ABSTRACT
Classification helps simplify a complex world and helps organise ideas. The chapter provides an overview of different types of classifications in relation to accounting. Deductive classifications start with a theory of accounting or accounting differences which is used to develop the categories. Key features of the accounting system or the economic, institutional or cultural environment of countries are identified on the basis of prior knowledge and theoretical arguments, and these are used to guide the classification of accounting systems. Inductive classifications, in contrast, start with observing the accounting rules or practices themselves and use various statistical techniques to uncover the underlying groups. The complexity of classification systems increases across discrete, continuous multidimensional, cluster, component analysis and hierarchical approaches. The chapter provides examples of research studies using different methods. Although classification studies originated when national differences in accounting were more pronounced, the move to widespread application of International Financial Reporting Standards still leaves scope for identifying different choices and different approaches where national regulations persist.
