION OF SOME ASIA PACIFIC COUNTRIES
IN ACCOUNTING VALUES
FLEXIBILITY STATUTORY CONTROL
Less Developed Asia -Indonesia -Taiwan -Thailand -Malaysia -the Philippine Japan Hong Kong Singapore Asian Colonial Anglo-Saxon Australia New Zealand PROFESSIONALISM UNIFORMITY
POSITION OF SOME ASIA PACIFIC COUNTRIES
IN ACCOUNTING VALUES
OPTIMISM SECRECY
Less Developed Asia -Indonesia -Taiwan -Thailand -Malaysia -the Philippine Japan Hong Kong Singapore Asian Colonial Australia New Zealand Anglo Saxon TRANSPARENCY CONSERVATISM
CONCLUSION
There is insufficient space to fully recount all the many
environmental elements which have been felt to be influential
in determining the forms which accounting practices take in
different countries.
In Asia-Pasific Region, accounting system and practices are
also influenced by environmental element such as culture and
social economic. This is reflected in relationship between
societal and accounting values introduced by Hofstede and
Gray
