Ball (2006, p.17) makes the fo
Ball (2006, p.17) makes the following comment: “In sum, even acursory review of the political and economic diversity amongst IFRSadopting nations, and of their past and present financial reportingpractices, makes the notion that uniform standards alone willproduce uniform financial reporting seem naïve.” Critically assessthe validity of Ball’s comments and discuss five factors which leadto national differences in accounting (Hint: treat differentcultural dimensions as one factor).
I agree with Ball’s comments andthe mere fact that the IFRS adopting nations differ from each otherdue to the different political and economic factors affecting themis a strong enough factors that will prevent these nations toproduce uniform financial reporting. The existence of differentpolitical and economic factors leads to differences in the wayusers of financial statements desire information and the accountingstandards like IFRS ignores the fact that market forces are localand so are political forces. Both market forces and politicalforces have a significant impact on a business and so itsaccounting as well.
Five factors which lead to nationaldifferences in accounting are:
· Different cultural dimensions anddifferences in users and the information that they desire –Cultural dimensions are different for different countries and hencethe information that a user may need in Country A may not beimportant information for users in Country B.
· Government imposed rules whichdiffers from one country to another country – Government rules andregulations cannot be standardized and they largely remain countryspecific and hence vary significantly from one country to anothercountry.
· Differences in companies and theirindustries – The economic composition and structure of industriesalso vary from one country to another country.
· Implementation of accountingstandards is not even and differs from one country to another.
· Incentives of managers of a company(known as prepares of financial statements) and that of variousenforcers (like auditors, board members, stock analysts etc.)remain largely local.