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The issue of regulatory environment and cultural influence explaining behaviour in society has been recognised and impact on accounting reporting. This paper will examine the accounting theory influence on the financial reporting and ABR Holdings Ltd is used to test this theory.
Financial Reporting Regulatory Environment in Singapore
During the colonial period, Singapore accounting standards and professional training were under the influence of British and mainly of UK accounting standards. In 1963, Singapore Institute of Certified Public Accountants was established as an accountancy body that support the profession interest and followed IASC for accounting standard setting.
Singapore regulatory environment established itself as Anglo-American corporate governance model which centre upon capital market controls of managerial behaviour. Singapore corporate governance structures and efficient capital markets with high standards of disclosure are recognised as mechanisms which positively enable international standards of accountability, efficiency and transparency to be attained.
Accounting Standards Council authorized under Accounting Standards Act prescribes accounting standards for financial user in companies, charities, and societies. International Accounting Standards Board issued International Financial Reporting Standards which adopted as the governance policy. The IAS standards are examined to Singapore context.
Pro-regulation group like Accounting and Corporate Regulatory Authority (ACRA) took directives from the government to provide responsive regulatory environment for public accountants and businesses by collaborate monitoring between disclosure regulation of public accountants performing statutory audit with corporate compliance.
Singapore Companies Act drew its elements from the UK Companies Acts and has a substantial influence on accounting practices. It prescribes disclosure requirement for Singapore companies and preserving British common-law influence which requires credential of the financial statements which give a ¿½¿½true and fair¿½¿½ view.
Singapore develop financial services sector into a key sector of economy. It setup financial institutions namely SGX and Monetary Authority of Singapore to regulate financial reporting. Singapore has developed through a transition period produced by support of international financial reporting, auditing standards and audit profession expectation to the international standards.
Singaporeans cultural value follows a hierarchy relationship in society through Confucian teaching as composed of people who are fundamentally distant in rank (Hofstede, 2001). Subordinates will hesitant to question authority and unwillingly to initiate upward conversation due to importance of status hierarchies. International Accounting Standards Board seen as an authoritative figure in declaration of international accounting standards. Singapore high power distance will abide control of accounting standard setting to an authoritative international body.
Singaporeans social behaviour likely is humble. Humble requires them to be averse to self-assertion and express humility at a compliment which appear to lack assertiveness. Singapore would not prefer autonomy over dependence on others which a feminine society will likely to adopt IFRS (Curtis, 2010).
Singaporean is cultivated within family¿½s group which accustomed to be a part of the group and make decisions that benefit the group. Singaporean is taught to advocate the dignity of groups like family and country. Singapore collectivist societies would accept an international standard setting body which concerned with the effect of a decision on society at large.
Singaporeans are generally at comfort towards contingency and uncertainty, respectful of systems and tolerant approach in religious and ethnic differences. Singapore's low UAI score is a result of pragmatism in economic survival. The profession places a level playing field and fewer regulations as possible. Singapore is likely to place highly in professionalism in accounting where accountant exercise professional judgments, honesty and integrity.
Long term orientation indicate that Singapore demonstrate cultural values encouraging long term investment such as diligence, thrift and continuous efforts being with scarce resources. The stress on tradition has accommodated to secure a safe and reliable environment. This cultural character shape Singapore accounting setting in place of a shareholder aspect on stable and growing company¿½s performance that dominates traditional management accounting.
Singapore government is responsible for fair distribution wealth and resource. Politician decides setting of accounting standards as it impacts how resources are distributed. Political economic theory identify the consequences of accounting report distribution of wealth and income in society (Cooper, 1984).
Public interest theory indicates Singapore accounting principle is highly influenced by political environment. Singapore government is responsible to resolve between contesting economic interests in the determination and adoption of accounting standards. Each inherent accounting standard in Singapore therefore has to undergo a political process. The main reason is the truth that accounting standards setting represent a necessary part in economic direction and public interest (Watts, 1977).
Singapore is deeply committed to legitimization and democratic of authority. Institutions are political responsive have the definite right to dominate others to abide by their rules and regulation (Peltzman, 1976). Accountancy community in determining accounting international standards has appeared under politics pressure from Singapore Accounting Standards Council to adopt IFRS. Accounting Standards Council is responsible to ensure accounting standards are reviewed constantly depending on the current economic situation and changing accounting standards in the world.
Politicians ensured that an efficient structure is established for setting accounting standards and government committed in the progress to administrate the development of effective, transparent and responsible accounting standards. Government is accountable for safeguarding the accounting standards that are presented by the parties using them, failure to abide them is chargeable by law. This indicates how politics of Singapore influence the creation of accounting standards.
Reporting undertaken by ABR Holdings Ltd
ABR reports its procurements of beans and paper products from rainforest alliance-certified farms which are ecological sustainability and develop medical facilities in the farming community. ABR reported it raised $93,134 towards japan disaster relief effort from sales of ice-cream. Throughout the year, it provides support to various charitable events and welfare group.
ABR sustainability reports demonstrate direct responsibility not only to shareholders, but also to stakeholder included employees, communities and individuals that have a related or collateral interest in an organization. As a public listed company, social goals and financial results is a common reporting practices in the industry.
Legitimacy theory suggests ABR choose to content social expectations by looking after the interests of communities, employees and other stakeholders. ABR reports on corporate social responsibility and voluntary disclosure strive to increase public accountability (Richardson, 1987). ABR prefer to be perceived having ethical and moral responsibilities and not only focusing on profits for their shareholders (Tilt, 1994). Consequently, ABR desire to be recognise as a responsible and accountable company so powerful stakeholder will willingly to deal with them.
The incentives for ABR sustainability reporting promote a healthier culture which people will likely to patronize their restaurants which generate higher sales growth. If ABR is recognised as a responsible company, people will buy their shares which leads to more capital for future investment. A good reputation makes ABR easier to recruit and retain human resources which increase productivity. Investors will believe ABR are responsive to social demands and are willing to finance ABR businesses.
As stakeholders become more environmentally conscious, environmental data may be required of Singapore companies by their shareholders. As more companies involved in voluntary disclosure reporting which share sustainability and financial data, competitors will do likewise and ABR will feel the heat to do so.
Under the influences of British, Singapore concept of the ¿½true and fair view' of a company's financial position depends heavily on the judgment of the accountant as an independent professional. The accounting information disclosures and particularly enforced by law may be required. Independent professional judgment is consistent with a preference for a distant social framework where it influences companies reporting practices.
Cultural values in Singapore have an impact on ABR reporting practices. ABR reporting practices proposed professionalism, a concept that accountants are perceived as independent and exercise professional judgments while it also are subjected to statutory control to comply with public regulation and legal requirements.
Cultural theory suggest Singapore which have low uncertainty-avoidance and individualism concept emphasis on transparency of accounting financial report and publicly accountable approach instead of secrecy where favour for confidentiality of disclosure about business information only to board and restrict disclosures so as to avoid conflict (Lehman, 1987). Singapore a high power-distance societies characterized by the restriction of information to preserve power inequalities where decision making in financial reporting are made at the ABR board, top down approach.
Stakeholder theory indicate Singapore environment followed the Anglo-American model where professional accounting bodies emphasises importance of true and fair of financial reporting (Roberts, 1992). ABR shares information about its corporate responsibility strategy, sustainability model and social contribution as an important means to stakeholders. ABR understand stakeholders want a clear picture about movement in integrating responsible practices into business operations.
Also, ABR acknowledge transparency as a fundamental component to an accountable business approach and performance of company for understandability of shareholders. Consequently, accountability reporting is the essential tool use to provide valuable information and manage corporate responsibility issues which impacts the stakeholders (Deegan, 2002).
Understanding the impact regulatory environment and cultural values on accounting practices are important as we move towards international accounting standards. Any insights into how local values may influence through accounting theory will eventually impact financial reporting is critical to ensure the comparability of international standards