BusinessEssays.net

By reference to one developed and one developing country examine and explain the non-accounting variables that might influence the disclosure and financial reporting regulations.

Two countries for comparison purposes are US (developed) and Egypt (developing). The differences of the two economies are summarized in table below.

The non-accounting variables possibly affecting disclosure and financial reporting regulations are:

1. 1. Societal values have institutional consequences.
   2. Hofstede’s and Gray’s work indicates that there may be a correlation between widely held cultural norms and their relationship to accountancy values.
   3. The differences of cultural values between US and Egypt are shown in table above. Due to the differences, the respective disclosure and financial reporting regulations may differ.
   4. For example, in US, management may disclose more information relative to the required regulations, as they may consider that as a professional way in accounting disclosure practices. In Egypt, accounting disclosure is strongly driven by statutory control.
   5. In US, transparency is valued, and it can be seen that management tend to proactively disclose valuable information about the business to investors. In Egypt, management may be reluctant to disclose certain crucial information to the public. They may perceive disclosure of such information may harm their businesses or benefiting their competitors.
   6. In US, a high degree of flexibility in financial reporting can be found. Creativity in terms of financial reports presentation is observed. In Egypt, financial reporting is found to be more uniform, whereby standards format can be easily observed.
2. Legal systems.
   1. Different regulations applied in different countries.
   2. In US, the relevant legislation on financial reporting is GAAP.
   3. In Egypt, the financial disclosures are governed by Egyptian Capital Market Authority (CMA).
3. Family business structure.
   1. Depending on the ownership of the business, certain family controlled businesses may choose not to disclose certain information which they think sensitive.
4. Tax systems.
   1. In some countries the Government have established tax rules that are the corporate sectors accounting rules and must be followed; while in other countries, the accounts are adjusted after publication to calculate tax.
   2. It is found that both US and Egypt have the following tax system: accounts are adjusted after publication to calculate tax.
5. 1. US can more relevantly be considered as a country with Christianity religion, while Egypt is an Islamic country.
   2. Thus, it is possible to expect that certain accounting disclosure will be affected by the Syariah principles in Egypt.

Source: Dahawy, K., and Conover, T. (2007). Accounting disclosure in companies listed on the Egyptian stock exchange. Middle Eastern Finance & Economies, 1, 5-20.