As we know that, there are major international differences in accounting practices is not obvious to all accountants, let alone to non-accountants. This also includes the differences in the ownership and financing of companies that could lead to differences in financial reporting. One of the differences in the ownership and financing of companies could lead to differences in financial reporting is external environment and culture. Clearly, its environment, including the culture of the country in which it operates, affects accounting. We can se from the argues of Hofstede stated that culture include a set of societal values that drive institutional form and practices. Another reasons that could lead the differences in financial reporting are Providers of finance.
Several countries like Germany, France and Italy, capital provided by banks in very significant. It's difference with another countries like United States and United Kingdom, which their companies rely on millions of private shareholders for finance. The differences is such companies of capital market system (United State and Unite Kingdom) are, there have a strong equity market indicate from the large private shareholders, there have a large auditing profession for their investor by having a disclosure, audit and fair information. It's differences from the companies of credit based financial institution systems which there are having a weaker equity market because most of the capital is provided by banks, having small auditing profession because the banks or the state will nominate directors and thus be able to obtain information and effect decision and finally the need for published information is less clear. The profession also will lead to differences in financial reporting. The strength, size and competence of the accountancy profession in a country may follow to a large extent from the various factors outlined above and from the type of financial reporting they have helped to produce.
Another factors which affects the ownership and financing of the companies is the level of inflation. In several South American countries, the most obvious feature of accounting practices is the use of methods of general price-level adjustment. The use of this comparatively simple method is probably due to reasonable correlation of inflation with any particular specific price changes when the former is in hundred of percent per year, to the objective nature of government-published indices. The last reason of the differences in the ownership and financing of companies could lead to differences in financial reporting is the Theory. Accounting theory has strongly influenced accounting practices. Accounting theorist there had advanced the case that the user of financial statement would be given the fairest view of the performance and state of affairs of an individual company by allowing accountants to use judgment, in the context of that particular company, to select and present accounting figures.
In other countries, theory is less noticeable. In most of continental Europe and Japan, accounting has been the servant of the state.