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



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Table 3: Percentage of European Colonizers and IFRS Status of Colony Countries of Africa

European Country

Percentage territory

Percentage adoption of IFRS

Britain

35.1%

64%

France

32.4%

9%

Netherland

10.3%

9%

Germany

7.4%

4.5%

Austria

1.5%

4.5%

Italy

1.5%

4.5%

Portugal

8.8%

4.5%

Belgium

3%

0%

The influence of British imperialism over their territory in establishing an accounting standard similar to theirs has been well documented (Elad and Tumnde, 2009; Aguolu, 2000; Briston, 1978; Oliver, 1957). Zeghal and Mhedhbi (2006) argue that colonial ties are among the factors that influence developing countries to adopt international accounting standards. Other factors may include the existence of multinational companies, foreign investments, and the extent of openness to foreign markets, international treaties and the presence of international accounting firms. For international standards to be beneficial to the developing countries, they must reflect local needs and be fine tuned accordingly. There is no doubt that most of the developing countries of Africa will benefit from the IFRS if the standard recognises the disparity in economic growth between the developed western economies and the developing African countries. With considerate modifications5 and adaptation of the standards, the IFRS can contribute towards the economic growth of Africa (Larson, 1993).




  1. Conclusion

The influence of the British on their former African colonies remains strong, as evidenced by the rate of adoption of the IFRS. Zeghal and Mhedhbi (2006) confirm that countries with Anglo-Saxon ties are more likely to adopt the IFRS than others. This study further provides verifiable evidence on the level of the British influence, in comparison with other European colonizers, on their former colonies. The percentage of African countries colonized by the British, who have adopted the IFRS, is far higher than those of French, German, Portuguese and other European imperial powers. This followership enjoyed by the Anglo bloc can be attributed to the cultural affinity bounded by the commonwealth organisation. Alexander and Nobes (2010) note that several African countries, that are members of the commonwealth, have developed their accounting system from the British Companies Acts.


However, for accounting standards to be beneficial to the developing African region, they have to be adopted based on national needs rather than any form of cohesion or coercion. The importance of aligning standards to local environments has been advocated (Talaga and Ndubizu, 1986); this will ensure that the application of such standards is relevant to the needs of users of such financial information. If the IFRS is focused on the benefits of investors, as it’s currently posits, 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 their adoption. Rahaman et al. (2004) revealed how the World Bank’s lending operations to the Ghanaian public sector organization, the Volta River Authority (VRA), operating under a strict social and environmental reporting regime, have utilized accounting techniques in masking, legitimizing and justifying an exploitative relationship between the World Bank and the VRA.
Annisette (2004) also asserts how the World Bank utilizes accounting standards in further degradation of the economies of most developing countries. It was revealed that various ways exist for accounting to be implicated in the social, economic and environmental impoverishment of developing Africa countries (Walters, 1976). Given that the World Bank is an agency controlled by the developed economies; its collaboration with the IFRS is not surprising. Preparing financial statements in compliance with the IFRS has become a precondition for IMF loans and the World Bank. Some developing countries in Africa rely on international aid as such; the adoption of the IFRS becomes a compulsive child of circumstance rather than a national consensus. The implication of this; is that the relevance of the standards becomes distance from becoming a facilitator of national growth.
There is a greater need to involve the African countries more fully in the activities of the IASB. The disparity in the composition of the IASB creates an implied feeling of neglect and less relevance of the region. Of more serious concern is the evolution of class stratification generated among the standards setters, by such inequality in the number of representatives on the international standards board. For harmonisation to be achieved, equal representation of all the continents must be ensured, and the leadership rotated amongst all member countries. The current composition of the standards board leaves the African continent in a weak membership status. As Bakre (2008) posits, the IASB is a neocolonialist and capitalist organ of developed countries, with a sole mission of protecting Western investments.
Throughout its inception, the leadership of IASB has been a privilege position of the British and their western allies who colonized Africa. If the mission of the IASB is to articulate a translatable accounting standard, which will be a fit-all for all countries, its leadership will be rotated among member or subscribing countries. In spite of its non-subscription to the IFRS, the US has remained a dominant partner of the IASB. This is at the expense of the African continent which has a sole representative in the accounting standard setting body despite having many of its countries subscribing to the IFRS. Financial reporting techniques, practices and calculations have become a neocolonialist tool employed and continue to be employed to achieve the main objectives of colonialism. It has become a modern technology (Neu, 1999) employed by the colonisers to support their imperials expansion and control (Bakre, 2008).
Although some have questioned the relevance of the IFRS in developing countries (Perera, 1989; Hove, 1989), there is compelling evidence to believe that the standards can stir economic growth through foreign investments. The suspicion with which accounting reports from Africa are often seen (Richter-Quinn, 2004; Wolk, Francis and Tearney, 1989 ) will reduce if a harmonised standard is adopted, as the financial statements will be prepared with the best quality framework and principles.

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Appendix: Colonized African countries6, European colonizers and IFRS Status




Country

IFRS adopted?

Colonizers

1

Algeria

No

Netherland

2

Angola

No

Portugal




Benin

No

France/Portugal

3

Botswana

Yes*

Britain

4

Burundi

No

Belgium/ Germany

5

Burkina Faso

No¥

France

6

Cameroun

No¥

Britain/France

7

Cape Verde

No

Portugal

8

Central African Rep.

No

France

9

Chad

No

France

10

Cote d’ Ivoire

No¥

France

11

Congo; DR

No¥

Belgium

12

Egypt

Yes*

Britain

13

Equatorial Guinea

No¥

France

14

Gambia

No

Britain/France

15

Gabon

No

France

16

Ghana

Yes

Britain/Austria

17

Guinea-Bissau

No

Portugal

18

Lesotho

Yes

Britain/Netherland

19

Kenya

Yes

Britain

20

Lesotho

No

Britain/Netherlands/France

21

Liberia

No

Britain

22

Libya

Yes#

Italy

23

Madagascar

No

France/Britain

24

Mauritania

No

Netherlands/France

25

Malawi

Yes

Britain

26

Mauritius

Yes

Britain

27

Morocco

Yes

France

28

Mali

No

France

29

Mozambique

Yes§

Portugal

30

Namibia

Yes

Britain/ Germany

31

Nigeria

Yes

Britain

32

Niger

No

France

33

Rwanda

No

France/Germany/Britain

34

Republic of Congo

No¥

France

35

Sao Tome & Principe

No

Netherlands/Portugal

36

Senegal

No

France/Netherland

37

South Africa

Yes

Britain/Netherland

38

Sierra Leone

Yes

Britain

39

Sudan

No

Britain

40

Swaziland

Yes

Britain

41

Seychelles

No

Britain/France

42

Tunisia

No

France

43

Tanzania

Yes

Britain/France /Germany

44

Togo

No

France/Germany

45

Uganda

Yes

Britain

46

Zambia

Yes

Britain

47

Zimbabwe

Yes

Britain

*Required for listed banks, national standards are also used# IFRS adopted but not yet in use

§Partially for banks. ¥OHADA accounting standard is used.



1 The Organization for Harmonization of Business Law in Africa (OHADA) has unified regional business laws in African. Created in 1993, OHADA has designed and enforced uniform commercial laws and have formulated various accounting regulations. Its goals include the unification of business laws for OHADA member countries; which include: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal and Togo.


2 The fight to gain more territories resulted in lots cast to determine who gets what. Some weaker imperial powers were overthrown by more powerful ones. Where altercations could not be resolved, two or more European colonial invaders settle their differences by allowing others to co-colonise the same country (Oliver, 1957). Thus, some countries such as Cameroun, Gambia, Morocco, Namibia, Burundi, South Africa, Tanzania, Togo and Senegal among others had more than one colonial European invaders colonise their countries. The legacies of such multiple colonialisations are seemed in the multiplicity in culture, lingua-franca, political ideologies and intolerant suspicions among the constituent units of such countries.

3 Although, the US Securities and Exchange Commission (SEC) has proposed to allow EU firms listed on US stock exchanges not to reconcile their financial statements to the US GAAP but only if such financial statements are prepared in full compliance with the IASB. Given that the EU has a different version of IAS 32 and 39 on financial instruments, it inevitably means that such EU firms will have to reconcile to the US GAAP. This has been frowned upon by some in the EU as a political measure; considering that over 400 EU companies trade on the US markets (House, 2007). There is also disagreement between the Canadian and US GAAP in the treatment of accounting for business combination IAS 22 (Hiller and Smith, 1996); a difference resulting from their individual national agendum.


4 There are 54 independent and recognized countries in Africa and 27 functional stock markets located in the following 22 countries: Algeria, Botswana, Cameroun, Cote d’Ivoire, Egypt, Ghana, Kenya, Libya, Malawi, Mauritius, Morocco, Mozambique, Namibia, Nigeria, Rwanda, South Africa, Swaziland, Tanzania, Tunisia, Uganda, Zambia, and Zimbabwe. The remaining 32 countries do not have stock markets and, therefore, are not under consideration of the standard setters, whose underlying focus is providing information for capital market participants (Chamisa, 2000). Considering the huge amount of resources, pre-market conditions and expertise required in the establishment of a stock market, the non existence of a stock market in these underdeveloped countries is understandable. African countries with a developing capital market structure are most likely to benefit from the agenda of harmonised accounting standards than those without capital markets.



5 IAS 32 and 37 have been modified by the EU and adopted to suit their economic circumstance. Certain portions of the standards were eliminated which relates to fair value and requirement for hedging accounting. Thus, the EU version of the IFRS on those sections of the standards is significantly different. Such carve-out amendments to suit business operations in the EU region is a manifestation of the protection of the ‘imperial interest’ which accounting harmonisation agenda is often accused of fulfilling (Street and Shaughnessy, 1998).

6 These are countries that were colonised by European invaders. Other African countries with Arabic colonial link are not included on the list.

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