2.5 ‘Events, dear boy, events’
A further influence on accounting is, to borrow Macmillan, events. (Macmillan was the Prime Minister of the UK (1957–1963) who famously observed that the greatest obstacle to political achievement was ‘Events, dear boy, events’.)Countries' systems are overtaken by events of one kind or another that bring accounting consequences. Not least of these is war. Napoleon's desire to conquer Europe had the side effect of exporting his Roman law paradigm and the commercial code within it, to half of Europe. A cornerstone of European accounting was, in effect, a military decision. It can be demonstrated that the First World War provided the motivation for the development of cost accounting. The 1870 Franco-Prussian war and, later, restitution, brought the GmbH into French law. The empire-building enthusiasms of the nineteenth-century Europeans also led to the spread of different European accounting models all over the world.
We do not need to go too far along this track, other than to note that such events can have far-reaching (and wholly unintended) accounting consequences, as also can political decisions to do things like becoming a member of the European Union.
Imagine that the people of Italy have decided (in a referendum) to leave the European Union and become one of the United States of America. Identify the changes that this would bring to the system of accounting regulations and discuss how easy (or difficult) these changes would be to implement.
This is a rather extreme (not to mention unlikely!) example to illustrate some important points. Italy would probably be required to adopt the same system of accounting regulation as exists in the US. While experience of using IFRS in Italy would be helpful in understanding the US system, there would still be many differences. The underlying legal systems in the two countries are different – the US has a common law system, while Italy (in common with most continental European countries) has a Roman (code) law system. This would require a major change in attitudes to regulations and how they are formulated and enforced. There could also be some cultural issues in persuading the people of Italy of the need for change, which could be affected by the circumstances leading to the referendum and the level of support for the decision.