International Financial Reporting Standards (IFRS) Adoption in Africa:
the Influence of Anglo Neo-colonialism
Matthias Nnadi
School of Management,
Cranfield University, Bedfordshire, UK
Email: Matthias.nnadi@cranfield.ac.uk
Abstract
The study examines the British influence on the IFRS adoption in their former African colonies, in
comparison to other European colonisers. With many African countries adopting the International
Financial Reporting Standards (IFRS), the question of whether they have been influenced by their
colonial masters is an intriguing subject. The paper develops a model of IFRS adoption by
developing countries of Africa on the basis of their colonial history. It compares the British influence
on the adoption of the IFRS by her former colonies with those of those European colonisers. African
countries are segmented on the basis of their colonisers and classified on their colonial magnetism to
either the Anglo or Franco-German blocks. The disposition of the Anglo block to IFRS adoption is
compared with those of others to ascertain the level of influence of their colonial masters. The study
reveals that most former British colonies of Africa seem to follow their colonial ruler in adopting the
IFRS, a trend that shows the subtle influence of Anglo-imperialism in the region through the system
of financial accounting reporting. The Franco-German block has lesser influence on their former
colonial countries and hence, the low IFRS adoption rate in the block. Most Franco-German colonies
however follow the OHADA accounting model.
Keywords:
Colonialism, imperialism, Africa, Anglo-neocolonialism, IFRS
1
1. Introduction
Accounting system has been a well known tool used by imperial powers to control and protect their
investments in former colonies. British imperialism in Africa imposed a system of accounting that
ensures greater disclosure of expenses and profits in their investments in the region (Watts, 1973).
Accounting thus became a scheming process of imperialism. Davie (2000) observed that the British
colonial masters used accounting practice as an instrument of domination and control, which aided
their business activities and subsequent expansion of their colonial territories. It was used as a
convenient mechanism for the purpose of ensuring more accountability in the colonies, and as an
administrative tool of imperialism. Although his study focus on Fiji, a former British colony in Asia,
it demonstrates that accounting practice as endorsed by British imperialism was articulated through
negotiable interpretations and explanations to protect colonial interests and investments. Such
concepts as self accounting and financial responsibility were designed to favour imperial policies and
activities to the detriments of the indigenous population.
Colonialism was founded on coercion, the use of armed force to conquer and to maintain dominance.
It was maintained through an imperial project that involved the imposition of British economic and
cultural values. The British strategies for controlling work, land ownership and trade were an
intrinsic part of this project and accounting was implicated in the administrative structures required
to create and maintain such imperialistic system (Bush and Maltby, 2004). Accounting, was not
primarily intended to serve economic aims, but was a technology for imposing a new form of power
knowledge.
A key evidence of the British influence on IFRS adoption on African countries is seen on the number
of African countries that have adopted or signed up for the IFRS adoption, majority of which are
from the Anglo-Saxon School. Elad and Tumnde (2009) classify the African accounting system into
two categories: Franco–German and Anglo-Saxon; each exerts powerful influence on the accounting
system of the colonised countries. There is a force of colonial magnetism that influences the
accounting standards hence, their disposition to IFRS adoption.
The study develops a neo-colonial model of IFRS adoption in which the accounting standards of
each African country is influenced by their former colonial masters. Therefore, African countries are
demarcated on the basis of their colonial lineage which magnets them to either the Anglo bloc or to
2
the Franco-German bloc as shown in Figure 1. The Anglo bloc countries are those colonised by the
British and include Nigeria, Ghana, Kenya, Sierra Leone, Zambia and Swaziland. The FrancoGerman bloc include the African countries colonised by the French, Germany and other European
powers and includes Central African Republic, Chad, Gabon, Cameroun, Congo, Equatorial Guinea,
Senegal, Togo, Cote d’voire, Mali, Mauritania etc.
Figure 1: Neo-colonial model of IFRS adoption in Africa
IFRS colonial influence
Anglo bloc
Franco-German bloc
Ghana
Gabon
Kenya
Chad
Nigeria
Central Africa Republic
Sierra Leone
Colonial magnet
Cameroun
Zambia
Congo
Switzerland
Equatorial Guinea
South Africa
Togo
Uganda
Cote d’Ivoire
The current study has two objectives: first to establish through verifiable evidence, that the British
colonialism in Africa employed accounting standards in a dubious manner to achieve their imperial
mission. It illustrates the entrenchment of the British accounting system on it colonies through
crafted ‘standards’. Secondly, the paper demonstrates that the contemporary accounting standard of
IFRS is a tool of neocolonialism by the West, particularly the British, to protect their financial
3
interests in the developing countries of Africa. The current structure and composition of the
International Accounting Standard Board (IASB) is an eloquent testimony that the interest of the
IFRS is the protection of investments of the developed countries. It supports the argument in the
accounting literature that IFRS is a tool devised by the West to continue to exploit and maneuver the
economy of the third world countries (Bakre, 2008; Arnold and Sikka, 2001). The international
organizations such as the World banks that insist on compliance of IFRS as a pre-condition for
granting loans to poor countries, depicts itself as willing agents at the whelms of the imperialists to
ensure that underdeveloped countries mandatorily adopts the IFRS. In comparison with other
European colonisers of Africa such as the French, Germany and Portugal; the British asserts far
greater influence on the adoption of IFRS of her colonies.
2. Accounting as a tool of British imperialism and neo-colonialism
Accounting was used as an instrument of quantifying business values and returns, as well as creating
imaginable precision among the colonies. It was a visible link in the proliferation of British trade. It
created facts, which were muffled in the politics of ambiguity that significantly confused the locals.
Davie (2000) asserts that accounting in the hands of the British Empire served as a device to promote
imperial projects. It was used to justify the so-called economic benefits for changes that were based
on increased efficiency and cost reductions. The local traditional leaders who were used as stooge of
the Empire, benefitted from such manipulations, which increased their political powers in their
domain. In general, British imperialism used manipulative accounting standards to swindle the
resources of their colonies.
The accounting practices of most African colonies are replica of their colonial dictators even after
independence. Elad and Tumnde (2009) note that there were wholesale exports of British accounting
standards to Africa, notwithstanding the economic and developmental differences between the
colonizing European invaders and their underdeveloped African countries. Some evidence suggests
that such accounting standards were enacted mainly to protect the British investments in the African
countries (Briston, 1978; Oliver, 1957). The British influence in setting accounting standards
undoubtedly influenced their former African colonies who conscientiously followed their accounting
system. Attempts to reduce the influence of the former colonial masters led the Organization of
African Unity (OAU), (currently African Union AU) to establish the African Accounting Council
(ACC) in 1979. The main objective of the ACC is to provide any needed assistance to member
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countries in the standardisation of their national accounting system. Unfortunately, the activities and
impact of the ACC has become moribund due to structural and administrative lapses.
Fewer former French colonies in Africa have shown less keenness in the IFRS adoption.
Their
reluctance may be a reflection of the disposition of the French towards the IFRS. In France,
mandatory IFRS is only applicable to the small number of listed firms; a situation that is similar to
Francophone countries. Scheid and Walton (1992) affirm that in France, some major accounting
requirements and regulations are subject to individual interpretation and application. Such an attitude
towards full compliance by the French, have also been followed by their former colonies in areas of
accounting regulations compliance. Elad and Tumnde (2009) observed that most Francophone
countries using the OHADA1 accounting system hardly comply with its provisions. There are loose
interpretations that firms are allowed to apply, often to suit their circumstances.
The absence or minimal involvement of the French in advocating full IFRS compliance may
underpin the reluctance of its former colonies in Africa to fully embrace the Standards. Table 2
shows that although the French were involved in the colonization of about 32.4% of African
territories and countries, only 9% of its colonies have adopted or intend to adopt the IFRS as their
national standard. That most Francophone countries follow the precedence of the French could be
thought of as a foregone conclusion. Elad and Tumnde (2009) highlight some cases involving the
extent of culpable liability of auditors under the French system which are similar to the Cameroun, a
former colony of France, as well as, other Francophone countries.
Under the OHADA accounting regulation, French remains the acceptable language of interpretation.
Although the OHADA regulations have an English version, but where there is a conflict in
understanding of the accounting rules, the French interpretation will prevail (Enonchong, 2007). This
clearly illustrates the extent to which the colonial masters continue to influence their former colonies
in the contemporary issues of IFRS adoption and language particularly in Africa. France, which was
a key player in the colonization of Africa, has failed to influence its colonies towards mandatory
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.
5
IFRS adoption. In contrast, most former British colonies have adopted the IFRS owing to the
influence of Britain in edging towards a global harmonization of the accounting standards.
In general, the African accounting system has followed patterns of colonial lineage. Elad and
Tumnde (2009) demonstrate that African countries have followed two main schools in their
accounting standards: the Franco-German (uniform accounting) and the Anglo-Saxon (judgmental or
pragmatic accounting); each reflects the ideals of the colonizers. This is highlighted in Figure 1
above which shows the influence of imperialism on accounting system of most Africa countries. Of
the two schools, the Anglo-Saxon has remained very proactive and dominant in influencing its
colonies. With the America’s delay in adopting the IFRS, British has exerted its influence, perhaps,
inadvertently on its colonies, resulting in most of them adopting the IFRS.
3. Pre-colonial evidence of Anglo-Saxon and Franco-German influences on
accounting in Africa
The British imperialism utilized accounting techniques, in a very selective manner, to subjugate and
control colonies to entrench colonialism (Bell et al., 1995; Smith, 1990). Many studies have attested
to the use of accounting mechanism as a colonial weapon in facilitating the achievement of imperial
objectives (Miller and Rose, 1990), and as a controlling devise from a distance (Neu, 2000). Thus,
accounting as a technique played quite different roles based on the intentions of colonial rulers in
different colonies (Alam, Lawrence and Nandan, 2004).
During the German invasion, accounting as a colonial tool was applied to ostracize the Jews.
Accounting in the service of the German bureaucracy was a means of expediting the annihilations of
the Jews.
Funnell (1998) documents evidence that accounting numbers were substituted for
qualitative attributes of individuals and thus reducing their dignity. It was a disguised tool intended to
humiliate the Jews.
Tinker, Lehman and Neimark (1991) affirm that accounting was used by the colonialist in creating
class strata and grossly sustaining political and economic inequality between the capitalists and their
employees. A typical instance is the British tax system which was targeted at exploiting the wealth of
those in her colonises. Oldroyd, Fleischman and Tyson (2008) thus conclude that accounting should
6
be condemned as morally unjust in it support of slavery and for its alienation of the intrinsic property
rights of individuals in the British colonies.
In some instances, such contrived accounting tools were used in connivance of local leaders who
may be ignorant of such economic ploy by the empire. Alam, Lawrence and Nandan (2004)
document the experience of Fiji, a former colony of Britain, where in the pretext of preserving social
structures and protecting the indigenous community from exploitation, the colonial rulers devised
schemes to their advantage, so as to extract surplus value from land often with the collaboration of
indigenous chiefs of the country. An outstanding visibility in the use of accounting as colonial
technique by the British was in the tax laws. Bush and Maltby (2004) opine that taxation represents
the use of accounting to regulate behavior of the colonies.
Taxation was fundamental to
administration across the British Empire but was mediated by different cultures across Africa. This
resulted in the adoption of different taxation policies across the West African region. Hetherington
(1978) confirmed that the principle of taxation, as introduced by the colonial Lord Lugard, ensured
that taxation remained central to administration until the uprises of nationalism which inevitably
forced changes in colonial policy. Taxation was thus central to drawing the colonized into a
monetary economy linked to world commodity markets. Bush and Maltby (2004) also revealed that
in the colonial era of most colonized countries, development funds were firmly linked to capitalist
interests and the expansion of the modern cash crop economy. The colonized were still expected to
pay for their own development through the imposition of various types of taxation
Taxation in West Africa was therefore a scheme devised to serve a number of objectives. It was a
technology of government as well as the purely financial way of raising revenue (Miller and Rose,
1990). It was an instrument of British colonial policy, capable of having important effects on
Africans’ lives. In various countries of West Africa, tax as an accounting system was utilized as a
tool of colonialism; land tax in Sierra Leone was imposed on indigenous farmers; poll tax in Ghana
and Hut ( yard ) tax in Gambia. In Nigeria, taxation was more of a political rather than an economic
nature. Lugard used taxation as part of a scheme to create a calculative order, but not a capitalist one
(McPhee, 1926).
The imposition of tax and its assessment made Africans accountable to the colonial masters and
accounted for their activities. The traditional African system was therefore beclouded by such
imposition of foreign accounting system of colonialism. In some cases, such impositions are met
7
with stiff opposition from the local people; a situation that sometimes resulted in the use of military
force to subdue any uprising by the colonised populace. Bush and Maltby (2004) attest that attempts
to impose rational, bureaucratic accounting and taxation systems met with stiff oppositions because it
failed to acknowledge the existence of African systems of communal organization and related
alternative systems of accounting, such as tally sticks similar to those used in Europe in the medieval
period. Johnson and Caygill (1971) observe that British professional bodies, particularly accounting,
came to be characterized as imperial bodies with imperial interests, not only because of their distinct
penchant for empire building, but also because of the very important empire management function
which they served
4. Difference between the Anglo and Francophone accounting systems and
Post Colonial Influence on African
Although both the French and British are signatories to the IFRS both have notable differences in
their accounting systems and in the level of influence they exert on their former African colonies.
Such differences are reflected in the financial reporting system of their former colonies. The French
accounting system is strictly regulated with a contractual and patrimonial view of the company. The
British accounting system upholds an economic view of the company and less regulated which
allows more freedom for firms financial reporting. These differences are also reflected in their
presentations of accounts. For instance, Pardina, Rapti and Groom (2008) observe that the French
allows valuing of assets at historical value instead of the economic value at the time of reporting
while the British allows assets at an estimate of their economic value following current cost
accounting approach or historical cost.
Another fundamental difference between the Francophone and Anglo-Saxon accounting is in the
charting of accounts. A chart of accounts is a listing of all accounts in the general ledger with the
accompanying reference or folio number. While the Plan Comptable Général (PCG) of the French
accounting practice has a legally fixed codification rules for accounts charts, the British has no legal
obligation for firms but instead allows significant freedom for firms. Most Francophone African
countries follow the French pattern by applying the PCG accounting systems such as the Systéme
Comptable Ouest–Africain (Syscoa) which uses a strict codification rule (Pardina, Rapti and Groom,
2008).
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Similarly, the English speaking African countries of former British colonies follow very closely the
accounting philosophies of the British with its reliance of the economic view as enshrined in the
IFRS. The British influence on her former colonies is palpable and undoubtedly conscientious. In an
address at the Commonwealth member countries Head of States, the British Chancellor implored all
‘African allies to gear up towards ensuring totally compliance with the international accounting
standard’ and praised ‘those African compatriots who have led their countries to adopting the IFRS’
(Henry, 2010). In a memo addressed to Economic Community of West African Countries
(ECOWAS) Finance ministers, the British Foreign Secretary, David Miliband urged ministers to
push for compliance with IFRS before the end of 2012 if the international community is to take their
financial aids requests seriously. Kenya and Ghana are among the foremost in the Anglo-Saxon bloc
to adopt full IFRS implementation and both received commendations from the British government
for ‘treading the right path with the British’ (Theophilus, 2009). During the 2010 induction lecture
for the newly qualified accountants in Lagos, the British high commission to Nigeria applauded the
national accounting body for following Britain in adopting IFRS and urged other African countries to
join as ‘the United Kingdom cannot mislead our African allies’ (Sunday, 2010). These evidences
demonstrate the assertive influence of the British in coercing and prodding their former African
colonies towards IFRS compliance.
The result of these overtures from the British is the surge in the number of IFRS adoptions in the
Anglo-Saxon school which are influenced by the British. In comparison with the Franco-German
European colonisers, the British has exerted more influence on her former colonies more than other
colonisers in entrenching IFRS adoption on their former colonies. Table 1 below depicts some
African countries colonised by the British and other European colonisers and the percentage of IFRS
adoption. It shows that African countries colonised by the British have a hundred percent IFRS
adoption rate.
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Table 1: Comparison of Anglo-Saxon influence on adoption of IFRS in Africa
Franco-German bloc
OHADA-PCG
Central
Anglo-Saxon bloc
IFRS
SYSCOA
IFRS
Franco-
IFRS
adopted
PCG
adopted
Belgian
adopted
Senegal
No
Algeria
No
Nigeria
Yes
African
Britain
IFRS
adopted
Republic
No
Chad
No
Togo
No
Tunisia
No
Ghana
Yes
Gabon
No
Cote
No
Morocco
Yes
Kenya
Yes
Sierra
Yes
d’Ivore
Cameroun
No
Mali
No
Leone
Congo
No
Equatorial Guinea
No
Mauritania
No
Zambia
Yes
Swaziland
Yes
IFRS Percentage
adoption rate
0%
0%
33%
100%
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.
10
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).
11
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 UKbased 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,
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.
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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.
5. 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
13
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.
14
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
15
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
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.
16
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
1
2
3
4
5
6
7
8
Name of member
Country of Origin
s/n
Name of member
Country of Origin
Sir David Tweedie
Stephen Cooper
Philippe Danjou
Jan Engstrom
Patrick Finnegan
Amaro Luiz de
Olivera Gomes
Probhakar
Kalavacherla
Warren McGregor
UK
USA
France
Sweden
USA
Brazil
9
10
11
12
13
14
Elke Konig
Patricia McConnell
Paul Pacter
Darrel Scott
John T. Smith
Tatsumi Yamada
Germany
USA
USA
South Africa
USA
Japan
India
15
Wei-Guo Zhang
China
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
17
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
18
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.
Table 3: Percentage of European Colonizers and IFRS Status of Colony Countries of Africa
European Country
Britain
France
Netherland
Germany
Austria
Italy
Portugal
Belgium
Percentage territory
35.1%
32.4%
10.3%
7.4%
1.5%
1.5%
8.8%
3%
Percentage adoption of IFRS
64%
9%
9%
4.5%
4.5%
4.5%
4.5%
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).
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).
19
6. 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
20
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.
21
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25
Appendix: Colonized African countries6, European colonizers and IFRS Status
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
Country
Algeria
Angola
Benin
Botswana
Burundi
Burkina Faso
Cameroun
Cape Verde
Central African Rep.
Chad
Cote d’ Ivoire
Congo; DR
Egypt
Equatorial Guinea
Gambia
Gabon
Ghana
Guinea-Bissau
Lesotho
Kenya
Lesotho
Liberia
Libya
Madagascar
Mauritania
Malawi
Mauritius
Morocco
Mali
Mozambique
Namibia
Nigeria
Niger
Rwanda
Republic of Congo
Sao Tome & Principe
Senegal
South Africa
Sierra Leone
Sudan
Swaziland
Seychelles
Tunisia
Tanzania
Togo
Uganda
Zambia
Zimbabwe
IFRS adopted?
No
No
No
Yes*
No
No¥
No¥
No
No
No
No¥
No¥
Yes*
No¥
No
No
Yes
No
Yes
Yes
No
No
Yes#
No
No
Yes
Yes
Yes
No
Yes§
Yes
Yes
No
No
No¥
No
No
Yes
Yes
No
Yes
No
No
Yes
No
Yes
Yes
Yes
Colonizers
Netherland
Portugal
France/Portugal
Britain
Belgium/ Germany
France
Britain/France
Portugal
France
France
France
Belgium
Britain
France
Britain/France
France
Britain/Austria
Portugal
Britain/Netherland
Britain
Britain/Netherlands/France
Britain
Italy
France/Britain
Netherlands/France
Britain
Britain
France
France
Portugal
Britain/ Germany
Britain
France
France/Germany/Britain
France
Netherlands/Portugal
France/Netherland
Britain/Netherland
Britain
Britain
Britain
Britain/France
France
Britain/France /Germany
France/Germany
Britain
Britain
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.
6
These are countries that were colonised by European invaders. Other African countries with Arabic colonial
link are not included on the list.
26