August 1, 1998 - A Rose Is A Rose Is A Rose...But is A Debit A Debit A Debit?

Tradition and culture often shape organizational activities that might at first appear to be beyond the influence of culture. For example, the seemingly universal rules for describing the business transactions of a firm - accounting principles - vary from country to country. This creates problems for interpreting the performance of organizations across cultures. Does the financial statement prepared by a Russian corporation mean the same as the financial statement of a British or American corporation? The answer is, "not necessarily."

While there is awareness that it is desirable to create uniform accounting standards as the economy becomes global - see Portrait of a Young Russian Capitalist page 487 in International Organizational Behavior - cultural differences remain a major consideration in achieving uniformity. For example, Russia continues to use accounting principles and practices developed under Communism despite attempts to modernize financial practices. Trevor Link, an accountant at the Arthur Andersen office in Moscow thinks that, "It is absolutely incredible that after this number of years, the system of accounting is largely unreformed. It fit the Soviet era very well, but was never designed to account for things like profit" (The Wall Street Journal, August 20, 1998 p 1). The concept of "profit" is as much a cultural phenomena as it is part of an economic system.

Further illustrating the cultural influence on accounting practices is the comment by Irna Zuyeva, the rector of Russia's Academy of Budget and Treasury, that although Western methods of accounting better reflect a company's true performance, "Accounts reflect our reality and reality in Russia is very complicated" (The Wall Street Journal, August 20, 1998 p A9).

Web Exercise

Using the following Web Sites, locate the financial statements of several Russian companies. It is not necessary to be an expert in accounting but only to compare the presentation of corporate results for either a quarter or year for a Russian company with the way companies present them in your country.

1. An interesting site for examining cultural aspects of Russian business is the Rye, Man & Gor Securities home page. It provides information on many Russian businesses including financial statements. Access to the detailed information in this site is free, but requires registration including a password that is issued via e-mail.

   http://www.rmg.ru/

2. The Center for Russian and East European Studies of the University of Pittsburgh maintains a Website with a variety of resources for studying business in Russia.

   http://www.pitt.edu/

E-Mail Exercise

In e-mail with your colleagues, discuss other organizational behaviors that at first glance appear to be beyond the influence of culture. For example, is the selection and use of technology, the compensation system, and the pricing of products and services, affected by culture? What are the mechanisms through which culture influences organizational behavior? Put another way, as Irna Zuyeva, who is quoted above recognizes, how do alternative "realities" develop and become sustained?

[ I N T E R N E T   E X E R C I S E S  |  U P D A T E S  |  F E E D B A C K   |  S A L E S  C A T A L O G U E   ]

© 2002 Prentice-Hall, Inc. A Pearson Education Company Upper Saddle River, New Jersey 07458 Legal Statement