Due to the rapid growth of businesses and globalization, procedures of international accounting have largely been emphasized. The globalization of business and the internationalization of financial markets has created need for investors not only to address their own local issues but also those of their trading counter parts (Doupnik, Timothy & Hector 156).Over the years, there has been development of several accounting principles and business practices in Sweden.
Historical Development of Accounting Principles in Sweden
The historical development of accounting principles in Sweden can be traced back from 1923 when the Foreningen Auktoriserade Revisor (FAR) was founded. It was responsible for issuing recommendations on accounting for a long time. According to Aghimien & Mitchell (3), BFN, an accounting standards board, was created in 1976 to deal with internal accounting issues in Sweden. Later in 1995, “Swedish GAAP” was established to aid in monitoring companies accounting practices (Aghimien & Mitchell 3).
Other bodies such as the Swedish Accounting Board (SASB) and Swedish Financial Accounting Standards Council (SFASC) were also developed to look at the additional standards of the Swedish public companies. For instance, SFASC recommended that companies follow the international accounting standards and financial reporting standards when dealing with accounting matters (Muller 89).
Level of Development of IFRS
The use of International Financial Reporting Standards (IFRS) is not very well developed in Sweden. The IFRS is an international framework that the European Union (EU) decided that all listed companies were supposed to follow since the year 2005 (Willms 12).However, some companies that were unlisted applies the IFRS in accounts while all other companies which are legally entitled do not necessarily apply the IFRS.
They apply the Annual (ÅRL) and the Accounting General Council (BFNAR 2000:2), or for the Accounting Standards RR 1-29 which have been shut down (Willms,15).Moreover, a group that applies IFRS has some complementary rules. These include RFR1 which are additional accounting rules for corporations and RFR2 which are used in accounting for legal persons (Willms 14). However, Aamir & Farooq reported that in 2010 many Small and Medium-Sized entities (SMEs) in Sweden were not ready to adopt the IFRS (1).
Large Accounting Firms in Sweden
There are several large accounting firms in Sweden. The major firms in Sweden are three and they are Ernst & Young and KPMG PricewaterhouseCoopers.(Doupnik et al 172)
Stock Exchange in Sweden
In Sweden, we only have two stock exchanges that are authorized by the Swedish Financial Supervisory Authority which include NGM and OMX (Doupnik et al 178).NGM acts as the exchange for Nordic growth companies with the role of monitoring and approving listed companies as well as solving conflicts. The NGM stock exchange also operates some unrestricted markets for companies that are not formally listed.Some of these markets include the Nordic MTF Oslo and Nordic MTF Stockholm. Through the Nordic MTF, there are unlisted equities trading. NGM stock exchange has largely stimulated the growth of companies in the Nordic region.
Corporate Income Tax Structure in Sweden
The tax structure in Sweden is open, effective and is well structured to cater for international investors. The tax rules favor companies, structures favor company holdings and there is a tax relief for major employees who are foreign. Corporate tax structure in Sweden is usually low and is majorly determined by the company’s yearly profit. License tax and local corporate tax are usually exempted.
An advantageous tax environment for enterprises that set up a holding company, a subsidiary or a branch in Sweden is created by the Swedish legislation. Some of the benefits of Sweden’s corporate tax structure include tax exemptions on intra-group dividends and capital profits, absence of withholding tax or low withholding tax on benefits, total deductible payments on interest and lack of thin capitalization procedures.
These are some of the factors that have made Sweden to attract many foreign investors, unlike other countries in Europe. Double taxation is usually avoided by unilateral tax treaties which have eighty jurisdictions or more. Binding advance tax rulings offered by the Swedish Tax Agency enables companies to make prior queries regarding the applicability of specified tax strategies. By international standards, corporate income tax in Sweden is usually low. It’s important to note that each company in a group is taxed separately. No taxation is done on consolidated income of a group of Swedish companies.
Unusual Business Practices in Sweden
While doing international business, it is expected that one will encounter cross cultural challenges. This then means that one is expected to comprehend a country’s business etiquette and culture so as to relate well with business partners and to ease proceedings of the business. In Sweden there are various business practices which are not common in other countries. Some of them include egalitarianism, meeting and greeting etiquette in business, dress etiquette and meeting and negotiations among other practices. (Belkaoui & Ronald 125).Egalitarianism requires that one agrees calmly with the other on business deals.
In Sweden there lacks division in terms of status as is often found in other countries. The second unusual practice in business in Sweden is seen when it comes to meeting and greetings. When men are greeting each other, the handshake should be strong and firm but in a case where a man and a lady are shaking hands, the handshake should be light. One is supposed to remove gloves before shaking one’s hand and a man is expected to wait for the lady to extend her arm in greetings. In business, people are addressed by their first names. When talking to each other in Sweden, you have to give each other some personal space and apart from the handshake, you should not touch each other. You are also expected to listen carefully as one is speaking without interrupting so as to give a person ample time to express him or herself.
In Sweden both men and women in business have a dress code. For ladies, they can put on trousers, suits or business dresses that are decent. Both senior people and the employees are expected to dress similarly, to ensure that one does not notice the difference in their status. Keeping time is highly regarded in Sweden, both in business and in social activities. In case you are late, then you are expected to phone and inform someone. Failure to do this will ruin your reputation.
It’s important to know that Swedes adore experienced and knowledgeable people (Perera 49). They like things to be explained in details. This implies that any proposal you make should be detailed and well organized. It’s also important to know that the Swedes will never make any decision on the first meeting. Instead, they use the first meeting for examining you and you proposals. Any key decision will only be made after subsequent meetings. The Swedes expect that you must agree on matters as opposed to arguing and acting emotionally. Thus, one is expected to act in a calm and controlled manner.
In conclusion, we can say that accounting in Sweden has developed to some extent though many Small and medium-sized entities are reluctant to adopt the IFRS. Consequently, there are three main public accounting firms in Sweden which include: PricewaterhouseCoopers, Ernst & Young and KPMG. Moreover, stock exchange in Sweden is governed by NGM and OMX while the corporate income tax structure favors investors. Finally, there are several unusual business practices in Sweden with egalitarianism being the dominant of them all.
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