Cultural Influence on disclosure in financial reporting-The current scenario in India

Following cultural theorists, accounting researchers argue that the nature of a country’s accounting system/practice is dependent on the culture of the country. For example, Indian culture is characterised by the upholding of a high level of secrecy. As a result Indian companies are not expected to disclose financial information beyond the minimum requirements of Indian accounting standards. In other words, it is not expected that they will provide voluntary disclosures sensitive to their activities. This study explores the status of disclosures of Indian companies taking related party transactions as the case. We argue that contrary to the views of cultural theorists, the related party disclosure status of Indian companies is more than the required minimum level of Indian accounting standard. Following this result, we argue that the recent changes in Indian economic policies towards a free market economy and globalisation have played a crucial role in refuting the arguments of the cultural theorists. We further argue that factors other than culture need to be considered to explain the nature and status of the accounting system/practice of a country, such as its economic and political environments.