Comparative International Accounting

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Comparative International Accounting


The specific form of Accounting Standards is divided into two types: one is Britain and other English-speaking countries generally adopted accounting standards; another form is Accounting Legislation and Accounting system in Germany and France as the representative of the European civil law countries. In recent years, with the development of economic globalization, there is a tendency that the European civil countries’ accounting canonical form transforms into Anglo-American marine law countries’. But the most countries and regions according to their actual situation has developed recognized Accounting principles or Accounting standards.

Nobes (2012:4) says the interesting thing about international accounting, is that “if a number of accountants from different countries are given a set of transactions from which to prepare financial statements, they will not produce identical statements.” Due to each country’s difference Culture, Legal system, Providers of finance, Taxation and other external influences, these reasons lead to the international accounting differences. This report will employ 3 representative counties and choose one company from each country as samples. The three companies are GlaxoSmithKline, Caterpillar and L'Oréal.

GSK is one of the world's leading research-based pharmaceutical and healthcare companies in UK.

Caterpillar is an American corporation which designs, manufactures, markets and sells machinery and engines and sells financial products and insurance to customers via a worldwide dealer network.

The L'Oréal Group is a French cosmetics and beauty company; it is the world's largest cosmetics company.

Then, the comparison uses these samples to analysis international accounting differences. Finally, this report will give a summary for international accounting differences..

Theoretical Background:

Firstly, this report analysis the theoretical background for United Kingdom, American and France. Comparing the major international differences in three countries’ accounting practices, the results of the differences are as follow:




Legal system

Common law

Common law

Roman law

Providers of finance

Institutional investors

Institutional investors

Bankers, Governments or Founding families

Equity market

Stronger market

Stronger market

Weaker market

Accounting profession

Old, large profession

Old, large profession

Young, small profession




Separate (optimism)

Strongly related (conservatism)

Measurement of assets

Multiple methods, revaluation allowed

Historical cost

Multiple methods, revaluation allowed

Balance sheet format

Liquidity increasing Financial position

Liquidity decreasing

Report format

Liquidity increasing

Two-sided format

Income statement format

By function


By function


By nature



Culture is the most basic values for evey countries and it affects the social structures. Accouting can be considered one part of the socity structure. In 1988s, Gray (p5) explains:“ the value systems may be expected to be related to and derived from societal values with special reference to work related values. Accounting ‘values’ will in turn impact on accounting systems.”

Based on the research of Hofsted (1984:83, 84), he diffined four types of culture:

  1. Individualism vs Collectivism.
  2. Large vs Small power distance.
  3. Srong vs Weak uncertainty avoidance.
  4. Masculinity vs Femininity.

Legal system:

In western counties, according to a limited statute law, the legal system can be divvied into Common law and Roman law. Roman law is the basic of legal system in many countries. The so-called "civil law" is originated from Roman law. The civil law countries in Europe and many South American countries have the close relation with Roman law. Common law also called as Anglo-American legal system, Common law originated from medieval England. In accordance with legal systems, the below table shows the main western countries fall into these two categories.

Western legal systems

Common law

Codified roman law

England and Wales




United States






New Zealand


Japan (commercial)

Providers of finance:

In 1983s, Zysman formalized a proposed grouping of counties into types by financial system. The types of financial system are as follow:

  1. Capital market systems (e.g. UK, US)
  2. Credit-based governmental systems (e.g. France, Japan)
  3. Credit- based financial institution systems (e.g. Germany)

According to Zysman’s three types, in ‘Credit’ countries, the providers of Finance who are bankers, governments or founding families. Shares are held by institutional investors rather than by individual investors in ‘capital’ mark countries, such as the UK and the US.


Tax system is easily divided into ‘classical’ and ‘imputation’ system by countries’ using. The degree is different in each country between taxation regulations and accounting measurements. For example, the depreciation rates allowed for tax regulations in the UK or US is quite independent of these accounting figures. On the contrary, in France, the tax regulations allowed maximum depreciation rates for particular assets (Nobes & Park, 2010: 38).

Sample companies:

The above words simply expound the reason for international accounting differences in macro-background. Then, this report will use three sample companies’ reporting to analysis three countries differences.

Comparing 3 companies’ report, the reporting rules and enforcement are as follow:

GlaxoSmithKline (UK)

Caterpillar (US)

L’Oréal (Fr)

Reporting rule


+Companies Act 2006


+ Securities Exchange Act 1934

French GAAP

+ 1999 French Chart of Accounts

Enforcement body

IASB (International Accounting Standards Board)

SEC (Securities and Exchange Commission)

AMF (Autorité des Marchés Financiers)

Glaxo is a British company, but it adopted IFRS rules. L’Oréal as a French company, it use French accounting not IFRS rules.

The enforcement body of Glaxo is L’Oréal (Fr) is AMF

The type of enforment body of US and France are same, stock exhange regular. The UK is private sector type.

GlaxoSmithKline (UK)

Caterpillar (US)

L’Oréal (Fr)

Financial position

(showing net assets)

Liquidity increasing

(cash at bottom)

Report format

Liquidity decreasing

(cash at top)

Report format

Liquidity increasing

(cash at bottom)

Formats differences:

In general speaking, companies can choose UK GAAP OR IFRS for unconsolidated financial statement. The format of financial statement is flexible with the constraints of EU directives.

In France, the true and fair view must be given in all of financial statements. Especially, the biggest impact is in the Notes, not the balance sheet and income statement.


Nobes, C. & Park, R. 2012. Comparative International Accounting: Differences in financial reporting. P4.

Gray, S. J. (1988). “Towards a theory of cultural influence on the development of accounting systems internationally”, Abacus, Vol. 24, No. 1.

Zysman, J. (1983). “Governments, Markets and Growth: Financial Systems and the Politics of Industrial Change”, Cornell University Press, Ithaca

Nobes, C. & Park, R. 2012. Comparative International Accounting:Causes and examples of international differences. P 38.