Is There A Favorable Cultural Profile For IFRS?: An Examination And Extension Of Gray's Accounting Value Hypotheses

Gray (Gray, 1988) proposed a link between Geert Hofstede’s (Hofstede, 1980) popular national culture dimensions used in comparative management analysis and his own comparative concepts for accounting. In the past twenty-four years, Gray’s work has been cited by over 650 scholars. His article presented a hypothetical set of complex correspondences between Hofstede’s original four dimensions of Power-distance, Individualism, Masculinity, and Uncertainty Avoidance and Gray’s accounting values of Professionalism versus Statutory control, Uniformity versus Flexibility, Conservatism versus Optimism, and Secrecy versus Transparency. Gray’s accounting dimensions were intended to capture underlying cultural values that would tend, in the absence of external influences or other factors, to influence a culture toward the development of certain types of accounting systems. The purpose of this paper is to identify which Gray values and which corresponding Hofstede cultural dimensions would be most supportive of the establishment of accounting standards like the International Financial Reporting Standards (IFRS), currently being adopted by nations throughout the world. A specific set or profile of Gray values most conducive to IFRS is identified and termed the IFRS-favorable profile. In arriving at this profile, the paper also addresses two newer Hofstede cultural dimensions, long-term orientation and Restraint versus Indulgence, and extends Gray’s model by proposing how these two new Hofstede dimensions correspond to Gray’s four accounting dimensions. The IFRS-favorable profile and the expansion of Gray’s link to Hofstede are discussed as practical applications to facilitate successful IFRS implementation in individual countries