The task of this report is to analyze the cultural and language oriented implications that may accrue from the decision to harmonize accounting standards and practice. It will help the reader to determine whether culture and language are really an impediment to harmonization of accounting standards and practice. This report takes into account political, social, economic, as well as technological factors that have consequences on such harmonization. Among other things, the cultural and lingual factors governing communities, as well as their effects and contributions on sound accounting systems, form the basis of this report.

Executive Summary

This report is mainly concerned with the cultural and lingual issues that need considerations before harmonization of accounting standards and practice takes place. In fact, there is a lot of research that has been investigated showing that cultural and language oriented factors impact on the harmonization of accounting function both positively and adversely.

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This report has a number of objectives. It aims to among other things:

Examine the role of culture and language in harmonization of accounting standards and practice

Assess the viability of the proposed harmonization in a multicultural environment

To evaluate the economic opportunities and benefits available to organizations upon harmonization of accounting standards and practice, considering the changing cultural, social, political, economic, and technological factors

Examine the presence, or otherwise, of support firms, as well as technologies that support harmonization of accounting policy amidst cultural fundamentalism

An examination of the available information regarding harmonization of accounting standards and practice was crucial for the compilation of this report. It was also necessary to make consideration of the available information regarding the role of culture and language in harmonization of accounting standards and practice. This report has also established that there are pecuniary benefits resulting from harmonization of accounting among countries.


In many scholarly disciplines there have been a lot of investigations on the relationship between language and culture and their impact on, say, ethics, marketing, human resources, finance, business, religion and importantly, accounting profession. As the reader may be aware such an investigation bases itself on demographic aspects of a community. There is one hypothesis that this study believes in; as in, culture and language are windows that affect the way professionals go about their business, where accountants are not an exemption. The hypothesis would be better phrased as follows: culture and language influence the harmonization of accounting standards and practice. There can be no doubt about this. It is also the case that accountancy in business is not a thing for Americans or Britons or Africans just to mention a few. In this respect harmonization of accounting standards and practice would make sense if it has the potential of universalism and internationalization. This is exactly what this study seeks to explore; it seeks to assert that language and culture in the accounting profession should be a means or, a channel, through which accounting standards are adaptable in the world over. To reiterate, the essence of this study is to investigate the extent in which culture and language contributes to the universality or internationalization of accounting standards and practice. This is what the reader should have in mind when he thinks about the aspect of harmonization. Therefore, it will be very important to study in depth what culture is all about, somewhat, give its definition and its implications. It would also be important to look at language and its intricacies thereof and finally the essentials in accounting standards and practice. The report shall also give a succinct model of the theoretical framework that will govern this study all through.

Key Words: Internationalization, Universalism, a Window, Harmonization, Content Objective, Praxis, Communication, Conscious and Unconscious Motives

Aims, Objectives & Report Procedure

This report has been prepared with a motive to investigate the role of culture and language in the harmonization of accounting standards and practice. The report will also give an analysis of culture, language and accounting standards and practice and treat them as themes in their own right. This report will also establish whether the three elements can merge to produce a harmonized implementation of accounting standards and practice to suit the global needs in the financial sphere of many organizations.

Theoretical Framework

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Earlier on, a lot has been said, in that, culture of a community, language of a community and so on and so forth has a role to play in the harmonization of accounting standards and practice. May be to deviate a bit, does the reader think about the extent in which he has judged other cultures as good or bad; not because they are good or bad, but because he views them in the window of his own culture. Are there not instances when the reader might have come across a text in a different language and as a result brushed it off? As in, "the text is not in a language that can be understood, so it cannot be read! See the point? Why would one then disregard a text in Italian language or Italian culture if it fails to satiate his cultural expectations or lingual expectations as an American; why? Is this a psychological issue, emotional issue or is it a prejudice?

Specifically, when would an Italian accountant, for instance, fail to comply with the accounting standards and practice of Americans? Is it because of the inability to interpret them due to the fact that the Italian cannot read or speak English or is it because his culture is anti-American so that anything American becomes irrelevant? What exactly is this report bringing forth? That language and culture whether as a conscious motive or as an unconscious motive act as a barrier to harmonization of accounting standards and practice. Conscious motive according to this report simply means deliberate use of culture and language to suppress the harmonization of accounting standards and practice. On the contrary, unconscious motive is when the subject unintentionally, uses his culture and language to suppress the harmonization of the same. Harmonization is the ability to mingle disagreeing forces or standards so that they can have a unity of purpose.

That said this report develops a theoretical model in form of a diagram illustration as follows.

As can be seen the illustration above gives a process among the three major aspects and how they take place in the accountant's psychology. Notably, culture and language converge to accounting standards and practice and so becomes the window through which praxis take place. This is why; from the onset, this report set aside key words where praxis means implementation by the accountant while window means the medium of focus; just as how a person in green glasses will view reality as green is the same thing that will occur when an accountant views accounting standards and practice through the window of his culture and language as well. As in, he will view such standards as to suit his culture and language expectations.

Without much ado, it wound now be worthwhile to plunge into existing research on this subject. However, the theoretical framework discussed so far has not yet demonstrated how culture and language can be useful in the harmonization of accounting standards and practice; but, it has shown that culture and language cannot be ignored whenever accountants seek to harmonize the various accounting standards and practices in their profession. That in deed, culture and language can destroy attempts to internationalize the standards. Internationalization is simply the ability to upgrade an idea or ideology to suit many nationalities, for instance, international accounting standards.

Cultural Impact

The concept of culture has had many connotations over the years. This study will look at some of them with an aim to link this understanding with harmonization of accounting standards and practice. According to Birukou et al. (n.d.) culture means the totality of behavior in the traditional context where the human race is the principal actor. By this it means that they are the main developers of culture where subsequent generations come to learn about it. They go ahead to state that culture lacks a precise connotation. This is because it points to behavior in the traditional context or what can also be referred to as "traditional behavior". In this regard, traditional behavior is manifested in a particular society, or given groups of societies, a race, an area and this takes place in a specific period of time.

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Another definition has it that people learn their culture (Axelrod, 1997). Moreover culture relates to groups of people and it also captures a wide range of phenomena, say, values, norms, shared meanings, and patterned way of behaving (Hofstede, 2001). In anthropological terms, culture has been used to refer to societies with respect to their national or ethnic terms; the concept of culture of culture has also been used to describe knowledge and behavioral patterns of other groups, for instance, notions in corporate culture or organizational culture (O'Reilly, 1989).

It is believed that globalization process has impacted on culture both positively and negatively (Harrison and Carroll, 2006). In the first place, the difficulty of interaction of culture has been associated to it. It is these interactions that bring about barriers or integration among communities. This is the reason why there is a great need to have managers and professionals who are well-acquainted with the behavioral practices that constitute their organizations.

Other researchers have defined culture as the transmitted knowledge and behavior in the social mainstream. In addition, such knowledge and behavior becomes a shared conviction or ideology by a group of a people (Peoples and Bailey, 1998). Culture has also been defined as a total way of life of a people that they have either acquired or learnt. It also refers to the ways of thinking, feeling and acting with respect to members of a given society (Harris, 1975).

Majorly, the reader can bear this study witness that the definitions discussed so far emphasis one key point in that culture is shared or learnt although its content varies from one group to the next. Needless to say, this report does not intend to talk about culture but the main aim is to show how culture can be used to harmonize accounting standards and practice. So far it has developed several definitions where through deduction it can be shown how culture leads to this end. This study believes that "culture is an acquired or learnt or shared way of life by a given group of people which later becomes a window through which they view reality. This is very important as it directly points to this study.

Analysis of Culture

This part of the report will furnish the reader with some critical points on the definitions of culture given above in order to link culture to harmonization of accounting standards and practice. Also the reader will come across some of the key words emphasized in the beginning of this report. Their usage is very fundamental since it will help to understand the matter in question.

So, what is all this about culture and what is all this about culture being a channel to harmonization of accounting standards and practice? As the reader may be aware, culture entails a people's way of life through shared meanings, experiences, ideologies and facts just to say the least. Therefore, when one considers culture as a window through which, say, an accountant professional views reality then it can be argued and justifiably so that it is in the same culture that the accountants understand and implement accounting standards and practice. One of the key words referred to was that of "content objective". This is a philosophical term used in the modern period when philosophers sought to solve the problem of knowledge. Content objective simply means that the mind takes its content and imposes it on reality. See the point? The mind can be taken as to mean the accountant professional with all his cultural and lingual beliefs and convictions while reality can refer to accounting standards and practice.

That said it can be argued that every accountant has got his own cultural values and practices. So, an accountant in Asia, for instance, may have difficulties in adopting accounting standards and practices in America or Japan. Assuming that Asia believes in "survival for the fittest" and in deed is a value in their culture and it is also the case that their accounting standards do not prohibit accountants from stealing from the huge profits realized by the business then chances are that they will not entertain an accounting standard that is anti-fraudulent. See that the aspect of survival for the fittest is a cultural value and as such it has been transferred to become an accounting standard. What is happening hear is that the Asian qualify it on the basis of their culture.

Already, one problem is evident; when this report talks about culture, what culture does it refer to? Second, when this report talks about accounting standards and practice what standards does it refer to? This is because there seems to be a contradiction between harmonization of accounting standards and practice with culture especially when dealing with only one particular group. Harmonization would make sense if talking about accounting standards in the global viewpoint.

Anyhow, if an Asian accountant professional finds it hard to cope with American accounting standards and practice on cultural basis how then would the same culture of the two entities be used to harmonize such a standard where fraudulent behavior is condemned as well as appreciated. So, does it refer this report to multi-culturalism or inter-culturalism? It is very complicated. Meanwhile, why not look at the aspect of language where in turn, more reflection will be given to consolidate the discussions advanced so far.

Language Impact

When it comes to language what is core is communication. Language, as such, is for communication purposes and not necessarily to do with when two or more people talk to each other. But it covers any phenomenon that is characterized by a subject and an object in communication process. This means that for there to be a language there has to be a communicator and a recipient of the intended message, see the point? The reader can assume that the communicator refers to the accounting standards and practice while the recipient refers to the accountant professional. So, how exactly can language be used to harmonize accounting standards and practice?

By definition language is a system of communication through the utilization of words and symbols (conventional symbols); a teacher, for instance, can be said to teach foreign languages (Smith, 2007). More importantly, a language used becomes a standard through out the discipline and also the effectiveness of the implementation of a given program depends on the language in which it is written (Smith, 2007). Needless to say, language can be expressed through words, write-ups, lyrics et cetera (Mores, 2008).

Another definition states that language is a framework through which an entity's thoughts and feelings are communicated through signals, for instance, sounds, voice, gestures, or symbols. This is a system that is used across different nations, people, and other diverse communities (Balzer, 2005).

Even in common parlance, an average person will talk of language as that which he uses to reach his colleagues. Moreover, he can define language as that which he uses to assimilate concepts, rules, set of standards and conventions. So far this report has touched on the aspect of universalism and now it is high time to talk about it in depth. When one thinks about "universalism" and "harmonization" with respect to accounting standards and practice what comes into mind is the element of globalization or internationalization? Whenever an accounting standard is declared universal it means that its adaptability applies across the many countries without difficulty or opposition. Language is a key factor to such harmonization and internationalization.

Literally, if language is not comprehensible then the entire content intended to be communicated will also be incomprehensible. Consider the following example: it is the case that under the GAAP principles one of the requirements is consistency (Paghare, 2010).This requires that professionals should gather and present information in the same way over the subsequent periods (Koen, 2010). Company X, for instance, should not alter how it accounts for inventory now and then. If so, it has to note it in the financial statements and also provide a sound and valid rationale for such a change. Now, this is an accounting standard and it falls under language in the written format. Practically, this standard as presented in this report is in English, US English for that matter. What does the reader think would suffice if the standard was presented to a Portuguese accountant professional who does not know English? Absolutely, he will see it as Greek! Now, between the Portuguese professional and American professional how can one harmonize this standard? Is it by translation?

One thing should be clear though that harmonization does not only mean to make an entity fall for another entity's interest. It does not mean to present a policy in a language that another entity can understand. Harmonization is beyond all that so that it can be regarded as the attempt to synthesis a body of knowledge so that it meets the following specifications:

Comprehensibility by all parties

Volitional compliance by all parties

Valuable contribution to all parties

Emancipation from ineffective state of affairs

Promotion of organizational good in the global scope

This report will be reviewing this in depth later when it will be looking at the theme of harmonization of accounting standards and practice. Meanwhile it will delve into the global trends in accounting standards and practice in the next section.

Global Trends in Accounting Standards and Practice

In a survey conducted in Middle Eastern Countries (MEC) the aim was to analyze the challenges of IFRS in the accounting world of Islam. According to this survey, among 21 Middle Eastern Countries only 15 of them allow their companies to implement the international financial reporting standards (IFRS). In the same vein, among 21 counties, only three of them have developed their own generally accepted accounting principles (GAAP) at the national level. Notably, the three countries do not accept other accounting standards (Razik, n.d).

According to Askary (2006) Middle East countries do play a significant role in world policy, capital markets and investments. It is for this reason why it would be worthwhile for them to adapt IFRS. However, this researcher goes ahead to assert that the deliberations as to which standards to choose for a nation boils down to culture. Culture, therefore, becomes the measure of the taxation system in place, business organization and management, including accounting profession as well.

It is also believed that despite the fact that IASB attempts to achieve global convergence of accounting standards and practice, it should not neglect the fact that other parts of the world are experiencing vibrant and evolving markets. So, Europe or North America cannot be regarded as an absolute measure (Razik, n.d.). So, in the quest for the IASB to achieve a globalization and a business framework where only one set of accounting standards are implemented it cannot disregard the growing trends of economy all over the world and culture so to speak.

Actually, MEC has not been left behind in the adoption of IAS but it is reportedly said that they have some difficulties with some of the provisions. In particular, they have a problem with IAS 24 that demands that transaction information regarding family members and where the party shares some relationship should be disclosed accordingly. However, due to cultural differences and forms of family bonds, MEC accountants find it difficult to abide by such standards (Razik, n.d.).

Arguably, practices in accounting have had historical variations from one country to another (Nobes, 2000). According to Bloom (1997) accounting practice is deemed as a function embedded in the culture of a country. It is due to the fact that each country has a unique culture that it will also have a unique accounting system. This in turn makes it very difficult to carry out informed investment decisions in the global framework since GAAP principles lack uniformity.

There were concerns expressed by other counties as to whether China's accounting standards upheld the IFRS standards or not (Ding & Su, 2008). It is due to this that its Ministry of Finance whose function is to regulate accounting practice tried to dissuade the IASB body into signing a memorandum that would endorse China's attempt to embracing IFRS. Sir David Tweedie, a representative of IASB and another representative of China signed the memorandum on 8 November 2005 to assert that China was fully compliant to IFRS but with three exemptions as follows (Ding & Su, 2008):

If it involves transaction to do with related party and also disclosure

If it involves rejected depreciable assets

Government subsidies

The other challenge facing the regulatory body in Chinese is the fact that it needs to obtain recognition amidst its foreign counterparts in that their standards are effective, sound, and fully IFRS compliant. In this regard, such recognition would render other countries that are IFRS complaint regard Chinese financial reports directly acceptable. The recognition of Chinese GAAP as compliant to IFRS was first asserted by Hong Kong Institute of CPAs and the European Union was expected to follow suit (Wang, 2007). In the same context, there have been on going negotiations where countries like Australia, Japan, Russia and other countries are expected to follow the same path. It is also believed that despite the fact that the new accounting standards in China are as per the standards set out in IFRS their mode of implementation is still very unique and different (Ding & Su, 2008).

As can be seen from the few insights and examples advanced in this part of the report the content aims to furnish the reader with some of the trends that underlie adoption of accounting standards (GAAP or IFRS or IAS) in various countries. The reader can research further beyond the few countries discussed above. Anyhow, one of the most important issues is that culture has been purportedly regarded as an influential factor towards the adoption of accounting standards. Secondly, despite the willingness of a country to converge their accounting practices into IFRS there are still some elements of it that remain unchanged and peculiar to the country itself. This must be the major difficulty in harmonization of accounting standards and practice in a global framework. This and more form the last section of this report under the theme "harmonization of accounting standards and practice".

Harmonization of Accounting Standards and Practice

It would be worthwhile to take into consideration some of the factors that lead to differences in accounting at the international level. Some researchers assert that Accounting Practices depend largely on the environment in which a country is in (Nobes et al., 1997; Radebaugh and Gray, 1997). Analogically, just as how different states have different histories, ideologies and political systems so does the same happen when financial accounting is concerned. It is believed that there are no two countries that share the same Accounting Standards and Practices (Roberts et al., 1998). Robert goes ahead to assert that there are certain variables that generate differences in Accounting Practices. They can be outlined as follows:

Provider of Capital

Legal System

Taxation System

National Culture

Other Influences

The above mentioned elements, in one way or another, influence the National Accounting Practices of a country. Legal system, for instance, takes into consideration the fact that some countries carry out their accounting practices through a legal framework and duty whereas there are countries whose accounting practices have nothing to do with the legal system (Nobes & Parker, 2000). Countries that use common law do not apply law in the Accounting Practice where the accountants are the ones who make or develop their own rules. In this regard, the private sector punctuates the "how" of Accounting and not the law (Choi et al., 2002). On the contrary, countries that use codified law somewhat inter-relate the Accounting Practice with the law. Therefore, law becomes the main actor in defining Accounting Practice so to speak. The table below gives a concise presentation of countries that use common law and those that use codified law.

This report will not dwell much on all the factors but it cannot leave out showing how national culture can be a cause of differences in accounting. It has been said largely in the earlier discussions that national cultures of nations have a great impact on Accounting Standards and Practices. Hofstede (1991) carried out an empirical investigation in an American Company and went ahead to assert that the manner in which accountants behave and the nature of Accounting Practices depends on the national culture. He states that individualism in some cultures affects accounting when matters on disclosure and income measurement rules are concerned.

The valuable thing as to why there is a need to understand the factors that contribute to differences in Accounting Practice are that it will help interested parties to know where exactly to do harmonization. In a pedestrian language one cannot know the best way to harmonize arbitrary differences in Accounting Standards and Practice if he does not know the causes for such differences. Inasmuch as the IASB attempts to harmonize these standards and practices it must, first of all, establish the causes for the same. The main question should be: where party A seeks to adopt IFRS in order to accommodate party B for investment purposes, it must ask "where do we differ", "What is the cause of these differences". In general, the harmonization process should be a question of "why" and not of "what" or "how" or "when". This is the first step where everything else follows suit.

That said the next important thing would be to look at some of the benefits of harmonization of accounting standards and practice.

One of the benefits associated with harmonization of Accounting Standards and Practice is that it fosters an environment where the global economy fully realizes its gains. It also facilitates international transactions and reduces exchange costs due to the availability of appropriate information (Shil, 2009). The other benefit is the fact that harmonization of accounting standard and practice occasions a "level playing field" in the global process. In this context, it makes it easy and safe for nations to trade without misappropriations of tariffs or quotas and other infringing mechanisms involved in trade. It is therefore the case that harmonization of accounting policy rescues different economies from malicious motives that would not occur in a free trade.

Organizational internationalization and engagement in international trade is another factor that benefits largely from harmonization of accounting standards. Due to this phenomenon, entrepreneurs and business communities need a standard language that can be understood by all (Memani, 2006). This is what harmonization of accounting standards and practice does. If this report turns a bit biblical where it is said that what led to the collapse of the Tower of Babel was due the many languages spoken and unfortunately, no one understood the other. This is a biblical myth but can be used to enrich this study. In the same way, this is what would happen if different economies failed to have a unified way of doing accounting practice. This is what culture and language would do in case there was no converging point.

Cross-boarder mergers and facilitation of acquisitions is the other benefit that would accrue from global convergence of accounting policy. By extension, such harmonization strengthens the quality of financial reporting globally (Srkant, 2005).

Last but not least, the other benefit would be that harmonization makes comparability of financial information at the international level possible. Comparability eliminates current misunderstandings related to reliability of foreign financial statements and as a result to smoothen the flow of international investment (Diaconu, 2009).

However, harmonization of accounting standards and practice has got several limitations. This report will not detail them but it hopes that the reader gets to research on them. It is also part of the reasons why the findings of this report should be improved in the future. On the other hand, the findings established are obviously the most critical as they form the basis of this study. This means that failure to state the negative aspects of harmonization of accounting standards and practice will not hinder this study from realizing its aim and objectives. This also applies to other phenomenon that might arise.


On the basis of the reported findings, this report further recommends that:

The quest for internalization of accounting standards and practice become a government project and a legal requirement. This way, most organizations and companies will consider reviewing their accounting function to suit international accounting standards.

Business curriculum programs be such that they educate the business students on the effect of culture on effective business environment. It is high time accounting courses introduce cultural studies in the modules.

IASB can consider educating the public both internationally and domestically on the benefits of harmonization of accounting standards and practice through the media. This can be through business magazines or newspapers.

Governments should educate their citizens on the importance of foreign investment and how they can contribute to it through cultural emancipation.

Further to recommendation (iv) above the government can directly pinpoint on those cultural aspects that do not add value to accounting practice across organizations and eliminate them through education and affirmative action.


The need for this report arose out of the need to evaluate the underlying effects of culture and language in the harmonization of accounting standards and practice. The aim was to establish whether culture and language do have any significant implications on sound accounting standards and practice. This report has established that culture and language do affect the scope of harmonization of accounting policies across the boarders. It has also been established that there are several pecuniary benefits that come with the move. The cultural environment has been pointed as an area where a lot needs to be done if sound accounting standards and practices are to be realized. However, possible measures have also been proposed to this end. The political as well as the economic regimes have been shown to be quite influential to this end.