Influences on accounting regulation
Influences on accounting regulation

This free course is available to start right now. Review the full course description and key learning outcomes and create an account and enrol if you want a free statement of participation.

Free course

Influences on accounting regulation

1.5 Borrowed finery

These examples show how financial reporting has evolved in response to economic evolution, but other influences have occurred also. One of these is ‘borrowing’ legislation from other countries. There is a strong tradition within continental Europe of looking at what the neighbours are doing and adapting their solutions for one's own use. Forrester (1996) discusses how professional accountants from the nineteenth century onwards encouraged exchanges of accounting rules.

The Savary Ordonnance (see Section 1.3) spread, ultimately, to many countries and is the original foundation of the accounting elements of the commercial codes encountered in Europe. The German state of Prussia used the Savary Ordonnance in the eighteenth century. At the beginning of the nineteenth century, it was adapted into Napoleon's first Commercial Code (1807), which was forcibly exported to Portugal, Spain, Italy and the Netherlands. Apart from the last, these countries have kept the code in place ever since.

When the new country of Germany was founded in 1870, it too built on the Prussian base and developed that into a similar code. Subsequently, Germany developed another corporate vehicle for small business, the GmbH (Gesellschaft mit beschränkter Haftung), which was an idea taken up in other European countries (France: société à responsabilité limitée etc.) and even back to the UK, in the EC Second Company Law Directive.

One of the remarkable aspects of the borrowing is that while Japan, for example, did not hesitate to adapt the German Commercial Code for domestic use, the UK remained largely outside the European exchanges of accounting technology until it entered the European Union. This is because the UK and the US have always exerted a strong influence on each other. For example, the technique of producing consolidated accounts was pioneered in the US in the early twentieth century and started to be used in the UK from about 1930, but only became widespread in the rest of Europe following the Seventh Directive, passed in 1983.

This fact supports the notion that worldwide there are two ‘families’ of financial reporting, the US/UK one (known as Anglo-Saxon reporting) and the continental European one (sometimes referred to as commercial code accounting).


Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to university level study, find out more about the types of qualifications we offer, including our entry level Access courses and Certificates.

Not ready for University study then browse over 900 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus