International Financial Reporting Standards (ifrs) Adoption in Africa: the Influence of Anglo Neo-colonialism Matthias Nnadi



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The table highlights the two main influences on financial reporting in Africa: the Franco-German and the Anglo-Saxon blocs. The former has exuded significant influence on the adoption rate of their former colonies (see Appendix for the full list of colonised African countries, their European colonisers and IFRS status).


The influence of the British in the formation of accounting standards for their former colonies is not in doubt; the landmark of their imperialism often includes the establishment of their accounting system and frameworks. Such an inheritance becomes the foundation of accounting practices in such countries. Wijewardena and Yapa (1998) document the imitation of British accounting education system in Singapore and Sri Lanka, both countries were colonized by the British Empire. In Singapore for instance, the British accounting system was imposed on the country via various channels: importation of accounting personnel into the country; sole recognition of British accounting qualifications and professional bodies, and the use of British experts in the development of the accounting programmes in institutions of higher learning.
These influences perpetuated the British accounting system in Singapore for decades. In the case of Sri Lanka, the influence of the British colonizers still lingers in their accounting practice. Their accounting system was initially designed to protect British investment in the plantation stock companies which had huge British interests. Even some countries that have detached from imperial influence still have their accounting practice very closely aligned with the British accounting tradition. This can be seen in the formats and disclosure requirements of their company accounts.
Perhaps a major evidence of British post colonial influence is in the institutionalization of the British professional accounting bodies on the accounting systems of her former colonies. Bakre (2006) narrates how the ACCA was foisted on the Jamaican accounting body despite some of its contentious contents. Even when the indigenous people wished for an accounting body that is more atoned with the socio-political and economic policies of the country, their efforts continued to be met with resistance. This is due to the nature of the old colonial relationship with the ACCA which significantly affected the failure at localising the accountancy profession in Jamaica. The huge market created by commercial activities in the colonial territories overwhelmed the British accounting body that held sway, not wanting to lose juicy accounting consultancies. Bakre (2001) confirms that ACCA was not prepared to lose its former empire accountancy market in Jamaica as it enjoyed uninterrupted dominance of the booming accountancy market in the territory.
To sustain her dominance in the accounting system of former colonies, the British accounting body downgraded culture, idea and value systems of the colonized peoples whilst actively promoting their systems of capitalist representation (Fanon, 1967) through accounting principles. A key feature of this was the restructuring of the institutional structures, processes of accounting education (Viswanathan, 1990), and the production of accounting books (Said, 1993). The colonial masters deeply encouraged dependency on their accounting body and presented it as a model to emulate, such that any challenge or critique of the prevailing orthodoxy or the proposal of alternatives is disregarded, ridiculed, dismissed or totally ignored (Gosovic, 2000). Bakre (2006) confirms that ACCA controls the accountancy education, profession and the certification in most former British colonies of the Commonwealth. They form alliances with the members of the local professional bodies who share the same capitalist ideology and world views, and have been given the monopoly of the state guaranteed market as external auditors. The accounting systems were either imposed through colonial influence or by powerful investors or multinational corporations (Perera, 1989).
Similar experiences have been relayed in various British colonies such as Trinidad and Tobago, Nigeria, Sri Lanka, Ghana and others where the accounting body is remotely controlled by the ACCA. Anisette (1996) describes how in a relatively short space of time after the independence of Trinidad and Tobago, the influence of colonialism, imperialism and capitalism have succeeded in transforming the indigenous national accounting body, to one that has become an agent of the UK-based ACCA. In most of the West African countries, the regulations governing taxation and business activities are drawn from the British ACCA.
The adoption of such British-like accounting rules is not a manifestation of lack of experience and manpower in the regions, but perhaps shows the ineptitude of the government to initiate accounting independence and regulations that are peculiar to their regional needs. In Nigeria for instance, the system of personal tax administration follows the British system, which introduced it in 1904 in the Northern and 1917 in the Eastern Nigeria by Lord Lugard. Aguolu (2000) notes that the first indigenous tax law in Nigeria was enacted in 1961 shortly after their independence from the British. However, the law was based on the recommendations of Raisman Fiscal Commission of 1958. The Commission, which had majority of British nationals, reflects the British system of accounting and taxation. Although the Personal Income Tax Act 1993 is currently in use, most of its provisions are borrowed from the British accounting system. The tax regulations of most Western African countries are replica of the British.
The idea behind harmonized accounting standards emanates from the conception of the imperial powers, most of whom have at different times colonized Africa. Britain, France, Germany, Belgium, Portugal, Netherlands and Italy have all been involved in African colonialisation. Walter (1973) chronicles how the European colonial allies fought among themselves to colonize the juiciest parts of Africa, a situation that caused disagreements among the European invaders. Oliver (1957) adds that the scramble for Africa was unprecedented, as Britain and their collaborators fought brutal wars to gain more territories in Africa2. The territories obtained were imposed with economic policies, including accounting systems of their colonial masters. Britain was among the key colonizer of the European invaders and most territories of Africa fell under their control.

Using accounting reporting as an imperial tool was not peculiar to the British Empire. The Americans also devised accounting practices to influence their colonies. Dyball, Chua and Poullaos (2006), note that the American colonisers would not grant independence to their colonies, if the system of accounting and accountability were not trusted. The insistence on proper accounting and management of government finances by the colonizer was a calculated ploy to perpetuate colonialism in their captured territories. Neu (2006) confirmed that the accounting system was a mechanism of entrenching imperial rulership in the colonies. The colonisers introduced standards that were hard to comply with, creating opportunities to remain in authority and siphon the resources of the colonised territory. In a study of Canadian colonies, Neu (2000) argued that accounting practices were used as vehicle of translating imperial agenda into action. The standards were introduced to ensure that the colonies accounted for the resources in their domains to the imperial powers. Stiff penalties could result where proper accountability was not given.


The dominance of the imperial governments through accounting policies is corroborated by Said (1993), who opined that colonialism created opportunity through ideological formations, such as accounting practices, for the control of the activities of their colonies. The purpose, therefore, of imposing accounting standards was to regulate the distribution of colonial wealth. In fact, some studies (Bauman, 1989; Funnel, 1989) have linked such imposition to the remote cause of genocides in the empire, particularly where there was resistance to such impositions. Gibson (2000) also attested to the use of accounting as a tool for the aboriginal dispossession in Australia by the European invaders. The colonial rulers could also use accounting practice in a more positive and advantageous manner. Hence, Neu (2000: 282) defined accounting as ‘monetized, numerical calculations and techniques along with accountability relations’ which was positively used by the Canadian Empire to influence positively the behavior of their colonial servants.


  1. IFRS and the British Influence on the African continent

Financial reporting techniques have been part of the colonial tools employed by the British colonialist to establish the colonial and post-colonial exploitative frameworks of economic environment in Africa. The attainment of independence by the British colonies did not guarantee independence of their accounting system nor standards. Bakre (2008) reports how the Jamaican accounting system still remains at the apron-string of the British despite attempts to freedom. The IFRS in its present form, with the financial reporting standards and practices, are more in line with western standards and practices to fit the requirements of international mobility of capital rather than the developing countries. Other studies have demonstrated that imposing a financial reporting standard on less developed economies is a testimony that accounting is a political technology and architectural innovation of the West (Mitchell and Silka, 1993; Power, 1994; Copper, 1995). As a neo-colonial tool, accounting has been applied to accumulate and allocate economic surpluses and safeguard the interests of colonial and other international capital by watching over capital and performing global functions of capital (Arnold and Sikka, 2001).


Bakre (2008) describes the global accounting standard setters as capitalist bodies which seek to impose on other countries, particularly developing countries, established financial reporting rules conducive to the international mobility of capital. Accountancy firms and professional bodies from the western world dominate and attempt to set financial reporting standards not just for the western world, but also for the whole world. These rules and regulations are often a response to politics, conflicts and scandals in the western world (Mitchell and Sikka, 1993). For instance, Botzem and Quack (2009) report that at the G20 (i.e. the world most developed economies) summit held in London in April 2009, the Summit urged the standard setters to articulate urgent solutions to the financial crisis particularly caused by treatment of financial instruments. Such directives are indications of the extent of influence and interest of the West on reporting standards.

Bakre (2008) also demonstrated how the British professional accounting body in collaboration with the multinational accounting firms have tilted the balance of the accounting profession towards international mobility of capital, in which their interests and that of their home countries are protected. He argued that the continued use of imperial-type financial reporting techniques and practices, as in the IFRS, is a political technology because of the peculiar ends that it serves. Rattray (1962) describes how the multinational companies operating in the Africa continue to engage the services of international Western auditing firms to audit their financial activities and thereby foisting the accounting standards of the home countries of these transnational accounting firms on the colonial countries.


Such reinforces the already existing pattern of a transnational accounting and auditing firms to dominate and subsequently exploit the financial sectors. Hove (1986), notes that accounting, as being currently practiced in developing countries, particularly by the international accounting firms, is not capable of disclosing information that may enable the respective host governments of developing countries to detect the use of unfair transfer pricing techniques, especially for taxation purposes. Added to this pressure, the International Monetary Fund (IMF) directed that countries receiving financial aid must prepare their financial statements in compliance with the IFRS (Alexander and Nobes, 2010). Such added pressure inevitably implies that the accounting systems of African aid seekers have to be streamlined to the demands of their creditors and not necessarily to the developing needs of their respective countries. Thus, the IMF and the World Bank became an instrument used by the British and the West to foist their accounting ideologies on the poor African countries.
The African continent has made frantic efforts to ensure that the region is not left out in the accounting harmonisation process. The African Accounting Council (ACC), made conscientious efforts to help member countries set up their independent GAAP. Most Francophone countries also subscribe to the OHADA accounting regulations. Whether such harmonisation is relevant or contributes to the development of the continent has remained an issue of intense debate.

Thus, most Francophone colonies such as Benin, Niger, Burkina Faso, Cameroun, Republic of Congo, Cote d’Ivoire, Gabon, Mali, Guinea, Senegal, Togo, Chad, Congo DR, and Equatorial Guinea became under obligation to modify the OHADA accounting system by including elements of the IFRS (Elad and Tumnde, 2009). If the IFRS is focused on the benefits of investors, countries without stock markets will find its adoption irrelevant. In such circumstances, coercion by imperial powers and the World Bank for adoption of the international standards becomes mean and oppressive; as such countries do not stand to benefit from the adoption. It becomes therefore apparent that edging towards IFRS compliance in these countries is not out of self will but from compelling influence and circumstance.


Accounting harmonization through the IFRS is a well thought out and laudable idea of the industrialised countries, which aims to ensure a global standard of accounting reporting. The agenda therefore is to foster harmony in the accounting system of both the developed and developing economies. However, the developing countries of Africa are least represented in the core principles and foundation of the IFRS. This is reflected in the composition of the board of the International Accounting Standards Board (IASB), a body responsible for the formulation of the accounting standards. The traditional composition of board membership of the IASB has only a single African representative in the board. Apart from South America, all other major continents have four permanent members each, representing Asia, Europe and North America as shown in Table 2. The disparity in the board composition of such an international accounting board is a clear manifestation that the interests and agenda of the developed economies are largely the focus of the IFRS.
The standard setting nations share common ideology in the treatment of certain accounting issues. Street and Shaughnessy (1998) note that some core areas of their mutual interests include the accounting for investments on associates, interim reporting, business combinations, joint ventures, deferred taxes and pensions. There are also areas of immense disagreement such as correction of errors; research and development, and interest capitalization. The gulf among key players particularly the EU and the US over the adoption of IAS 393 as published by the IASB is intriguing. The primary objective of the standards setters to protect vested investment interests is reflected in the IASB aim of objective reporting for the purpose of providing information for use by investors in the capital markets (Young, 2006). This confirms that countries in Africa that have no capital markets4 are therefore not the primary concern of the standard setters. After all, the IFRS is mainly mandatory for consolidated financial reports of listed firms.
Street (2006) documents how the G4 +1 nations, comprising of Australia, Canada, New Zealand (N.Z.), the United Kingdom (U.K.), and the United States, influenced the structure and framework of the IASB; metamorphosing from ‘‘think tank” to “embryonic standard setter (Accountancy, 1998). The G4 ruled that only countries that could demonstrate the necessary expertise in standard setting and that possessed adequate resources to contribute to the process should qualify for a board seat. Thus ruling out the initial admittance of African countries as they are ‘less likely’ to fit their prescription. Such a seemingly unfair agenda, as well as, under-representation of African countries in the IASB, coupled with pressure from international financiers such as the IMF that financial statements from beneficiary countries should be in compliance with the IFRS, constitutes an ‘accounting colonialism’.
Table 2: Country Composition of the IASB Membership




Name of member

Country of Origin

s/n

Name of member

Country of Origin

1

Sir David Tweedie

UK

9

Elke Konig

Germany

2

Stephen Cooper

USA

10

Patricia McConnell

USA

3

Philippe Danjou

France

11

Paul Pacter

USA

4

Jan Engstrom

Sweden

12

Darrel Scott

South Africa

5

Patrick Finnegan

USA

13

John T. Smith

USA

6

Amaro Luiz de Olivera Gomes

Brazil

14

Tatsumi Yamada

Japan

7

Probhakar Kalavacherla

India

15

Wei-Guo Zhang

China

8

Warren McGregor

Australia

16

Currently vacant

?

Britain was a major player in the colonization of Africa. According to the New World Encyclopedia (2011), the transition from an "informal empire" of control through economic dominance to direct control took the form of a "scramble" for territory by the nations of Europe. Although Britain tried not to play a part at the early stages of the scramble, being more of a trading empire rather than a colonial empire. It however soon became clear it had to gain its own African empire to maintain the balance of power. To forestall the disorderly scramble of the African continent, the Berlin Conference (1884-85) was conveyed to regulate the competition between the powers by defining "effective occupation" as the criterion for international recognition of territorial claims, a formulation which necessitated routine recourse to armed force against indigenous states and peoples.

Britain's 1882 military occupation of Egypt contributed to a preoccupation over securing control of the Nile valley, leading to the conquest of the neighboring Sudan in 1896–98 and confrontation with a French military expedition at Fashoda. Oliver (1957) also documents how the British completed the occupation of South Africa in 1899. This had begun with the annexation of the Cape in 1795 and continued with the conquest of the Boer Republics in the late nineteenth century, following the Second Boer War. Cecil Rhodes was the pioneer of British expansion north into Africa with his privately owned British South Africa Company. Rhodes expanded into the land north of South Africa and established Rhodesia. Rhodes' dream of a railway connecting Cape Town to Alexandria passing through a British Africa covering the continent is what led to his company's pressure on the government for further expansion into Africa.

British gains in southern and East Africa prompted Rhodes and Alfred Milner, Britain's High Commissioner in South Africa, to urge a "Cape-to-Cairo" empire linking by rail the strategically important Suez Canal to the mineral-rich South. Though, German occupation of Tanganyika prevented its realization until the end of World War I. Ironically, Britain, the once acclaimed staunch advocate of free trade emerged in 1914 with not only the largest overseas empire but also the greatest territories in the share of Africa. Between 1885 and 1914 Britain took nearly 30 percent of Africa's population under her control, compared to 15 percent for France, 9 percent for Germany, 7 percent for Belgium and 1 percent for Italy.


Nigeria alone contributed 15 million subjects, more than in the whole of French West Africa or the entire German colonial empire (New World Encyclopedia, 2011). The appendix shows the colonial powers and their respective African colonies. Other European colonizers include France, Italy, Portugal, Netherlands, Belgium, Austria, and Germany. The number of territories captured and colonized by the British and France was vast, their domination and influence were felt more on the African continent than other European colonizers. Table 3 shows that while Britain colonized 35.1%, France had 32.4% of the territory. Netherlands, Germany and Portugal had 10.3%, 7.4% and 8.8% respectively. Austria and Italy shared 1.5% each of the territory.
Note also that 64% of the British colonized countries of Africa have adopted the IFRS in one form or the other. Many require their financial institutions to comply strictly with the standard (e.g. Ghana).

Others have adopted the standard but are on the process of full implementation (e.g. Libya) while some have earmarked a future date for full adoption and implementation (e.g. Nigeria). However, only 9% of the French and Dutch former colonies have adopted the IFRS in any form. Other European colonizers such as Germany, Italy, Portugal, and Austria have 4.5% of their former colonies adopting the IFRS. No former Belgian colony has adopted the standards in Africa. The overwhelming percentage of former Anglo colonies adopting the IFRS indicates the influence of the British in the accounting standards of their colonial territories. The British influence on the IFRS adoption of former colonies may be explained by the commonality of language (Abdelsalam and Weetman, 2000) and shared cultural organisations (Nobes, 1998). The Commonwealth organisation has played a major role in unifying British colonies under one cultural umbrella. With the Queen as the head, the influence of the organisation remains immense on the African continent.


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