Development and Classification in Qatar and GCC
Development and Classification in Qatar and GCC
International Financial Reporting Standards are used by different countries to make their business understand and compare their accounts with others who are not in their region. They developed because of increased participation in international business and trade among different countries. Such standards are essential because they make the work of accounting easier when companies in one country are dealing with others outside their territory. The standards are currently replacing different nation’s accounting procedures because of the desire to have one accepted accounting standard. The IFRS provides rules that should be used by accountants when preparing their books of accounts. The rules are reliable, comparable, understandable and relevant in accordance to the users’ external and internal environments (Callahan 59).
There are different factors that affect the development and classification of accounting around the globe. The practices and procedures of accounting are always as a result of different factors which might include economic, institutional and environmental factors within a nation. Such factors often require changes and this only applies after the development of accounting standards, theory and principles. When the results of one accounting system are adopted by other nations the ideas of accounting development emerge. This clearly means that the development of accounting has been accomplished between the nations in question.
The factors the influence the overall development of accounting are many, and thus the need to often reflect on those that are vital to the economy of a country. Institutional factors involve different agencies and institutions, which are known to play the crucial role when developing accounting among nations (Chakraborty 60). The various institutions within a country always require accounting standard to ensure easy calculation and follow-up of their processes. The different agencies and institutions in many countries may include banks, corporations, governments, universities, hospitals among many others. Different institutions have varied roles and requirements, thus the need for different accounting practices.
There are different environmental factors that influence the development and classification of accounting among different nations. The factors are known to make different changes on the accounting principles different nations use. The environmental factors are different among nations, and only apply when businesses perform their operations in those regions where they apply.
Legal systems among nations are different and this makes it difficult to unify various accounting standards among them. Nations that strictly follow the code of law desire the use of codification of different accounting standards. This brought about the formation of different other policies that did not adhere to different legal systems, because of their open nature. Countries that follow after different laws often demand all the companies operating under their territory to follow the laid down policies of accounting. The legal systems in Qatar allowed the exchange of products and services to the US with the use of different accounting systems.
The political system in a nation is also vital when developing different accounting principles (Francis 309). Due to the issues of importing and exporting nations often employ different accounting principles that are favorable within their nations. Standards of accounting often take shape differently among different political systems in the world. For example, the accounting conditions in the UK in the 20th century allowed for exportation to different Commonwealth nations. Indonesia and the Philippines also received products and services from the Netherlands without any problem. During this period the Germans were seen as trying to influence the political landscape of Sweden and Japan.
Business ownership is also a vital facet when organizations determine their accounting capabilities. In the US issues of public ownership has been encouraged compared to Qatar regions. Issues of public ownership allow corporations to have an accounting system that is often referred to as sunshine accounting disclosure. It operates on the premise of wide open communication between different parties. The French and UAE on the other hand have minimal financial communication capabilities, and this makes their accounting provisions secret.The magnitude and complexity of different business corporations often determine the development and classification of different accounting principles (Nobes 189).
Large and small corporations make use of different accounting methods due to their level of complexity. Conglomerates, for example, require different techniques of reporting when compared to small business operations which have minimal operations. Multinationals also have different requirements when using various accounting principles when compared to domestic companies. Such a provision applies to both Qatar and the US which has most multinationals.The social climate is another important environmental factor that is always considered when preparing different accounting information. The use of concepts like social responsibility when reporting has been an issue in most nations.
The French, for example, make use of social responsibility reporting while Qatar does not. The use of such terminologies is often denied in other regions where issues of interest are not regarded as right due to the religion and culture in those regions. In Qatar and many other nations the issues on interest rates are not regarded as right as they are seen as not ethical. The US has had its open books for purposes of tax and interest calculation since time immemorial.
The idea of accounting development and classification can also be determined by the output of any business process. Businesses can determine their level of profits through the output level within a specific period. When companies operate in different regions they often calculate their worth through the output they provide at the end of the accounting period. Companies in the US and Qatar make use of output to deliver different principles that govern them when reporting their financial standing after the end of a working period.
The issues of taxation are always important when it comes to financial recording and reporting. Taxation may desire the use of certain principles that are not relevant in other regions. In the US, where different concessions of tax are recorded before they are claimed indicates a situation where the LIFO method is applied. However, the FIFO method is known to take effect in Qatar and other regions from the GCC. The methods are essential as they dictate the inventory valuation issues. Protection laws that are provided by the US government help members to disclose a certain amount of inventory for analysis and valuation. Such a principle is not applicable in Qatar and many other nations around the globe.
Issues of business acquisitions and mergers are often very important in different regions like the US. Such provisions are not available in most cases and never considered in many countries. However, most organizations that form acquisitions and partnerships often require the need to include accounting perspectives that capture the merger requirements of their organizations. Regions like the US make use of merger considerations more compared to Qatar. The use of merger as a spectrum to check on the accounting functions to be used by organizations is important as displays the total ownership of such an organization without problems.
Industrial nations often have different provisions for their accounting capabilities compared to agricultural centers. The countries that rely on agricultural economies usually have principles that guide them towards their agricultural productions. This also applies to different nations that rely on industrial provisions. Both the US and Qatar have industrial provisions; hence make use of similar accounting provisions when it comes to the nature of their industries. Countries that fully or partially rely on agriculture often have a long desire to get credit with short-term business contracts. Such nations cannot make use of accrual accounting because of its ineffectiveness to capture the whole scenario once.
Stable conditions in different parts of the world often dictate the level of accounting procedure to be undertaken. Nations with prolonged periods of war have different accounting compared to those who continue to have peace. The desire to have stable accounting pertains emanate from the desire to have different markets that are competing. The US and Qatar, for example, have had long periods of peace and this makes them share commonness in their accounting provisions.
When there are minimal or no accounting professionals in a region most of them use the services of others to fulfill the large gap that is often left because of such a deficit. Countries require to have specified professional organizations that have the mandate of overseeing their accounting procedures. The use of UK accounting systems was vital until the end of World War II when the US authorities developed their own financial accounting reports. International accounting development was necessitated because of the dire need for codes that can be accepted and followed by different organs in the country. The idea of comparative development stems from the nature philosophy of different western nations which pride themselves with economic systems that are market-oriented.
The ideas of macroeconomics entail the various minerals that are in a country. Such minerals are always important as they provide assistance to the nation when being compared to others in the region. Macroeconomic provisions lead to the depreciation of different production thus changing the face of accounting in such circumstances. The microeconomic aspect of the economy entails leading an economy without the help of the government. Here the individuals are always given the opportunity to make their own decisions on matters of accounting. The western nations have a similar operation and often allow the business individuals to make inferences that relate to their operations on the microeconomic level.
Developing uniformity is often vital when dealing with accounting provisions. Countries make use of different approaches when desiring uniform presentations of their accounting systems. Under the business approach, businesses often follow the data they have under collection and the overall characteristics of their business operations. The approach is used mainly in design presentations and involves accounts that are deemed to be similar.
The economic approach entails the uniform nature of the accounting system when considering the macro level approach. The approach is often used because of its capability to include both the public and accounting policies that are specified in various manuals. The use of such information is important for members of the society as it helps them to know the different approaches they may use when making different business decisions. It is vital to note that economic approaches often deal with the financial aspects which are often neglected by different economies. Most countries prefer technological aspects which they think leads to increased financial gain.
Legal entities in any nation make use of the economic approach to measure their level of spending and the various costs that are associated with their expenditure. Such provisions are crucial because they enable them to make future changes that will ensure increased productiveness in future and better management capabilities.
The technical approach is also preferred by most scholars as it enables members of the society to have the knowledge and knowhow of different principles that are used by various economies around the globe. The idea of technical approach helps in the process of wanting to make double entries when different accounting principles are being used by an economy. The idea of technical approach was important because it brought together different methodologies that were not common among different users. The approach is theoretical but also has different sections that are related to the economic system as a whole. The development ideas of different accounting principles take care of these approaches to provide succinct policy to serve in the international market.
There are different models that relate to the understanding of international accounting. The use of absolute uniformity is commonly used because it desires that the best accounting standards are to be used by nations without having any bias or discrimination. The idea of absolute uniformity makes organizations operating in different nations to become equal and none of them is discriminated against because of different provisions that are not met. Absolute uniformity is used among nations that are in clusters because of their general tendencies of sharing different aspects of their operations. Such nations often find it easy to work and operate with one another because they have similar political standpoints.
Circumstantial uniformity is commonly used among nations of different cultures like the US and Qatar as they appreciate the presence of various accounting procedures but only make use of those that are accepted in their areas of operation (Gröjer 695). Such nations recognize that their accounting procedures are better when compared to others which are in operation. Purposive uniformity on the other hand, makes considerations of all the differences, benefits and requirements of all the nations that are involved in the trade in question. Most nations around the globe make use of purposive uniformity because it provides them with the ability to make choices while considering the nations they are working together within their business operations.
Accounting practices are essential in any economy as they present the information that is required to make different decisions and judgments. Organizations require such information so that they can relate their performance to their goals and objectives to make them aware of their industry and operations as a whole. Government agencies also make use of such accounting principles and standards to measure different business operations and determine those that should continue operating without any problem. The idea of accounting practices is important as makes different nations to know where they should get their provisions without breaking any set rules and regulations.
When developing different accounting principles there are usually different factors that are usually influenced in the long run. Some of such factors include sources of funding where countries take care of their equity markets to ensure profitability and sustainability. The US, for example, is often concerned with their companies and how well they are run by the different managers. This is done with the view of increasing profitability and overall sustenance of investors in those companies. The investors are made to know and understand future risks and cash through the provision of different accounting measurements. The measurements act as a pointer to different directions in the long run. Qatar has not such a provision because of the open disclosure methods used in the country. The organizations provide information to various financial institutions that later provide similar information to other required stakeholders in the organization.
Taxation is also an important aspect when considering international accounting as it affects industries and companies when they decide to do business outside their borders. Countries like Qatar have an effective rule that ensures that the accounting procedures must be recorded as expenses and income in the tax account. This is also done in the US, where the accountants make such recordings before presenting the information to different authorities. Economic ties are also important as they present different economies that have the past together. Economies that see each other as partners often desire the use of different practices which others may not desire to use. Britain and US have similar operations in most accounting procedures, and this is also true for Qatar and other Asian nations. Inflation is also part of the reason for differences in many accounting principles around the globe. Other difference are indicated below.
The US is governed by the Financial Accounting Standards Board or the Financial Accounting Standards Board-FSAB Governed by Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
The use of deductive and inductive approach is accepted. Only the use of inductive approach is practiced
Accept the ideas of interests easily Do not openly accept issues of interest due to their religious culture
Accrual basis of accounting is commonly used Accrual basis of accounting is not common
High credit levels Low credit levels
Taxation is a must in the US Workers in Qatar enjoy tax-free salaries
Disclosures are open Closed disclosures
US CPA for accountants ECPA for accountants
Strict legal systems Lenient legal systems
Public ownership is allowed Public ownership is not allowed
In conclusion, the process of accounting is vital and often corresponds to the needs and wants of every nation. Businesses often follow after the environment they are in, and avoid instances of using other nations’ principles when making accounting principles. The different provisions for nations when recording and analyzing reports is essential when making final accounting submissions that involve either their imports or exports. International accounting standards are essential as they enable countries and individuals to work in harmony while doing business. Companies can also conform to different rules and regulations without having to break any codes set by those countries. Following the development and classification of accounting among all stakeholders is also vital as it assists members to understand which concepts and principles to use while doing business or analyzing and reporting financial data.
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Chakraborty, Vasundhara, Victoria Chiu, and Miklos Vasarhelyi. “Automatic classification of accounting literature.” International Journal of Accounting Information Systems 2014: 60-98. Print.
Francis, Jennifer. “Discussion of empirical research on accounting choice.” Journal of Accounting and Economics 31.1-3 (2001): 309-319. Print.
Gröjer, Jan Erik. “Intangibles and accounting classifications: In search of a classification strategy.” Accounting, Organizations and Society 26.7-8 (2001): 695-713. Print.
Nobes, Christopher. “On accounting classification and the international harmonisation debate.” Accounting, Organizations and Society 29.2 (2004): 189-200. Print.