(1) The document discusses International Financial Reporting Standards (IFRS), which are a set of international accounting standards used to report financial statements. (2) It explores IFRS adoption in Africa, noting varying levels of capacity across countries from South Africa, which has highly developed capacity, to Francophone countries which may take decades to develop sufficient technical capabilities. (3) Culture and international power politics are examined as potential influences on IFRS adoption decisions. Hofstede's cultural dimensions are used to analyze how culture may impact interpretations of standards. Powerful countries may resist IFRS to maintain standard-setting control.

1. 1

2. CHAPTER ONE
INTRODUCTION
BACKGROUND TO THE STUDY
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
most likely, you have heard the term “IFRS” Steady Progress on
Convergence (commonly pronounced “Eye-Fers”) which is the acronym
for International Financial Reporting at a 2002 meeting of the IASB and
the U.S. Standards.
IFRS is a set of international accounting standards stating how particular
types of transactions and other events should be reported in financial
statements. IFRS are issued by the International Accounting Standards
Board.
Due to the growth of multinational companies and an increasing trend in
globalization, there is need for a single set of accounting standard that
2

3. facilitate the process of exchanging, sharing and reporting financial results
for international business activities. Now a days, ifrs is the basis of the
financial reporting standard of most countries and encouraged
improvement and convergence of accounting standard
There are many companies even after the adoption of IFRS still preferred
the national accounting practices in a way that minimizes as far as
possible changes in the form of financial reporting that they applied under
their previous national GAAP.(Ernest and young,2006)
There are many relevant literatures related to international differences in in
financial reporting prior to IFRs adoption. Few reasons of implementation
difference have been suggested such as providers of finance, taxation,
culture and all external factors (Nobes and parker, 2004)
In 1998, gray developed a model based hofstede (1980) cultural/societal
values related to accounting practices. In this model, he draws a link
between societal values and how both values reinforce accounting
practices in a particular country. The framework was extended by doupnik
3

4. and salter (1995) who developed a general model of accounting
development which links external environment, Culture and institutional
structures to accounting practices. Culture has been established by former
researcher to be one of the major reasons of differences in accounting
practices (Doupnik and Salter, 1995, Nobes (1998).
1.2 STATEMENT OF THE PROBLEM
4

5. 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.
Culture also influences accounting behaviors with regards to the adoption
of International Financial Reporting Standards (IFRS) worldwide. In this
context, the homogeneity of applications of IFRS by different countries is
to be surveyed. Different cultural values and thought patterns lead to
different perceptions of the real world and therefore to individual
interpretations of the same standards or conceptions. The translation of
standards again conveys individual interpretations and is consequently
5

6. more or less subjective. For this inspection, Gray´s research “Towards a
theory of cultural influence on the development of accounting system
internationally” and Hofstede´s cultural dimensions in “Culture´s
consequences: Comparing values, behaviors, institutions and organizations
across nations” are deployed. From this vantage point, we will attempt to
make a statement of the convergence of IFRS applications and the
comparability of financial reports between IFRS-adopters, which are the
ultimate goals of International Accounting Standards Board (IASB).
Related to the evidence found in previous investigation of the role of
international power politics and culture on Ifrs adoptions this paper tries to
analyze whether international power politics and culture across countries
can be an explanation for Ifrs adoption. The goal of this paper is not to
IFRS adoption. It aim to answer the following research questioin
6

7. 1.3 RESEARCH QUESTIONS
Following from the statement of the problem above, the following
are the statement of the problem in interrogative form:
(1)What is the relationship between decision to adopt IFRS by a
country and international power politics
(2)What is the relationship between decision to adopt IFRS by a
country and culture
7

8. 1.4 OBJECTIVE OF THE STUDY
The following are the objective of the study:
(1)To find out the relationship between decision to adopt IFRS by a
country and international power politics
(2) To find out the relationship between decision to adopt IFRS by a
country and culture
1.5 RESEARCH HYPOTHESIS
The following tentative statement guides this study:
8

9. (1)There is a positive relationship between decision to adopt ifrs and
international power politics
(2) There is a positive relationship between decision to adopt ifrs and
culture
1.6 SCOPE OF THE STUDY
The sample size taken for this study is 50 African countries out of
the 56 African countries listed.
The geographical area is on those African countries which s listed
out in the table.
9

10. The boundary of the subject matter is on the African continent
comprising of 56 counries.
1.7 Significance of the study
This significance of the study is of great understanding dealing with
fact of this new accounting standard called IFRS.
Years have come and gone and this accounting standard IFRS is
been globally accepted to improve the quality of financial statement on
businesses and firms. And here is a platform for couuntries that are yet to
adopt this accounting standard IFRS
This study will help the global community in enlightening them
on the adoption of IFRS In relation to the role of international power
politics and culture in African countries adopting IFRS. Of course this
studybwill greatly serve as a reference for future studies,
1.8 Limitation of the Study
10

11. This project work was limited due to some various factors
beyond my control, like the poor network of some internet facilities the
researcher used. Lack of power supply from the power distribution center
of the State and lack of sufficient material for the project and also
sourcings for datas for the variables.
1.9 Organisation of the study
The study is organised as follows
Chapter one is the introductory part of the study
Chapter two is the review of literature
Chapter three is the method of data collection and analysis
Chapter four is on presentation and analysis of data
Chapter five is the Summary,conclusion and recommendation
11

12. 1.10 OPERATIONAL DEFINITION OF TERMS
International Financial Reporting Standards (IFRS)
12

13. IFRS is a set of international accounting standards stating how
particular types of transactions and other events should be reported in
financial statements. IFRS are issued by the International Accounting
Standards Board.
IFRS are sometimes confused with International Accounting
Standards (IAS), which are the older standards that IFRS replaced.
(IAS were issued from 1973 to 2000.)
INTERNATIONAL POWER POLITICS
Politics by definitions is the process of making decisions by
adults in regard to how society ought to function. In terms of a
global society, international politics help steer and shape the
precedents set by industrialized nations so they may hopefully be
embraced and implemented in developing countries (Lane and
maeland).
13

14. CULTURE
Taylor(1974). Culture is the characteristics of a particular group
of people, defined by everything from language, religion, cuisine,
social habits, music and arts. Culture refers to the cumulative deposit
of knowledge, experience, beliefs, values, attitudes, meanings,
hierarchies, religion acquired by a group of people in the course of
generations through individual and group striving.
14

15. CHAPTER TWO
LITERATURE REVIEW
2.1 HISTORICAL PERSPECTIVE OF IFRS
Nations all around the world are following the fast pace convergence
of national generally accepted accounting principles with that of the
IFRSs. The forces of globalization and harmonization have been present
from the very beginning of this process and have shared in the
institutionalization of a "new regulatory regime" (Fontes et al., 2005,).
The International Accounting Standards Board (IASB) took on its
standard setting responsibilities on April 1, 2001 after its predecessor the
International Accounting Standards Committee (IASC). The IASC was
designated with the task to design and issue International Accounting
Standards (IAS) and did so from 1973 to 2001 until the appearance of the
15

16. IASB. The IASB did not only develop International Financial Reporting
Standards (IFRSs) but it also confronted new topics not yet addressed by
the IASC in addition to adopting the previous set of IAS and either
renamed them or developed them more in order to give them the new
name under a new authority.
IFRSs have been deliberately developed as a global language for
accounting across boundaries; this process began in the 1960's, which
latter led to the formation of the IASC in 1973 by an agreement of the
leading professional accounting bodies in 10 countries (Australia, Canada,
France, Germany, Ireland, Japan, Mexico, the Netherlands, the United
Kingdom, and the United States) to address the matter of the lack of
comparability of financial reports between countries (Alfredson et al.,
2005).
Now, the IASB has sought out for partnership agreements with
national accounting standard-setters in order to endorse the adoption of
IFRSs. The IASB is a London based regulatory board. Even though
16

17. developing countries may face difficulties throughout the process of
implementing and complying with these standards, the desire to achieve
international accounting harmonization has always been one of the key
motives that have made the process a bearable one. It was officially
recognized in 1966 when professional accounting bodies first activated
their attempts towards finding a set of international accounting standards
(IASC/IASB Chronology, 2006), that there was a need for a "high quality
global GAAP" (Ampofo & Sellani, 2005). Its not only developing countries,
"even countries with a long relationship and a strong position in the
international accounting harmonization process found themselves at
different stages of convergence" (Hussey & Ong, 2005).
2.2 IFRS IN AFRICA
Africa is a vast continent and both the strengths and weaknesses
of its implementation of a common form of financial reporting through
IFRSs and its institutional strengths and weaknesses vary enormously
17

18. from country to country, and region to region. The Francophone countries
north of the Sahara tend to retain their culture of sticking with French
domestic accounting rules. South Africa, by contrast, has been a financial
reporting powerhouse with a highly regarded stock exchange in
Johannesburg and an impetus in implementing the IFRS for SMEs
unrivalled around the world. The country of eastern Africa are steadily
moving towards IFRSs, and to the west an economic giant, Nigeria, is on
course for IFRS implementation from January 2012. ‘There is no country
resistance to IFRSs anymore’, says Zubaidur Rahman, Program Manager,
Financial Management Unit, Operations Policy and Country Services with
the World Bank. But he points to the other obstacles. ‘It is the capacity,
the professional accounting bodies, educational institutions, regulators
and auditors that remain the problem.’
‘Africa’, says Jerry Mutonga, Manager for Financial Management with the
African Development Bank, ‘has a wide spectrum of countries and the
accounting capacity varies from next to nil in some, to others, like South
18

19. Africa, with good capacity. For example, the number of qualified
accountants in Francophone countries is so limited. It will take years to
get to the technical capabilities required. Even with a simplified version of
IFRSs they will not be able to comply in the next 10 years.
2.3 IFRS AND CULTURE
Before introducing the dimensions of culture, it is essential to find a
proper definition for culture. There is no universally agreed definition for
culture. As we are going to analyze the influence of cultural values on
accounting behaviours by using the cultural dimensions of Hofstede, it is,
therefore, sensible to take the culture definition by Hofstede in account.
Culture is described as “the collective programming of the mind
which distinguishes the members of one group or category of people from
another” (Hofstede, 2001). Based on the definition, IFRS-adopters are
19

20. generally classified in three major accounting cultures: IASB-culture, EU-
IFRS culture and local IFRS culture .
Historically, distinct desired outcomes have led to the development
of different reporting mechanisms within financial accounting standards,
but more recent changes in the world business environment have made
such a multiplicity of financial reporting rules undesirable. First and
foremost among these is the inability to compare international financial
statements without considerable effort on the part of the stakeholder.
International standard setting bodies and national agencies have reacted
to this problem largely by adopting IFRS as a compliment to or in
replacement of their older national standards.
This literature shows that countries with similar values on the
Hofstede measures tend to have other social similarities including
business activities (Lin et al., 2008). Further, research shows that
countries with similar cultural foundations are more likely to trade with
one-another. Membership in the European Union offers benefits such as
20

21. trade and the ability of citizens to move between member states for
employment. Membership also has its obligations, however. One of these
is the requirement for consolidated financial reporting, where publicly
traded companies must use IFRS as the reporting medium. Thus, as a
precursor to a larger discussion of adoption of IFRS in the world
economies, the Union may have experienced a centric cultural migration
in order to facilitate the formation of such a cohesive economic policy.
Because economic affiliations tend to form along cultural similarities.
With the movement in international markets toward convergence
to IFRS as either the default system of financial reporting or an alternative
to the national system of reporting, the current research posits that
cultural commonalities among adopting countries may impact the timing
of such adoption. The influence of culture on the development of
accounting systems and financial reporting has been widely studied.
Hofstede’s work on mapping culture into four dimensions forms the basis
of much of this inquiry. Hofstede defines culture as the systematic
21

22. programming of the mind and he posits (1980) that there are four cultural
dimensions: individualism (versus collectivism), power distance,
uncertainty avoidance, and masculinity versus femininity.
The perception of IFRS as a European institution is likely to affect the
international standard acceptance by any country(Ding et al 2005,
ciesielski 2007,Norris 2007)
Countries that are culturally more accepting of European institution
international accounting standards can be politically feasible.in countries
where European institution are non native, adoption of IFRS can be
viewed as abrogating authority to a European standard setter. Thus
certeris paribus, we predict countries that are culturally closer to Europe
are more likely to adopt IFRS
2.4 IFRS AND INTERNATIONAL POWER POLITICS
22

23. This research also asserts a link between the political prestige
of a country and its willingness to adopt IFRS, with more powerful ones
resisting IFRS to a greater extent than those with less political influence.
Countries that perceive IFRS adoption as ceding standard-setting power to
the EU demonstrate a higher degree of aversion to IFRS. Network trends
may also exert influence on a country’s desire to participate in IFRS.
Current data indicate a correlation between a country’s adoption of IFRS
and its adoption by surrounding nations or by other countries with
significant political standing (Ramanna, 2009)
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
23

24. 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
24

25. 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.
25

26. 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
26

27. compliance in these countries is not out of self will but from compelling
influence and circumstance.
Thus countries that are former colonies are likely to be influenced in the
international community by the former masters in the adoption ot the
accounting standard called IFRS
2.5 CONCEPTUAL FRAMEWORK
There is evidence that political consideration affects the adoption of
IFRS decisions. We find that more powerful countries are less likely to
adopt IFRS, consistent with more countries being less willing to
surrender to the IASB. Country level power as measured as the first
principal component of a set of proxies for countries to influence
27

28. international decision considering their size and popularity within the
united nations
In contrast to the results of power,we do not find evidence of culture
closeness to the EU influencing their IFRS adoption decision, where
more Christians countries and countries with long settled colonial
relations with Eu powers are considered culturally closer to the region.
Academic theories yield mixed predictions on whether the adoption of
IFRS is benefictial to a country. Some scholars have argued that
international harmonization in according can improve Capital market
efficiency: a common sret of international accounting standard can
reduce the information processing and auditing cost to market
participant(Barth,2007:2008)
IFRS by definition are the result of an international political
economy equilibrium and thus cannot be expected to provide reporting
standards that are uniquely suited to any given countrys
circumstance(leuz and wysocki, 2008)
28

29. 2.5.0 Net Political values of IFRS
The adoption of IFRS by a country also involves trading off the
political gain from being able to influence international standard setting
against the value lost from surrending local authority over accounting
standards. We describe the trade offs between the benefit and cost as
constituting the net political value as arising from two factors
(i) International Power Politics
(ii) Culture politics
International power politics : ceteris paribus , we would expect more
powerful countries to have a larger positive political value since more
powerful countries are more likely to be to be able to influence the
nature of international standard
The influence of powerful countries can be the result of explicit lobbying
and pressure tactics or the result of the IASBimplicitly catering to powerful
interest when developing standards, The dominant position of the EU in
29

30. IFRS standard setting presents, however an important contrast is likely to
alter the prediction above
As notedealier the development of IFRS is strongly linked to support
from EU. The IASB is physically situated within the EU and to date, the
EU remains the IASB,s largest sponsor(IASB,2008). If a country choses to
adopt IFRS,it must either engage in the political process to try to shape the
nature of the international standards, cede the standard setting role to the
other political playes. It is unlikely that more countries will adopt the latter
route, however if they choose to engage in the political process.They will
either have to enter into costly political wrangling with the EU
Faced with this choice it is reasonable to expect that more powerful
countries are less likely to adopt IfRS. On the other hand, for less powerful
countries,there is little political face lost on adopting EU-centric standards
Thus, ceteris peribus we can predict that less powerful countries are
more likely to adopt IFRS
30

31. CULTURE POLITICS: In addition to country- level power politics, the
perception of IFRS as a European institution is likely to affect the
international standards acceptance in a country( Ding et al 2005, Ciesielski
2007, Norris 2007). In countries that are culturally more accepting of
European institutions, international accounting standards can be more
politically feasible.In countries where European institution are non
native,adoption of IFRS can be viewed as abrogating authority to a
European standard setter
Thus ceteris paribus, we predict countries that are culturally closer to
the Europe are more likely to adopt IFRS
2.5 REVIEW OF Empirical Literature
2.5.1 WHAT IS IFRS?
International Financial Reporting Standards (IFRS), together with
International Accounting Standards (IAS), are a "principles-based" set of
standards that establish broad rules rather than dictating specific
31

32. accounting treatments. From 1973 to 2001, IAS was issued by the
International Accounting Standards Committee (IASC). In April 2001 the
International Accounting Standards Board (IASB) adopted all IAS and
began developing new standards called IFRS.
2.5.2 Structure of IFRS
IFRS are considered a "principles based" set of standards in that they
establish broad rules as well as dictating specific treatments. International
Financial Reporting Standards comprise: •International Financial
Reporting Standards (IFRS) - standards issued after 2001 International
Accounting Standards (IAS) - standards issued before 2001 Interpretations
originated from the International Financial Reporting Interpretations
Committee (IFRIC) - issued after 2001 Standing Interpretations Committee
(SIC) - issued before 2001.
Different cultural values and thought patterns lead to different
perceptions of the real world and therefore to individual interpretations
of the same standards or conceptions. The translation of standards
again conveys individual interpretations and is consequently more or
32

33. less subjective. By examining those two factors, we could come to a
conclusion about the influence of value orientations on accounting
values and behaviours. For this inspection, Gray´s research “Towards a
theory of cultural influence on the development of accounting system
internationally” and Hofestede´s cultural dimensions in “Culture´s
consequences: Comparing values, behaviours, institutions and
organizations across nations” are deployed. From this vantage point,
we will attempt to make a statement of the convergence of IFRS
applications and the comparability of financial reports between IFRS-
adopters, which are the ultimate goals of International Accounting
Standards Board (IASB).
2.5.3 Reasons for adoption
There are many reasons for the adoption of IFRS. On the one
hand, all listed companies located in Europe are obliged to apply
33

34. IFRS. On the other hand, there are a great number of companies in
other continents apply IFRS on a voluntary basis such as Brazil,
Canada, US, Japan, China and Australia.
The motivation for the (voluntary) adoption can be
explained by the “economic theory of networks” (Ramanna/Sletten,
2009). Companies tend to adopt IFRS when their business partners
are also in a (worldwide) network of IFRS-adopters. 5 Moreover, the
adoption of IRFS opens access to the cross-border financial markets,
which enable competitive financing for companies. The choice over
a certain version of IFRS depends first of all upon the business and
financial culture, e.g. tax law, structure of business transactions,
business ethic, traditional forms of firm financing.
Furthermore, the politics and the regulatory culture of a
country also contribute to the different choice of IFRS-adoption
.According to Hall10 (1976), culture of a society can be seen as an
iceberg. While some aspects of culture are directly observable, the
large portion is below the water. On the assumption of relation
34

35. between accounting and cultural values, one needs to undercover the
underlying beliefs, value and thought patterns to find out the reasons
for different accounting behaviours as well as the choice over a
certain IFRS-version.
2.5.4 Merits of Adopting IFRS
“Advantages to developing nations of harmonizing on IFRS include: the
elimination or reduction of set-up costs in developing national accounting
standards; the potential for rapid national improvement in the perceived
quality and status of financial reports; increases in market efficiency in
35

36. (inter)national financial markets through the provision of more
understandable, comparable, and reliable financial
Statements; and a reduction in the cost to firms of preparing financial
statements”(Nobes & Parker, 2006).
The costs that developing countries would have incurred in
developing their own accounting standards are averted when they adopt
IFRS. However, these costs are shifted from setting up to training local
staffs in handling the IFRS which by far would be profitable to these
developing countries.
Invariably the quality of financial reporting in these developing
countries would increase considerably taking into account the source of
these standards. It would also boost the international activities of firms in
that they can present reliable andcomparable financial information. More
so, companies in these developing countries can raise capital from
international financial markets since their financial reports can be
compared to other international companies
2.5.5 Demerits of IFRS in Developing Countries
36

37. The international accounting harmonization objective is that,
“Globalization of capital markets appear to be the driving force behind the
proposed changes and while for this reason they may well suit the
purposes of the first world nations, their effect on third world countries
could be catastrophic” (IASC, 1990 as cited in Chamisa, 2000).
In this light therefore, developing countries adopt the IFRS with the
sole aim of satisfying their accounting and financial reporting requirements
but not purposely aiding in harmonizing accounting standards. These
developing countries therefore select the standards that would help their
course and modify those that would not be extremely beneficial to them.
Developing countries pursue international harmonization of these
accounting standards as far it does not hamper on the local accounting
needs, laws and regulations. If the main objective for proposing the IFRS
is to achieve a globalized capital market whiles most developing countries
possess weaker or no capital, then surely adopting these standards can be
disastrous to some degree.
In addition to the above, the “International Financial Reporting
Standards are “carbon copies” of standards originating from the UK and
37

38. the USA with strong orientations towards maximizing shareholders‟
wealth rather than the social functions of accounting” (Rahaman et al,
2004). Most developing countries have weak structures in place to develop
good accounting system and for that matter the first point of call when it
comes to accounting issues is shaping and developing meaningful
accounting system rather than adopting already structured standards from
the developed countries. More so, the fact that these standards were
developed with the economy of these developed countries as a yardstick
makes the importance of the adoption of IFRS questionable.
“Other authors also argue that accounting should not be treated as
the object of providing useful information to investors only, but a craft that
serves the purpose of divergent interested groups. Since most developing
countries would be pursuing different socio-economic development
policies, the usefulness of standards developed with significant influence
from the advanced industrialized nations remains contestable” (Mir and
Rahaman, 2004).
The bearing of IFRS on the economic growth of developing countries
which have adopted them is conflicting considering the precious studies
38

39. conducted. For instance, Woolley (1998) studied the bearing that the
adoption of IAS has on the economic growth of some Asian countries and
came to the conclusion that the average economic growth rate of
developing countries when grouped by their approach to adoption or non-
adoption of IASs was not significantly different which underscores the
point that the adopters were not better off nor worse off as compared to the
non-adopters.
However, a similar study conducted in Africa observed a higher level
of economic growth for countries that adopted with some form of
modification of some of the standards to suit the local environmental
factors (Larson, 1993).
It is worth mentioning that, harmonizing of IFRS by developing
nations would mean the adoption of a set of accounting standards unsuited
or irreconcilable to national needs. At firm and national levels, this may
result in standards overload as firms strive to comply with IFRS that
exceed their business requirements in complexity and the ability of local
accounting staff to implement or comply with them (Perera, 1989).
39

40. Increasing harmonization and complexity in accounting standards
tends to facilitate expansion of large international accounting firms at the
expense of local firms in both developing and developed countries.
2.5.6 The Strong converge while the weak adopt
What is even more intriguing is the fact that the highly
industrialized countries have all, to some extent, cherry picked some parts
of IFRS, ie. converged to IFRS on their own terms, whilst edging less
developed countries to adopt unreservedly without any modification. For
example, we might think that the larger economies like Canada, the
European Union China, India, Russia, and Japan have all adopted IFRS.
Nearly all these countries have modified IFRS to suit their economies’
needs. In other words, they pick and choose which IFRSs are relevant and
which are not. Unfortunately, many developing countries are in the terrain
of adopting these standards without any thought to modification.
40

41. 2.5.7 Uniformity for a diverse continent?
An argument I would like to advance for the no suitability of
IFRS in Africa is the fact there is to a larger extent a great diversity in the
socio-economic setting in the continent. At least in the European Union
(which happens to be the largest patron of IFRS), there exist differences
between member countries. But one thing sets them different from the
African Continent. The ability of the European Union to design regulations
and directives that are enforceable by all member states makes it easier to
have a uniform financial system.
In Africa, even regional bodies such as ECOWAS and the AU are
hardly able to agree on anything which can be enforced. At a conference in
South Africa, the out gone chairman of the IASB, Sir David Tweedie,
commented that the process of designing IFRSs involves constituents from
around the globe. These continents speak with one voice and have the
41

42. backing of the representatives from the Institutes and Standard Setting
Boards within the countries on those continents. When they speak,IFAC
(the International Federation of Accountants) and the IASB have to listen.
These other continents (excluding Africa) influence the development of the
Standards to take care of circumstances within their continents. Africa is
also there, but because its countries of this very diverse continent – 54
states! – do not have a united voice, they generally have minimal
influence.
Even if African countries should adopt IFRS as given, it is unclear how the
benefits of IFRS can be measured, as enforcement within the region will be
left in the hands of individual countries. Apart from that, each country in
Africa differs from the others economically. Thus, whilst some countries
are only tax based economies some are clearly natural resources driven.
42

43. CHAPTER THREE
METHODOLOGY
3.1 INTRODUCTION
Chapter 3 includes a review of the research method and
design appropriateness, a discussion of the population and sample,
sampling technique. In addition, this chapter also includes the
sources of data, measurement of variables, methods of data analysis
and the model specification.
3.2 THE RESEARCH DESIGN
The cross-sectional survey design was adopted in this
study, this is because the secondary data collected was at a
particular point in time without any intention to take a second look
at the data source
43

44. 3.3 POPULATION AND SAMPLE
The population in this study is made up of all the 56
countries making up Africa.
The sample size of 50 countries in Africa is used. This sample
size is adjudged to be adequate because it is representative of the
population.
3.4 SAMPLING TECHNIQUE
The samplingtechnique of this study which the samples were
collected enables the researcher to carry out his research in the
most appropriate manner which relates to the variables in the table
for a regression model on the data being collected.
44

45. 3.5 SOURCES OF DATA
The data used for this study and their secondary sources
are as stated below:
TABLE 3.5.1 DESCRIPTION OF VARIABLES
S/N VARIABLES DATA SOURCE
1. ADN International financial
accounting standard
2. IPP http//en.wikipedia.org/list
of Africa countries by Gdp
3. CULTURE http//en.wikipedia.org/list
of Africa countries and
territories
45

46. Source: Marwa,M.f and Nyaboga A.B 2008, International
financial accounting standard and the continent of
Africa.IABR and TLC conference proceeding
3.6 MEASUREMENT OF VARIABLES
The variables used in this study (international power
politics and culture) were majored as follows:
(1)International power politics: this is to be taken as the population of
the country or geographical area
46

47. (2) Culture: This is to be taken as cultural closeness to Europe. If a
country is culturally close to Europe, we give it a score of one and
otherwise zero.
3.7 METHOD OF DATA PRESENTATION AND ANALYSIS
All data collected and analyzed for this research will be presented in
table form. This is to ensure orderly and organized data presentation
for easy understanding and also the study adopted the regression
method of data analysis
47

48. 3.8 MODEL SPECIFICATION
A simple linear econometric model shall be adopted for this
study – since the study focuses on IFRS adoption: The role
of international power politics and culture ,the Binary logit
regression method shall be applied.
The specification of the model for explaining IFRS
adoption: The role of international power politics and
culture is given below:
ADN=F (IPP, CUL)…………………(1)
This can be econometrically expressed as
48

49. k K
ADN = α1 + ∑ β1 IPP + ∑ β2CUL
j=1 j=1
Where α1 = Intercept of the equation
B1-B2 = Coefficient of the variable
ADN = Adoption of IFRS
IPP = International power politics
CUL = Cultural closeness/Culture
.
49

50. The apriori or theoretical expectation between the
dependent and independent variables are given below;
BI >O International power politics has positive impact on
Adoption of IFRS (ADN)
B2>O Cultural closeness/Culture has impact on
Adoption of IFRS (ADN)
DECISION RULE
If the value of the calculated ratio is greater than the table
value, the null hypothesis (Ho) would be rejected and the
alternative hypothesis (H1) will be accepted. If the
calculated value is less than the table value, the null
hypothesis (HO) would be accepted and the Alternative
hypothesis (H1) will be rejected.
.
50

51. CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
4.1 INTRODUCTION
This chapter contains the presentation and
interpretations of empirical findings. This result is analysed
using the binary logit based on its advantage in qualitative
51

52. response models. Thus the coefficient are explained as the
likelihood of achieving the dependent variable
4.2 PRESENTATION AND ANALYSIS
The study has attempted to examine empirically IFRS
Adoption and the role of international power politics and
culture. In the previous chapter, we specified an econometric
model that captured the effect of the independent variables
on the dependent variable.
The data is analyzed using the Binary logistic regression
technique with data covering 50 observations.
The Binary logistic regression Estimation technique is
adopted due to the presence of categorical variables in the
model. The coefficient of the variables is explained as the
likelihood of achieving the independent variable (Adoption of
IFRS). The result for the specified model is presented as
follows:
52

53. RESULT OF BINARY LOGIT ESTIMATION
Dependent
Variable
Explanatory
Variable
Coefficien
t
Standard
Error
-ratio
AND C 0.619228 0.572029 1.082512
CUL 1.452725 0.657814 -
2.208428
IPP 7.83E-05 9.12E-05 0.858582
Sources: EVIEWS 2012
ADN= 0.619228-1.452725CUL+7.83E-05IPP
53
McFadden R-
squared 0.082983
LR
statistic 5.725385
Prob(LR
statistic) 0.057115

54. (1.082512) (-2.208428) (0.858582)
Note: Z-Statistics are presented in Parenthesis below each
coefficient estimate in the equation above:
4.3 INTERPRETATION OF RESULT
A close examination of the results above shows that in
table 4.1, the explanatory variables (CUL and IPP) explained
about 8.29% of the systematic variation in ADN. This is
shown by the McFadden R-squared of 0.82983 above.
The LR-statistic value of 5.72 is significant. This is
because a comparison of the calculated value with the table
value at the 11% level of significance shows that LR-statistic
value critical value. This shows that the explanatory
variables are jointly significant in the model for explaining
the adoption of IFRS. Thus the overall model is significant in
explaining the adoption of IFRS
54

55. On the basis of the Z-test, only the co-efficient (CUL)
passed the Z-test at 5% level of significance. This is because
the critical value of (-2.208428) in absolute term is greater
than the rule of thumb value of 2. This is to an extent means
that culture is a strong determinant of the adoption of IFRS.
The coefficient of (IPP) did not pass the test of significance.
The Economic criteria pertaining to the apriori sign from
the results shows that the coefficients of IPP conform to the
apriori expectation by bearing the required signs. The
coefficients of CUL did not conform to the apriori expectation
by bearing a negative signs.
4.4 HYPOTHESIS TESTING
55

56. On the basis of the test of individual empirical
significance, the result of the regression exercise reveals that
explanatory variables (CUL) used for the analysis passed the
test of significance, while IPP fail to pass the test. It is on this
basis we can now test our hypothesis.
DECISION
From the result above, it can be observed that the Z-
calculated value of (-2.2084) in absolute term for CUL is
greater than the rule of thumb value of 2 . Therefore we can
conclude by accepting the alternative hypothesis (H1) and
reject the null hypothesis (HO). Hence Culture has a
significant impact in the adoption of IFRS
While the Z-calculated value of (0.858582) in absolute
term for IPP is less than the rule of thumb value of 2 .
Therefore we can conclude by rejecting the alternative
56

57. hypothesis (H1) and accepting the null hypothesis (HO). Hence
IPP has no significant impact in the adoption of IFRS
4.4.1 DISCUSSION
The result obtained from the binary logistic regression
is fairly satisfaction and can be relied upon. Thus the
deduction that could be made from the empirical findings is
predicated on the size and magnitude of the slope of the
coefficient.
The result shows that culture has a negative
relationship on IFRS. A unit change in CUL will result to the
likelihood of not adopting IFRS.
57

58. Another implication of the result is IPP, which shows a
positive relationship. A unit change in IPP will result to the
likelihood of adopting IFRS.
In conclusion, the result implied that the explanatory
variables play an important role in the adoption of IFRS. In
conclusion,the result implied that the explanatory variables
play an important role in adopting IFRS.
CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION
5.1 SUMMARY OF FINDINGS
58

59. This study has tried to fully comprehend and highlight the
econometric Analysis of the impact or the relationship between Culture,
international power politics and the IFRS adoption using cross sectional
data of 50 African countries.
Based on the quantitative exploration of the relationship between the
dependent and independent variables used in the model,we found out
that culture plays a significant role in the adoption of IFRS. The study also
shows a positive relationship between the adoption of IFRS and
international power politics which was proxied with GDP. Though
international power politics had the required sign, it was not statistically
significant in the model and does not to a large extent according to our
research findings determine the adoption of IFRS.
The empirical analysis that exist between the dependent and
independent variable was carried out with the aid of the logistic
regression. The binary logit was used and the result shows negative
relationship between in the adoption of IFRS and culture. The result also
59

60. shows that culture was significant in explaining the adoption of the IFRS ,
while international power politics was not statistically significant in the
model but had a positive relationship with the adoption of IFRS
5.2 RECOMMENDATION
In view of the current economic situation in the country and Africa
at Large, this study hence recommends the following :
1. Countries especially West African countries should adopt IFRS as a
common accounting standard in other to bring transparency,
uniformity and universality into accounting reporting system.
2. Since the world is fast becoming a global village and African
countries are in dire need of expanding their frontiers, it is
important for both British colonized and non-British colonized
countries to adopt IFRS as it gives them the opportunity to venture
into cross boundary activities.
60

61. 3. There should be massive sensitization and enlightment of
developing countries on the need to adopt IFRS, as it will enable
countries have a unified accounting standard.
4. African countries should develop a common accounting standard in
other to have their own objectives and standard incorporated in the
IFRS as the IFRS have been argued to reflect United kingdom
accounting system.
5. There is need to improve on culture in respect to the adoption of
IFRS in other to remove the colonialist barrier
6. Countries should ensure that they establish meaningful accounting
system in place before thinking of adopting IFRS
CONCLUSION
IN conclusion, this study have established that there exist a
positive relationship between in the adoption of IFRS and
61

62. international power politics while a negative relationship with
culture.
The research work demonstrates and underscores the need for the
adoption of IFRS, as IFRS serves as a global language for accounting
across boundaries.
The research work also demonstrates the problem facing the
adoption of IFRS, in terms of culture barrier as many French African
speaking countries prefer to stick with French domestic accounting
rules. Thus there is need for concerted effort on the part of
Government in francophone countries to break away from this
culture barrier in other to have a universally accepted accounting
reporting method called IFRS.
The research shows that IFRS has been perceived as a European
institution and according to Bakre (2008) countries describe the
global accounting standard as a capitalist body which seeks to
impose on other countries, established financial reporting rules
62

63. conducive to the international mobility of capital. Thus, there is
need for massive sensitization of developing nations and the need
for the accommodation and a critical way to give room for the
harmonization of Africa accounting rules into the IFRS, as most
countries perceives developed countries as selecting the standard
that would help their course.
63