DEVELOPMENT AND CLASSIFICATION

AKUNTANSI INTERNASIONAL

Group Names:
03. Ni Made Devi Nugraheni​ ​ (2415613010)
13. I Gusti Agung Ayuni Paramitha​ (2415613052)
15. Island Rosana Swandewi​ ​ (2415613062)
16. I Putu Gede Surya Dharma​ ​ (2415613067)
26. Ni Made Sugiartini​ ​ ​ (2415613107)

PROGRAM STUDI D3 AKUNTANSI

JURUSAN AKUNTANSI
POLITEKNIK NEGERI BALI
TAHUN 2025/2026
 DEVELOPMENT AND CLASSIFICATION

A. Preface
When a company engages in transactions involving other countries, such as export
and import activities, or wishes to open a branch abroad, it must adopt a single set of
international accounting standards. Accounting standards and practices vary from country to
country, shaped by complex interactions between economic, historical, institutional and
cultural factors. It is to be expected that differences will arise between countries;
consequently, the development of accounting is influenced by several factors that lead to
differences in accounting practices between nations. Accounting must evolve to provide the
information required for decision-making within companies in response to changes in the
business environment. To understand and analyse how accounting systems operate, they are
classified into several groups based on their specific characteristics. By recognising
similarities and differences, our understanding of the accounting system itself is enhanced.

B. Content
1.​ International Accounting Development
a.​ Initial Definition Of International Accounting
International accounting is a type of accounting that records
transactions between countries by comparing accounting principles applicable
in other countries and harmonizing accounting standards worldwide. In
Indonesia, the guidelines used in international accounting are IFRS
(International Financial Reporting Standards) and GAAP (Generally Accepted
Accounting Principles). The difference between these two standards is more
about the preparation of financial statements: IFRS uses principles-based
principles, while GAAP uses rules-based principles.
b.​ Development Of International Accounting
The development of international accounting can actually be seen as a
long process of how financial recording systems, which initially varied across
countries, are now moving towards uniform global standards. Initially,
accounting developed locally. Each country had its own standards, influenced
by its economic conditions, laws, culture, and business systems. For example,
countries like the United States are more capital market-based, so their
financial reports focus on investors. Meanwhile, other countries focus more on
taxes or [Link] the globalization of international trade expanded,
companies began expanding across borders, and with the emergence of
multinational corporations, these differences in standards became problematic.
Investors found it difficult to compare financial reports across
countries, due to differing formats and regulations. This is where
harmonization efforts began. One important milestone was the establishment
of the International Accounting Standards Committee (IASC) in 1973, which
aimed to create accounting standards that could be used internationally. The
IASC then evolved into the International Accounting Standards Board (IASB)
 in 2001, which remains responsible for developing global standards to this
day.
The IASB produces standards known as International Financial
Reporting Standards (IFRS). These standards aim to make financial reports
across countries more transparent, comparable, and credible to global
investors. Their development can occur in several stages:
1)​ National Stage → each country has its own standards.
2)​ Comparative Stage → standards are compared across countries.
3)​ Harmonization Stage → efforts are made to standardize basic
principles.
4)​ Convergence/IFRS Adoption Stage → many countries are beginning to
adopt or align their standards with IFRS.
The development of international accounting can be explained through
four main stages that demonstrate the process towards uniform global
standards. The first stage is the national stage, where each country develops its
own accounting standards according to its economic conditions, legal system,
and domestic needs, resulting in significant differences between countries.
The second stage is the comparative stage, when accounting practices
in various countries begin to be assessed to understand differences and find
common ground.
The third stage is the harmonization stage, characterized by efforts to
reduce these differences by developing internationally accepted basic
principles, one of which is the role of the International Accounting Standards
Committee in formulating the initial standards.
The fourth stage is the convergence or international adoption stage,
where many countries begin to adopt or align their national standards with the
International Financial Reporting Standards developed by the International
Accounting Standards Board, creating a more uniform, transparent, and
globally comparable financial reporting system.
Currently, most countries worldwide have adopted IFRS, including
Indonesia, which has implemented convergence through PSAK. Although not
yet 100% uniform, it is clearly moving towards global standards.

2.​ 8 Factors that Influence the Development of International Accounting

a.​ Sources of Finance
In countries with strong equity markets (like the US and UK),
accounting is focused on providing information for investors and emphasizes
transparency. In contrast, in credit-based systems where banks are the primary
source of capital (like Germany or Switzerland), accounting tends to be more
conservative to protect creditors.
b.​ Legal System
1)​ Common Law: Accounting rules are usually established by
private-sector professional bodies and tend to be more adaptive and
practice-based.
 2)​ Code Law: Accounting rules are incorporated directly into national
laws. They are typically more rigid, highly detailed, and prescriptive.
c.​ Taxation
In many countries, financial statements are the primary basis for
determining tax liabilities. In these cases, accounting rules must strictly follow
tax laws. In other nations, financial reporting and tax reporting are kept
separate, allowing for different methods of depreciation or revenue
recognition.
d.​ Political and Economic Ties
Accounting standards are often "exported" through colonialism, trade
blocks, or economic integration. For example, many Commonwealth countries
adopted British accounting patterns, while EU member states work toward
harmonizing standards to facilitate intra-regional trade.
e.​ Inflation
High inflation rates render the historical cost principle irrelevant
because assets become undervalued on the balance sheet. Countries that have
experienced chronic inflation often develop accounting models that allow for
the periodic revaluation of assets to reflect current market prices.
f.​ Level of Economic Development
The complexity of accounting issues depends on the type of economic
transactions occurring in a country. Advanced economies require sophisticated
standards for things like derivatives, business combinations, and pensions,
which may not be a priority for developing nations.
g.​ Education Level
Sophisticated accounting standards and practices are useless if there
are not enough highly trained professionals to implement them. A country's
educational infrastructure determines its ability to adopt complex international
frameworks like IFRS (International Financial Reporting Standards).
h.​ Culture
Culture encompasses the values and attitudes shared by a society.
Cultural variables underlie nations’ legal systems and other institutional
arrangements. Based on his research, Hofstede identified four national cultural
dimensions (societal values):
1)​ Individualism: this refers to the degree of interdependence a society
maintains among its members. Individualism is a preference for a
loosely knit social framework in which individuals are expected to take
care of only themselves and their immediate families ("I"). In contrast,
Collectivism represents a preference for a tightly knit framework in
society where individuals can expect their relatives or members of a
particular in-group to look after them in exchange for unquestioning
loyalty ("We").
2)​ Uncertainty Avoidance: this is the degree to which the members of a
society feel uncomfortable or threatened by uncertainty, ambiguity, or
unstructured situations. Societies with strong uncertainty avoidance
 maintain rigid codes of belief and behavior and are intolerant of
unorthodox behavior and ideas. They often feel a strong need for
written rules and regulations to minimize risk.
3)​ Power Distance: this is the extent to which the less powerful members
of institutions and organizations within a country expect and accept
that power is distributed unequally. In high power distance societies,
hierarchy and inequality are seen as normal, and people at various
power levels tend to accept their place in the system without requiring
further justification.
4)​ Masculinity (vs. Femininity): this dimension relates to the
distribution of emotional roles between the genders. Masculinity
represents a preference in society for achievement, heroism,
assertiveness, and material rewards for success (often referred to as
achievement orientation). Its opposite, Femininity, stands for a
preference for cooperation, modesty, caring for the weak, and quality
of life.

3.​ Four Accounting Value Dimensions that Influence a Country's Financial

Reporting Practices
a.​ Professionalism vs Statutory Control
A preference for the exercise of individual professional judgment and
professional self-regulation, as opposed to compliance with prescriptive legal
requirements. The preference for independent professional judgment aligns
with a loose social order, emphasizing independence and a belief in fair play.
Professionalism is more accepted in societies with a small power distance,
where equal rights are valued and people feel less threatened, and where there
is a belief in the need for laws and codes of ethics.
b.​ Uniformity vs Flexibility
A preference for uniformity and consistency over flexibility in reacting
to circumstances. A preference for uniformity is related to uncertainty
avoidance, punishment, and strict rules. Uniformity is also associated with
collectivism and group norms. It is more easily implemented in societies with
a large power distance.
c.​ Conservatism vs Optimism
A preference for a cautious approach to measurement to cope with the
uncertainty of future events instead of a more optimistic, risktaking approach.
A preference for conservative profit measures is influenced by uncertainty
avoidance and security concerns. An emphasis on individual achievement
encourages a less conservative approach.
d.​ Secrecy vs Transparency
A preference for confidentiality and the restriction of business
information on a need-to-know basis versus a willingness to disclose
information to the public. The preference for secrecy is related to uncertainty
avoidance due to the need to limit information disclosure to avoid conflict and
 maintain security. Societies with high power distance restrict information to
maintain power imbalances, while societies focused on quality of life are more
open about social information.

4.​ Goals and Approaches in the Classification of International Accounting

Classification serves as a foundation for understanding and analyzing why and
how national accounting systems differ. It also allows us to assess whether these
systems tend to converge or diverge. The purpose of classification is to group
financial accounting systems based on their specific characteristics. Classification
reveals the underlying structure in which members of a group share similarities, as
well as what distinguishes one group from another. By recognizing both similarities
and differences, our understanding of accounting systems becomes more
comprehensive.
International accounting classifications fall into two categories: judgmental
and empirical. Judgmental classifications rely on knowledge, intuition, and
experience. Empirically derived classifications apply statistical methods to databases
of accounting principles and practices around the world.
Four Approaches to Accounting Development
The pioneering classification is the one proposed by Mueller in the mid-1960s.
He identified four approaches to accounting development in Western nations with
market-oriented economic systems.
a.​ Under the Macroeconomic Approach
Accounting practices are derived from and designed to enhance
national macroeconomic goals. Firm goals normally follow rather than lead
national economic policies as business firms coordinate their activities with
national policies. Thus, for example, a national policy to maintain stable
employment by avoiding big swings in business cycles would result in
accounting practices that smooth income. As another example, a nation that
wished to promote the development of certain industries could permit them to
rapidly write off capital expenditures. Accounting in Sweden developed from
the macroeconomic approach.
b.​ Under the Microeconomic Approach
Accounting develops from the principles of microeconomics. The
focus is on individual firms whose main goal is to survive. To accomplish this
goal, firms must maintain their physical capital. It is also critical that they
clearly separate capital from income to evaluate and control their business
activities. Accounting measurements based on replacement cost best fit this
approach. Accounting developed from microeconomics in the Netherlands.
c.​ Under the Independent Discipline Approach
Accounting derives from business practices and develops on an ad hoc,
piecemeal basis from judgment and trial-and-error. Accounting is viewed as a
service function that derives its concepts and principles from the business
process it serves, not from a discipline such as economics. Businesses cope
with real-world complexities and ever-present uncertainties through
 experience, practice, and intuition. Accounting develops the same way. For
example, income is simply what seems to be the most useful in practice, and
disclosures respond pragmatically to user needs. Accounting developed as an
independent discipline in the United Kingdom and the United States.
d.​ Under the Uniform Approach
Accounting is standardized by the central government and employed as
a tool for administrative control. Uniformity in measurement, disclosure, and
presentation makes it easier for government planners, tax authorities, and even
managers to use accounting information to control all types of businesses. In
general, the uniform approach is used in countries with strong governmental
involvement in economic planning where accounting is used to measure
performance, allocate resources, collect taxes, and control prices, among other
things. France, with its national uniform chart of accounts, is the leading
exponent of the uniform approach.

5.​ Comparison of International Accounting System Classifications

a.​ Legal Systems: Common Law vs. Code Law Accounting
Accounting can also be classified by a nation’s legal system. This view
has dominated accounting thinking for the last 25 years or so.
1)​ Accounting in Common Law Countries
Common law accounting is often called “Anglo-Saxon,”
“British-American,” or “micro-based.” Common law accounting
originated in Britain and was exported to such countries as Australia,
Canada, Hong Kong, India, Malaysia, Pakistan, and the United States.
Characteristic:
a)​ Fair presentation
b)​ Transparency
c)​ Full disclosure
d)​ Separation between financial and tax accounting.
e)​ Stock markets dominate as a source of finance
f)​ Financial reporting is aimed at the information needs of outside
investors
g)​ Setting accounting standards tends to be a private sector
activity, and the accounting profession plays an important role.
2)​ Accounting in Code Law Countries
Code law accounting is often called “continental,” “legalistic,”
or “macro-uniform.” It is found in most of the countries of continental
Europe and their former colonies in Africa, Asia, and the Americas.
Characteristic :
a)​ Legalistic in orientation
b)​ Opaque with low disclosure
c)​ Alignment between financial and tax accounting.
d)​ Banks or governments (“insiders”) dominate as a source of
finance
 e)​ Financial reporting is aimed at creditor protection.
f)​ Setting accounting standards tends to be a public sector activity
A common law legal system emphasizes shareholder rights and offers
stronger investor protection than a code law system. Laws protect outside
investors and are generally well enforced. The outcome is that strong capital
markets develop in common law countries and weak ones develop in code law
countries. Relative to code law countries, firms in common law countries raise
substantial amounts of capital through public offerings to numerous outside
investors. Because investors are at arm’s length to the firm, there is a demand
for accounting information that accurately reflects the firm’s operating
performance and financial position. Public disclosure resolves the information
asymmetry between the firm and investors. By contrast, ownership of firms in
code law countries tends to be concentrated in the hands of families, other
corporations, and large commercial banks. Firms satisfy substantial fractions
of their capital needs from the government or through bank borrowing. Debt
as a source of finance is relatively more important in code law countries than
in common law countries. Conservative accounting measurements provide a
cushion to lenders in the event of default. Major lenders and significant equity
investors may occupy seats on boards of directors, along with other
stakeholders, such as labor and important suppliers and customers. Because
information demands are satisfied by private communication, there is less
demand for public disclosure. Accounting income is the basis for income taxes
owed and often, as well, for dividends and employee bonuses, resulting in
pressures for smooth income amounts from year to year.
b.​ Practice Systems: Fair Presentation vs. Legal Compliance Accounting
There are several reasons why accounting distinctions at the national
level are becoming blurred.
1)​ The importance of stock markets as a source of finance is growing
around the world.
Capital is increasingly global, creating pressure for a world
standard of corporate reporting. The integration of the world’s capital
markets is arguably the most important reason why the International
Accounting Standards Board (IASB) has emerged as the focal point for
accounting standard setting in Australia, Japan, Europe, Singapore,
South Africa, the United States, and elsewhere. Stock market
development is also a top priority in many countries, especially those
emerging from centrally planned to market-oriented economies. Two
such countries are the Czech Republic and China
2)​ Dual financial reporting
Which is one set of financial statements complies with local,
domestic financial reporting requirements, while the other set uses
accounting principles and contains disclosures aimed at international
investors.
 Starting in 2005, all European listed companies were required
to adopt International Financial Reporting Standards in their
consolidated financial statements. However, some EU code law
countries, such as France and Germany, operate a dual system:
a)​ Individual company financial statements → follow national
accounting standards.
b)​ Consolidated financial statements → follow IFRS.
3)​ Shifting responsibility for setting accounting standards from the
government to private-sector groups
This change makes the standard-setting process more like that
in common law countries such as Australia, Canada, the United
Kingdom, and the United States, and is seen as a way to more actively
influence the agenda of the IASB.
These points indicate that another framework besides legal
systems is needed to classify accounting worldwide. One approach is
to distinguish between:
a)​ Fair presentation
b)​ Legal compliance
The distinction between fair presentation and legal compliance
has pervasive effects on many accounting issues, such as:
a)​ Depreciation
●​ Fair Presentation: based on the decline in an asset’s
usefulness over its economic useful life.
●​ Legal Compliance: based on the amount allowed for tax
purposes .
b)​ Lease
●​ Fair Presentation: treated as a purchase if the substance
of the transaction is a purchase.
●​ Legal Compliance: still treated as a standard lease.
c)​ Pensions
●​ Fair Presentation: costs are recognised when the
employee works.
●​ Legal Compliance: paid when cash is disbursed.