The adoption of international accounting standards in Jordan - a study of accounting practices applied by Jordanian listed companies

• Main Author: Halbouni, Sawsan Saadi
• Published: University of Manchester 1999
• Subjects: 657
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.633431

This thesis investigates the development of financial reporting in Jordan over the 10 years between 1988 and 1998, a period during which the Jordanian government sought both to internationalise the economy and to facilitate this through adoption of accepted international standards for accounting. A survey of accounting practices adopted by Jordanian companies for measuring assets and profits was conducted and indices used to measure the degree of consistency between companies. The survey shows that the Jordanian companies were continually changing their accounting practices and that these changes affected the degree of consistency over time. The degree of compliance between Jordanian accounting practices and the requirements of international accounting standards (IAS) was measured for a selected number of areas of accounting, for individual items required by standards in each area, and for individual companies against all the IASs included in the study. This study reports the degree of consistency between companies and the degree of compliance with the international accounting standards both before and after their endorsement by the Jordanian Association of Public Accountants in 1990 and before and after their adoption by the Jordanian regulations in 1997. It concludes that neither event was associated with any material increase in the overall degree of consistency or in the degree of compliance. Multivariate analysis and the nonparametric statistics are applied to test the association between companies' compliance and factors such as asset size, ownership spread, international trade, foreign investment, international or local audit firm, rate of return, earnings margin, leverage and industry. The findings are consistent with the prior expectations concerning the association between asset size and individual company degree of compliance. However, the opposite was the case in relation to the sign of the relationship between the rate of return and individual company degree 01 compliance. The nonparametric statistic findings reveal that asset size, ownership spread, international trade and industry are factors associated with variations in the individual company degree of compliance. Neither the multivariate analysis nor the nonparametric statistical findings reveal that foreign investments, audit firm and leverage were factors associated with compliance levels. The survey evidence and statistical analysis is complemented by the collection of views of certain groups of participants in the financial reporting process through the conduct of interviews and completion of questionnaires. Comments expressed include the view that the IASC is capable of satisfying the needs of developed and developing countries and therefore, the adoption of the IASs is suitable for the Jordanian environment. Local users' needs, the international lending associations and linked audit firms were considered to be the most influential factors in the adoption of the IAS. It is also suggested that maximising profit was the main objective of companies' management when deciding to apply IASs.