‫ اﻻردن ﻛﻤﺜﺎل‬:‫اﻧﻌﻜﺎﺳﺎت اﻟﺘﻮاﻓﻖ اﻟﻤﺤﺎﺳﺒﻲ اﻟﺪوﻟﻲ ﻋﻠﻰ اﻻﻗﺘﺼﺎدﯾﺎت اﻟﻨﺎﺷﺌﺔ‬

‫ رﯾﺎض ﺟﺎﺳﻢ اﻟﻌﺒﺪاﷲ‬.‫د‬.‫أ‬ ‫ﻣﺎﻟﻚ أﺣﻤﺪ اﻟﺸﺮاﯾﺮي‬

‫ ﻣﻤﻠﻜﺔ اﻟﺒﺤﺮﯾﻦ‬/‫ﺟﺎﻣﻌﺔ اﻟﺒﺤﺮﯾﻦ‬ ‫اﻟﻤﻤﻠﻜﺔ اﻟﻤﺘﺤﺪة‬/‫ﺟﺎﻣﻌﺔ درھﺎم‬
‫اﻟﻤﻠﺨﺺ‬
‫ﺑﺎﻟﺮﻏﻢ ﻣﻦ أھﻤﯿﺔ ﻇﺎھﺮة اﻟﺘﻮاﻓﻖ اﻟﻤﺤﺎﺳﺒﻲ اﻟﺪوﻟﻲ وﻣﺴﺒﺒﺎﺗﮭﺎ ﻓﺄن اﻻﻛﺜﺮ اھﻤﯿﺔ ھﻮ‬
‫اﺳﺘﻤﺮارﯾﺔ اﻟﺠﺪل ﺑﺸﺄن إﻧﻌﻜﺎﺳﺎﺗﮭﺎ وﻣﻀﺎﻣﯿﻨﮭﺎ واﻟﻨﺘﺎﺋﺞ اﻟﻤﺘﺮﺗﺒﺔ ﻋﻨﮭﺎ وﺑﺎﻻﺧﺺ ﻓﻲ اﻻﻗﺘﺼﺎدﯾﺎت‬
‫ ﻓﺎﻟﺠﺪل ﻣﺎ زال ﻣﺤﺘﺪﻣﺎً وﻋﻠﻰ اﺷﺪه ﺑﯿﻦ اﻟﻤﺆﯾﺪﯾﻦ واﻟﻤﻌﺎرﺿﯿﻦ ﻟﻤﻮﺿﻮع ﻣﺜﻞ ھﺬا ﺑﺴﺒﺐ‬.‫اﻟﻨﺎﺷﺌﺔ‬
‫ﻣﻌﺎﯾﺮة‬/‫اﻻﻧﻄﺒﺎع اﻟﻤﺘﻮﻟﺪ ﻣﻦ ان اﻟﺘﻮاﻓﻖ اﻟﻤﺤﺎﺳﺒﻲ اﻟﺪوﻟﻲ ﻣﺎ ھﻮ إﻻ ﺷﻜﻞ ﻣﻦ اﺷﻜﺎل اﻟﻌﻮﻟﻤﺔ وﻧﻤﻄﯿﺔ‬
‫ اﻟﺘﻲ ﯾﻔﺘﺮض‬،‫ وﺑﺎﻟﺘﺎﻟﻲ ﻓﻤﻦ اﻟﻤﻨﻄﻘﻲ اﻻﺳﺘﻔﺴﺎر ﻋﻤﺎ إذا ﻛﺎﻧﺖ اﻟﻤﻌﺎﯾﯿﺮ اﻟﻤﺤﺎﺳﺒﯿﺔ اﻟﺪوﻟﯿﺔ‬.‫ﻏﯿﺮ ﻣﺮﻧﺔ‬
‫ اﻟﻤﺘﺄﺛﺮة واﻟﻤﻮﺟﮭﺔ ﻣﻦ ﻗﺒﻞ اﻟﺪول اﻟﻤﺘﻘﺪﻣﺔ ھﻲ ﻣﻤﻜﻨﺔ‬،‫اﻧﮭﺎ ﺟﺰء ﻣﻦ ﺣﻘﻞ ﻣﻌﺮﻓﺔ إﺟﺘﻤﺎﻋﻲ ﻛﺎﻟﻤﺤﺎﺳﺒﺔ‬
‫ ﻓﻔﻲ ﺣﺎﻟﺔ اﻻردن ﻧﺮى‬.‫اﻟﺘﻄﺒﯿﻖ وﻓﻲ ﻧﻔﺲ اﻟﻮﻗﺖ ﺗﻌﻜﺲ اﺳﻠﻮب ﻣﺜﺎﻟﻲ ﻟﻼﻗﺘﺼﺎدﯾﺎت اﻟﻨﺎﺷﺌﺔ ﻛﺎﻻردن‬
‫ ﺑﻤﺎ ﻓﯿﮭﺎ اﻻﺳﺘﻌﺎﻧﺔ ﺑﺎﻟﺸﺮﻛﺎت‬،‫ﻣﻦ ﻧﺎﺣﯿﺔ ﺧﻄﻮات ﻃﻤﻮﺣﺔ ﺑﺄﺗﺠﺎه ﺗﻄﺒﯿﻖ اﻻﺻﻼﺣﺎت اﻻﻗﺘﺼﺎدﯾﺔ‬
‫ اﻟﺘﻲ ﺗﺤﺘﺎج اﻟﻰ ان ﯾﻜﻮن اﻻردن ﺷﺮﯾﻜﺎً إﻗﺘﺼﺎدﯾﺎً ﻓﻌﺎﻻً وﻣﺴﺘﺠﯿﺒﺎً ﻟﻤﺘﻄﻠﺒﺎت ﺷﺮاﻛﺔ‬،‫ﻣﺘﻌﺪدة اﻟﺠﻨﺴﯿﺔ‬
‫ وﻟﻜﻦ ﻣﻦ ﻧﺎﺣﯿﺔ أﺧﺮى ھﻨﺎك ﺗﺨﻮف‬.‫ﻣﻦ ھﺬا اﻟﻨﻮع ﻛﺎﻻﻟﺘﺰام ﺑﺘﻄﺒﯿﻖ اﻟﻤﻌﺎﯾﯿﺮ اﻟﻤﺤﺎﺳﺒﯿﺔ اﻟﺪوﻟﯿﺔ‬
‫ إن ﺣﺎﻟﺔ‬.‫ﻣﺸﺮوع ﻣﻦ ان اﻟﻤﻌﺎﯾﯿﺮ اﻟﻤﺤﺎﺳﺒﯿﺔ اﻟﺪوﻟﯿﺔ ﻗﺪ ﺗﺆدي اﻟﻰ ﺗﻐﯿﯿﺮات ﺟﺬرﯾﺔ ﻓﻲ اﻟﺜﻘﺎﻓﺔ اﻻردﻧﯿﺔ‬
‫اﻻردن ﺗﻤﺜﻞ وﺿﻌﺎً ﻣﺜﺎﻟﯿﺎً ﻻﻗﺘﺮاح ﺗﻄﺒﯿﻖ ﻣﻔﮭﻮم اﻟﻌﻮﻟﻤﺔ اﻟﻤﻜﯿﻔﺔ ﺑﺎﻟﺜﻘﺎﻓﺔ اﻟﻤﺤﻠﯿﺔ ﻛﺤﻞ ﻣﻤﻜﻦ ﻟﺤﺎﻟﺔ‬
‫اﻟﺠﻤﻮد اﻟﻔﻜﺮي واﻟﺘﻄﺒﯿﯿﻘﻲ اﻟﻤﺘﺄﺛﺮة ﺑﺎﻻﺳﺘﻘﻄﺎب اﻟﺤﺎﺻﻞ ﺑﯿﻦ ﻣﺆﯾﺪي اﻟﻌﻮﻟﻤﺔ وﻣﻨﺎھﻀﯿﮭﺎ اﻟﻤﺴﺘﻨﺪﯾﻦ‬
.‫اﻟﻰ اﻣﻜﺎﻧﯿﺔ اﻟﺘﺄﺛﯿﺮ اﻟﺴﻲء ﻟﻌﻮﻟﻤﺔ اﻟﻤﺤﺎﺳﺒﺔ ﻋﻠﻰ ﺛﻘﺎﻓﺎت اﻟﺒﻠﺪان اﻟﻤﺨﺘﻠﻔﺔ‬

The Reflections of the International Accounting Harmonization on

Emerging Economies: Jordan as an Example
Malek A. R. Alsharairi Prof. Riyadh J. Al-Abdullah
Durham University, UK The University of Bahrain, Bahrain

Abstract:
Beyond the phenomenon of international accounting harmonization and its
causes, there still a debate on its reflections, implications and consequences,
especially in the emerging economies. In addition, there are proponents and
opponents for such a topic as it looks like a form of globalization and a rigid
standardization. Therefore, it is questionable whether international standards
driven by the advanced countries for a social science like accounting can be
installed and are optimal for emerging economies with the Jordanian case taken
as an example. With this example, it is apparent that there are ambitious steps in
applying the economic reform regime on the one hand, however it lacks the
large Jordanian multinational companies (MNCs), which are one of the most
vocal parties in demanding a cosmopolitan set of accounting standards, on the
other hand. The case of Jordan reflects an ideal situation for the use of
glocalization as a possible solution for the stagnation in accounting thought and
practice influenced by the extreme polarization between the proponents and
opponents accounting globalization.

Electronic copy available at: http://ssrn.com/abstract=1410084

1. Introduction
The international accounting harmonization is considered to be a new accounting
phenomenon presented by some advanced countries. This phenomenon started to take
place effectively in 1970's and continues till present (Choi et al, 1999). Demands for
greater comparability and transparency in financial reporting have arisen due to the
increase of international business activities and the greater participation in the global
financial markets. If a firm selects accounting policies that are consistent with
international standards, it will increase the quality of reporting in terms of transparency
and comparability with other companies using the same set of international standards.
Nowadays, advocates of global accounting uniformity believe that the emergence of the
so-called economic globalization and the urgent need for huge capital markets to finance
the governmental privatization policies are major justifications for developing and
adopting international standards for accounting. It could be argued that such standards
would facilitate comparisons among companies’ financial performance across countries
and consequently enhancing the efficient allocation of resources in an increasingly global
capital market. In promotion for such an argument, in 1998, Sir Bryan Carsberg,
Secretary-General of the International Accounting Standards Committee (IASC)
comments on the need for one set of global accounting standards:
“…So the use of different accounting rules in different countries
limits the efficiency of the capital markets in attracting investment
funds to the applications where they will earn best returns and
therefore has some depressing effect on economic growth in general” 1
(Eccher and Healy, 2000: 1).
After stimulating the appetite for the need of harmonizing the international accounting
standards to reach a global uniform of financial reporting practices, the IASC was
launched in London in 1973 (Epstein and Mirza, 2001). The goal of the IASC, which

1
“Global Issues and Implementing Core International Accounting Standards: Where Lies IASC's Final
Goal?” Remarks of Sir Bryan Carsberg at the 50th Anniversary Dinner, Japanese Institute of CPAs,
Tokyo, 23 October 1998.

Electronic copy available at: http://ssrn.com/abstract=1410084

became the International Accounting Standards Board (IASB) in March 2001, is to create
a single set of understandable and enforceable global pronouncements –International
Accounting Standards (IAS) are issued by IASC, then the International Financial
Reporting Standards (IFRS) are issued by the International Accounting Standards Board
(IASB) (the new name of IASC) – (IASB, 2005) that will help increase transparency,
consistency and comparability in accounting numbers across the globe.
A lot of enormous objectives are assumed to be accomplished through the issuance of
internationally harmonized standards. However, important questions concerning the
impact and the effects of international accounting harmonization in some applying
societies are raised and need to be answered. For instance, the standards developed by the
international regulatory body, the IASB, are primarily based on those standards for
countries with highly developed capital markets, such as US and UK. Nonetheless, these
international standards are still under the stage of development, analysis, comparison and
argument. Furthermore, they have not ascended yet to the level of theory.
Beyond this phenomenon and its causes, there are also various reflections, implications
and consequences, especially in the emerging economies (Eccher and Healy, 2000). In
addition, there are proponents and opponents for such a topic as it looks like a form of
globalization. Therefore, it is questionable whether such standards can be installed and
are optimal for developing economies with the Jordanian case taken as an example. With
this example, it is apparent that there are ambitious steps in applying the economic
reform regime on the one hand, however it lacks the large Jordanian multinational
companies (MNCs), which are one of the most vocal parties in demanding a
cosmopolitan set of accounting standards, on the other hand. The impact of international
accounting harmonization, therefore, is questionable in developing countries.
In this paper, we provide a literature review and a theoretical basis on the potential
reflections by the international accounting harmonization with shedding a light on the
Jordanian case. Our argument in this paper based on the fact that accounting as a social
science is a product of its environment and that the international accounting
harmonization is being perceived as a globalizing force. In the next section we provide an
analytical frame and a literature related to the topic. Then the concept of globalization is
discussed considering both proponents’ and opponents’ perceptions. Afterwards, we give

3
a glance on the role of multinational companies in the international harmonization before
discussing the dimensions of the global accounting between the comparative approach
and the uniformity approach. Finally, analytical view is presented on the Jordanian
context in terms of the related regulations, the economic regime and the reaction toward
adopting IAS/IFRS then ending with a conclusion.

2. The Objectives
It is beyond doubt that the concept of accounting globalization, which has been stemmed
from the international accounting harmonization, suffers from strong polarization
between its proponents and its opponents. The main declared objectives, as suggested by
its proponents, include improving transparency, consistency and comparability across the
globe which hopefully will lead eventually to movements of capital and all countries
would greatly benefit. The opponents driven by strong accounting globalization phobia
would argue that the above declared goals are not the real ones. It is culture which is
targeted with the ultimate goal being a complete domination and hegemony by western
world on the emerging economies. Our main objectives in this paper are to highlight the
different perspectives and the reflections of the international accounting harmonization
and demonstrate that a possible solution may be acceptable to the polarizing parties
through introducing the concept of glocalization. Jordan is used as an example for the
possibility of applying glocalization since both indigenous factors (historically developed
and accommodated culture and other distinct features in the structure) and exogenous
factors (being active partner at the global arena for economic reform and development
requirements) apparently have an interaction and greatly possibility of integration.
The second main objective is to demonstrate the possibility of striking a compromise
between two powerful factors impacting and causing stagnation to the applicability of
IAS/IFRS; national environment (more preferably called cultural dimensions)
evolutionary and historically modified and IAS/IFRS tailored specifically to serve the
social, political and economic interests of highly developed capitalistic western nations
with totally different evolutionary and historically modified cultural roots from those of
emerging economies.

4
3. The Methodology
The methodology in any scientific endeavor represents the philosophical tools used to
advance an argument. The main orientation of this research is positively based. However,
positivism here is not based on induction and statistical tools; instead it is mainly based
on logical empiricism since our generalizations are empirical ones. This means that
deduction is used. However, the premises used in the deductive system are not
hypothetical postulates but inductively generated generalizations. For example, the
statement that “accounting system in any country is influenced by various cultural
elements” is an inductively derived generalization that is based on observations made in
the past. The statement that “globalization in accounting leads to less cost for adopting
advanced accounting systems by developing countries” is also an inductively derived
generalization. Therefore, using and combining these inductively derived generalizations
lead to a more relevant theoretical basis which may open more horizons to further
research.

4. Analytical Frame and Literature Review

The so-called process of harmonizing international accounting standards is viewed by
many researchers as a tool of globalization (Al-Abdullah, 2000; Kirby, 2001; Rasheed
and Hussein, 2002; Diaconu and Coman, 2006; Baker and Barbu, 2007; Baskerville and
Hay, 2007) and, consequently, this topic became debatable taking the controversial
consequences of globalization specifically on the developing countries (Drache, 1999;
Henry, 2003; Mott, 2004) and sometimes going conservative further by claiming that
harmonization process is structured according to the capitalism, which comes from
powerful economic lobbies resulted from globalization (Rasheed and Hussein, 2002). In
reviewing the literature in this paper we find more focus on the technical issues of the
harmonization process and its consequences and implications afterwards.
Initially, one may ask why national accounting standards differ among various nations.
Ding, Jeanjean and Stolowy (2005) emphasize the role of culture as an explanatory factor
underlying differences between national accounting standards and IAS/IFRS through

5
selecting sample of 52 countries2.They show that culture even matters more than legal
origin (common law/civil-law) in explaining divergences from IAS/IFRS and, therefore,
opposition to IAS/IFRS is not exclusively driven by contractual motives, a claimed
technical superiority, or legal origin, but also by diversity in cultural factors. Al-Ani
(2004) provides evidence on the relationship between the cultural framework, which is
important in building the accounting theory and accounting practices, and financial
reporting system.
Ideally, it could be argued that a world-wide integration of economic, legal and political
systems is required to achieve optimum accounting uniformity and comparability, and
alternatively, if these cultural, political, legal and economic dimensions are taken into
considerations whilst the harmonization process, many harmful reflections are likely to
evolve (Ball et al, 2000; El-Jajawy, 2000).
Internationally speaking, on assessing the efforts on international accounting
harmonization, Carmona and Trombetta (2008) and Garrido et al (2001) suggest that the
IAS/IFRS constitute a significant step forward in the process of accounting
harmonization. However, there still a need to continue working towards greater formal
harmonization. To attain the required higher level of harmonization, it could be suggested
to allow more policy options (Tarca, 2003) in the international standards in order to
mitigate the gaps and to converge different national standards. Carmona and Trombetta
(2008) suggest that the current standards are flexible enough to enable the application of
IAS/IFRS to countries with diverse accounting traditions and varying institutional
conditions. However, major changes are expected in the expertise, the educational
background and training programs held by accountants, and in the organizational and
business models of accounting firms (Carmona and Trombetta 2008; McGee and
Preobragenskaya 2004; McGee and Preobragenskaya, 2003). Nonetheless, there is still
far to go in the comparability of accounting measures across countries and regions,
knowing the fact that a complete and perfect comparability would also require a uniform
set of international manager and auditor incentives (Ball et al, 2000)
Eccher and Healy (2000) examine the usefulness of applying IAS in a transitional
economy, considering China as a case, and they claim that IAS are based largely on UK

2
It is worth to mention that Morocco and Iran are included in the sample.

6
and US accounting standards, in addition, the absence of effective controls and
infrastructure in China to monitor the additional reporting judgment available to
managers under IAS. This illustrates the potential incompatibility between the IAS/IFRS
and a transitional environment on which these standards are applied.
The same sort of argument is addressed by some empirical evidence, which also suggests
the high level of proximity between IAS/IFRS and US-GAAP explicitly (Eccher and
Healy, 2000; Leuz, 2002) or implicitly (Dunagploy and Gray, 2005) in terms of the
resulted accounting information under each set of standards. Dunagploy and Gray (2005)
found that the difference statistically in key financial ratios between US-GAAP and
Japanese-GAAP (after being revamped in line with IAS/IFRS) is not significant and Leuz
(2002) emphasize the same result after finding that the differences in key financial
variables in the financial statements prepared under IAS and those prepared under US
GAAP firms are statistically insignificant and economically small.
However, an interesting evidence provided by Christensen, Lee and Walker (2007) on
examining the economic consequences for UK firms of the European Union's decision to
impose mandatory IAS/IFRS. They find that mandatory IFRS adoption does not benefit
all firms in a uniform way but results in relative winners and losers. As of January 1,
2005, all European Union companies with shares listed on securities exchanges are
required to prepare their consolidated accounts in accordance with IAS/IFRS (Baker and
Barbu, 2007). In this occasion, the role of multinational companies (MNCs) in
demanding, supporting and disseminating the international standards (Ruder, Canfield,
and Hollister, 2005) could be found mentioned in the literature since 1973. Savoie (1973)
warns the increased power of MNCs, which has raised a lot of criticism and he suggests
that harmonization of the world standards should be the response.
In a more focused view within the context of Jordan, Al-Jajawy and Noor (2003)
examine the application of IAS/IFRS in the Jordanian environment, the role of auditors
and companies in the application, and the role of universities and other academic
institutions to improve the compatibility and harmony. They found that the academic
environment varies in the level of compatibility with IAS/IFRS, and the practical
environment varies in the level of application of IAS/IFRS as well. They conclude that it
is necessary to focus more on the study of factors and elements to achieve more

7
appropriate compatibility and perfect application of IAS/IFRS. Moreover, the
compatibility between the legal infrastructure and the plugged in accounting standards is
one of the most basic requirements to allow these standards work properly in serving
accounting profession. Al-Abbadi (2003) highlights this issue in Jordan by studying and
analyzing the degree of compatibility of the items of the Jordanian income tax law, with
the requirements of the IAS/IFRS and examining the extent of commitment of the
Department of Income Tax to the use and application of the IAS/IFRS. His evidence
states that there is no compatibility between the income tax laws and IAS/IFRS in many
aspects, and as a result there is a great difference between the auditory profit and the tax
profit. Therefore, he recommends that the sample system should be applied in a better
way when considering the IAS/IFRS and taking them into account in tax regulations and
laws.
To shed light on the capital markets and financial statements effects of adopting the
international standards, the literature shows that some accounting information under the
international standards are generally value relevant, some other information (such as the
adjustments to income) are generally value irrelevant compared to the same information
provided based on the national standards as in Germany for example (Hung and
Subramanyam, 2004). Empirical evidence, which is provided by Assa'aideh (1997) on
investigating the impact of adopting IAS in Jordan on the usefulness of accounting
information to market investor, reveals a significant improvement in the correlation with,
and the predictive ability of financial leverage of equity market risk measures and he
concludes that adopting IAS has been partially effective, however, fewer methods and
choices in IAS and more compliance with them are still needed in order to limit the
management ability to manipulate published accounting information which reduces its
usefulness to market investors. Nonetheless, an inconsistent evidence provided by
Juhmani (1998), who examines the effect of introducing IAS on the Jordanian stock
exchange during the period 1990-1991. Juhmani (1998) finds that the adoption of IAS
does not increase the information content of financial statements. He also presents
evidence that although IAS adoption has little influence on Jordanian domestic-owned
firms' share price reactions, there is a considerable effect on foreign-owned firms' share
prices.

8
This quick glance on the literature shows the interrelationships between globalization,
MNCs and harmonization and that establishing a global set of accounting standards
cannot be done by only translating these standards into different languages without
considering the substantial cultural, legal, economic and political variables (Diaconu and
Coman 2006).

5. Globalization Vs Glocalization: Proponents and Opponents of

Globalization
Cancelling the customized-nationally standards and replace them by having one set of
standards to be applied on the globe sounds much related to the term globalization.
However, more than one definition of globalization can be found and they are different
explicitly but they all have the same essence, which is the "integration", "convergence" or
"intensification" of worldwide aspects in some sense Many writers (Kiely and Marfleet,
1998; Mott 2002; Graham and Neu, 2003) agree that globalization is best defined by
David Harvey as "a compression or overcoming of both distance and time, and noting the
variety of effects this has on social and cultural relations" (Harvey, 1989:240). Within
accounting literature, prior research on economic globalization has focused on the role of
financial market liberalization and the harmonization of accounting standards in
encouraging the spread of common practices (Al-Abdullah, 2000; Al-Jajawy, 2000;
Graham and Neu, 2003; Ghadar, 2004). So far, globalization is still a debatable topic
under the shadow of the distinct cut rural backgrounds. To the vast majority of
economists, political scientists, and political commentators globalization is a "friendly
force" (Gundlach and Nunnenkamp, 1996), leading the world ultimately to the era of
converging world economies, converging institutions as democracy becomes a universal
norm, and cultural richness as people of different background interact more frequently.
However, this view has been opposed by many. For example, Branko Milanovic in World
Bank argues that:
"We shall show here that this view of globalization is based on one
serious methodological error: a systematic ignorance of the double-
sided nature of globalization, that is systematic ignorance of its
malignant side" (Milanovic, 2002:3).

9
In the above stated argument, there is an obvious indication to the double-sided effect of
globalization which leads theorists, thinkers, commentators and critics to ramify into two
groups; proponents and opponents regarding the potential cultural and economic impacts.
Proponent Perception:
Proponents suggest that the ultimate openness under the umbrella of globalization offers
better chances for developing countries to catch up with the industrialized countries as
well as to achieve an economic reform, especially after the emergence of Washington
Agreement in 1989, which was suggested by the American economist John Williamson,
in a form of Ten Recommendations toward the broken-down communistic countries
(Kikso, 2002). Globalization is perceived by its proponents as a mean to ease the inflow
of capital and technology, thus, helping to increase the rate of factor accumulation
beyond the level to be financed by domestic savings (Gundlach and Nunnenkamp, 1996).
Others argue that countries that rank high in economic freedom and trade openness also
rank high on social (e.g. infant mortality, longevity, etc.) and economic indicators (GDP
growth, GDP per capita, income share of the poorest, etc.) (Mejia-Vergnaud, 2004). They
believe that those countries with greater barriers to trade and economic activity exhibit
high poverty and low levels of human development. Moreover, they argue that critics of
globalization have conveniently chosen to ignore the obvious link between closed
markets and corruption. Therefore, in a corrupt and closed economic environment, the
gains from economic activity are more likely to be captured by elites, and then, increase
economic inequality (Mejia-Vergnaud, 2004). Some suggest that the improvement
toward welfare is a direct result of the increase in globalization in both developing and
developed countries. However, this requires an open market, protection of private
property rights, the rule of law, privatization of public assets and limited government
intervention. These suggestions with an empirical study taking the following social
indicators into consideration: 1) individual rights (measured by child labor and human
development), 2) income distribution, 3) health, 4) the environmental effects, 5) gender
equality (Quinlivan and Davies, 2003).
The implication for accounting would be obvious then. As any other globalization tool,
accounting would work well for everybody and everybody would accordingly be well-
off.

10
However, globalists believe that globalization also reduces the degrees of freedom of
economic policy making in developing countries (Gundlach and Nunnenkamp, 1996),
and they support the economic policies that assist disadvantaged and poor countries
through both: multilateral grants (not loans) and trade policies that would create millions
of jobs (Quinlivan and Davies, 2003).
The effects of globalization on developing countries which are perceived by globalists
can be summed up and summarized as follows:
1- Developing countries are economically benefited from the industrialized countries.
2- Easing the inflow of capital and technology into developing countries.
3- Increasing the rate of factor accumulation beyond the level to be financed by
developing countries domestically.
4- Earning a high rank on social indicators as well as economic indicators.
5- Squeezing poverty and maximizing the levels of human development.
6- Reducing corruption which is combined with the closed economic environments.
7- Contributing to economic equality.
8- Improving social welfare represented by human development, gender equality,
income distribution, health and environmental conditions.
9- Creating more job vacancies and contributing to employment.
10- Attaining multilateral grants.
11- Losing the freedom of making an economic-policy decision.
Opponent Perception:
In view of the fact that opponents of globalization suggest that the globalizing movement
is being led by capitalism, which is related to pure Euro-American origins, it will not be
surprising to find that most anti-globalists are from developing countries. The central
argument of anti-globalists that there are "invisible hands" behind globalization aiming at
demonstrating supremacy on developing countries by advanced counties (Sulaiman,
1999; Ragheb, 2001; Al-Abdullah, 2000; Tahoon, 2003; Ghadar, 2004). They also argue
that globalization is a kind of colonialism or imperialism permitting one party to control
another one. The former produces informational tools, methods and techniques in order to
spread facts, knowledge, values, culture, standards and rules from its "own" perspective
to the latter. Then ultimately the following clear classification of the world comes up.

11
Producing party (an active sender) that controls and imposes its environment
conceptually and materially and, on the other hand, consuming party (a passive recipient)
which is fascinated by the easiness of obtaining information, knowledge, entertainment
and other products. (Tahoon, 2003). This relationship between the producing and
consuming parties impairs the equilibria at different levels of flow of "things" leading
more poverty in the developing countries and more richness in the advanced countries.
Consequently, the gap between the rich and the poor countries is getting wider. Even
capital flows into developing countries, sometimes, have considerable negative effects on
economies. Examples of economic crises resulted from the liberalization of capital flows
are obvious in Mexico (1994), South East Asia (1997), Russia (1998) and Brazil (1999)
(Khateeb, 2002; Titawi, 2002).
According to the Islamic philosophy, economic activities are bounded by many ethical
values and principles that prohibit unfairness, deception, usury, monopoly and so on. This
philosophy does not consider "profit maximization" as the highest goal of economic
activity as it is in the case of the capitalistic system. Thus, any activity that does not agree
with these high values would be prohibited and not allowed by Islam. Since the economic
globalization is considered to be an extension of "unfair" capitalism, then the Islamic
system is conservative and cautious of this phenomenon.
The effects of globalization which are perceived by anti-globalists on developing
countries can be summed up and summarized as follows:
1- There are "invisible hands" behind globalization aiming at demonstrating
supremacy on developing countries by advanced counties.
2- Globalization is a kind of colonialism and imperialism.
3- Globalization allows advanced countries to spread its knowledge, values, culture,
standards and rules to developing countries.
4- Globalization impairs the equilibria at different levels. This implies more poverty in
developing countries and more richness in advanced countries.
5- Economic crises can be resulted from liberalization of capital flows.
6- International organizations are established to impose certain plans, rules and
conditions on the Third World but in behalf of the advanced countries.

12
7- International organizations and advanced countries trick the developing countries to
uncover their markets, resources and other information through the promotion for
"transparency".
8- Globalization is an extension of "unfair" capitalism.
9- Globalization impairs the ethical values of Islamic philosophy and, thus, it is
resisted by the Islamic system.
From an accounting perspective, the anti-globalists argue that accounting is employed in
the globalization process and it would then disseminate western values around the globe.
So they would discredit accounting globalization benefits and accordingly would raise an
obvious red flag pertaining to the detrimental effects of accounting globalization on
cultural, economic, and political aspects of most countries of the world.
Glocalization as a reformed Globalization:
While globalization is critiqued as a biased power, a new concept arose, glocalization.
The term was modeled on Japanese word dochakuka, which originally meant as a concept
arose to help mitigate the conceptual difficulties of global-local relationship (Khondker,
2004). The word and the concept came from Japan and it is composed of Globalization-
Localization. It is defined by Wordspy3 “the creation of products or services intended for
the global market, but customized to suit the local cultures.” (Khondker, 2004). For more
illustration, if a marketing plan of an international restaurant series recommends to adjust
the menu according to each country’s distinct cultural and social norms this can be
described by glocalization, i.e. a global product is modified to fit the local “endogenous”
system. If these international products are introduced to different societies as they are
without any adjustments, probably they will not sell.
In the accounting harmonization literature, we could not find any previous use of this
term, which has been intelligently used by many researchers in the social, political and
even psychological sciences to describe the need of “indigenization” whilst the process of
globalization because it raises questions about the applicability of social scientific ideas
and concepts (Khondker, 2004). One basic question arises here as an example on the need
of employing this concept in the accounting harmonization –at least at this stage of the
process-, do all countries have the same regulatory, legal and taxation frames? Some

3
http://www.wordspy.com/words/

13
studies show that incompatibilities can be found between the applicable code of tax and
the international standards of accounting (Al-Abbadi, 2003) for example, which implies
the need of either having “glocalizable” international standards or then local legal
modifications will be urgent.

6. The Multinational Companies (MNCs): a Key Player

As it is mentioned above, globalization means a closer international integration of
markets and production, or, in general, the liberalization of the trade. This means that
firms can place their production around the world, and source inputs from different
countries. This would be better by harmonizing the atmosphere of international
environment regarding many aspects. Governments, laws, rules, accounting standards,
norms, cultures, technologies and languages are examples. It is noticeable that this kind
of business, international or multinational, has emanated from globalization. It refers to
Multinational Companies (MNCs), Multinational Enterprises (MNEs) or sometimes
Transnational Companies (TNCs). The simplest definition of MNC is "a business
organization operating in more than one country" (Miller, 1979:3; Kiely and Marfleet,
1998:50). However, the definition constructed by Professor Raymond Vernon of Harvard
University is widely used. It depicts an MNC as a "parent" or dominant enterprise
controlling the operations of a network of foreign corporations and furnishing them with
"common" objectives, strategies and resources (Miller, 1979).
US-based MNCs responded to particular conditions; market saturation in some sectors, a
developed international communications and transportation system, and growing
economic challenge to the US from Europe and Japan (Kiely and Marfleet, 1998; ILO,
1981). European and Japanese companies have followed the steps of the US companies to
increase the direct foreign investment. This has resulted in some giant MNCs whose
assets are comparable to some developing countries GNPs and they started to dominate
some important decisions on the international arena. During the 1970s, the growing
problems associated with the emergence of MNCs, as well as international accounting
diversity, began to attract interest. These resulted in the establishment of IASC in 1973.
At the same wise, the U.N. Economic and Social Council focused on this area by

14
appointing a study group which eventually led to the creation of a U.N. Commission on
Transnational Corporation in 1976 (Evans et al, 1985).
Views regarding the effects of multinationals on the developing economies vary,
supposing one of them is a host country4. These opinions can be categorized into two
categories; the optimistic versus pessimistic view. In the optimistic view, three types of
effects may be distinguished (1) net macro-economic impact, such as adding to total
national income and to the host government's revenue and foreign exchange availability,
(2) horizontal impact, which is the impact of MNCs on other enterprises that compete
with them or are otherwise linked to them through various market-structure mechanisms
and (3) vertical linkage impact, which is the impact of MNCs on employment in other
enterprises directly linked to them in the production chain, by selling or buying from
them (ILO, 1981).
On the other hand, MNCs are charged with some concerns, as a pessimistic view, by
developing countries. An example of these concerns, which is not all-inclusive, such as
having the power to be above any government and abrogating the sovereignty of the local
government, competing unfairly, fostering technological dependence, lacking social
responsibility, destroying stability of labor markets, disrupting foreign exchange markets,
exploiting local resources and capital and evading taxes (Miller, 1979).
From an accounting perspective, since the international accounting harmonization
primarily serve this kind of organizations, it could be argued that accounting
harmonization ease the spread of MNCs, and at the same time, support greatly the spread
of IAS/IFRS in all the host countries where their subsidiaries operate. Therefore, a debate
regarding the association between the international accounting harmonization and MNCs
might arise also when the positive and negative effects of MNCs are taken into
consideration.

7. Global Accounting: Uniformity Vs. Comparative

As a result of the growing importance of financial and economic globalization5, more
awareness by the accounting profession has recognized the need to establish a uniform
set of accounting standards that would be valid at the international or global level.

4
Host country is the country in which a subsidiary operates and is located.
5
The concept of Globalization and Economic Globalization is discussed in Part 2 of this chapter.

15
More specifically, it could be said that globalizing or internationalizing of accounting is
induced by the following four critical factors: 1- Multinational enterprise6 operations, 2-
Globalization of money capital markets, 3- International nature of some technical
accounting problems, and 4- Historical antecedents (Choi and Mueller, 1984).
When talking about international, global, universal or world accounting, there is
confusion in the literature regarding these concepts. A good definition for the purpose of
this study is set by Weirich et al as follows:
"International accounting is considered to be a universal system that could be
adopted in all countries. A worldwide set of generally accepted accounting
principles (GAAP), such as the set maintained in the United States, would be
applicable to all countries. This concept would be the ultimate goal of an
international system" (Weirich et al, 1971:80).
It could be said that, on one hand, an ideal condition is to have a complete "uniformity"
of accounting standards in order to be adopted by all countries around the globe. On the
other hand, a concept of "comparative international accounting" directs international
accounting to understand, study and analytically classify national accounting systems as
has been done in the other social sciences such as economics, politics and laws. This
involves an awareness of the international diversity in corporate accounting,
understanding of the accounting standards and practices of each country, and assessing
the impact of diverse accounting practices on financial reporting.
Many have investigated the determinants and factors influencing the accounting
standards, practices and financial reporting. For example, Nobes and Parker (1991) have
set the following seven factors that may explain the financial reporting differences
internationally: 1- Legal systems, 2- Providers of finance, 3- Taxation, 4- The accounting
profession, 5- Inflation, 6- Theory, and 7- The accidents of history. Belkaoui (1985)
believes that five environmental factors are affecting the determination of accounting
standards, namely; 1- cultural relativism, 2- linguistic relativism, 3- political and civil
relativism, 4- economic and demographic relativism, and 5- legal and tax relativism.
While others, such as Arpan and Al Hashim (1984), suggest these determinants as only

6
The concept of Multinational enterprise (MNE) is discussed in Part 2 of this chapter.

16
four, namely; 1- the differences in accounting uses, users and preparers, 2- socio-cultural
differences, 3- legal and political differences, and 4- economic conditions.
Given these determinants of accounting standards while assessing the logic, applicability
or relevancy of both uniformity and comparative concepts, it is noticeable that
uniformity, as an ideal state, requires a maximum level of homogeneity for the
international environment in terms of culture, language, policies, civilization, economics,
demographics, laws and taxing systems in order to achieve the optimum compatibility
between the standards and the environment, whereas the comparative theorem of
international standards seems to be more logical but serves at the national level, and
might not be useful internationally.
Such a debate does exist between those favoring "uniformity", and those preferring a
"comparative" analysis of different national accounting systems. The argument of those
supporting the comparative standards that accounting is influenced by accounting
objectives, cultures, policies and techniques result from the environment factors in each
country since these environmental factors differ significantly between countries. It would
be expected that the major accounting concepts and practices in various countries would
also differ. Therefore, the environmental conditions affect the determination of
accounting standards as it is shown above. However, there is an internationally organized
trend toward uniformity which is represented by the process of International Accounting
Harmonization.
International Accounting Harmonization:
Indeed, the starting point of the efforts of international accounting standards setting in
1959 is credited to Jacob Kraayenhof7, who urges that the work on international
accounting standards ought to begin. In 1961, "Groupe d'Etudes"8 was established in
Europe to advise European authorities on matters concerning accounting. Then in 1966
Accountants International Study Group was formed by professional institutes in Canada,
United Kingdom and the United States of America (Choi et al, 1999). In June 1973,
IASC was founded to be charged with the issuance of IAS, but later it changed its name
into IASB, which has issued the IFRS (IASB, 2005).

7
A founding partner of a major European firm of independent accountants.
8
An association of practicing accounting professionals.

17
During this phase, a debate regarding two concepts associated with the efforts of the
uniformity of accounting standards namely, "standardization" and "harmonization" has
been existed. In fact, it could be said that the term "standardization" has some rigidity
since it implies no flexibility in a given set of standards, then incompatibility with
different applying environments might arise. Generally, standardization means the
imposition of a rigid and narrow set of rules, and may even apply a single standard or rule
to all situations (Nobes and Parker, 1991).
Therefore, using the word "harmonization" sounds more favorable to remove this rigidity
since harmonization is defined as a process of increasing the compatibility of accounting
practices by setting limits on how much they can vary (Choi et al,1999). Thus,
harmonization implies a reconciliation (bringing together) of different points of view.
This is more practical and logical when the formation of accounting standards at the
global level takes place.
A third related concept, which is not commonly used, has appeared and used especially in
the European literature is "normalization". English "standards" being called "norme" in
French, the process of "standardization" is translated by "normalization" (Barbu, 2004:5).
According to Barbu's opinion (2004), normalization is situated between harmonization
and standardization.
However, it is argued that every country has its own sets of rules, philosophies, and
objectives at the national level aiming at protecting or controlling the national resources.
This aspect of nationalism gives rise to particular rules and measures which ultimately
affect a country's accounting system. It is suggested that harmonization requires: (1)
recognizing these national particularities, (2) attempting to reconcile them with other
countries' objectives, and (3) correcting or eliminating some of these barriers in order to
achieve an acceptable degree of harmonization (Belkaoui, 2004).
This agrees somehow with the scientific logic suggested by Al-Abdullah (2000), in which
he argues that determining the causes and providing explanations and justifications is a
must to conclude a scientific result. Otherwise, globalization of accounting could suffer a
complete absence of scientific logic.

18
It is fair to mention that international harmonization could have the following advantages
and disadvantages (Choi et al,1999; Al-Abdullah, 2000; Epstein and Mirza, 2001;
Belkaoui, 2004).
Advantages of international harmonization:
1- The comparability of international financial information.
2- Set-up cost and time saving for those countries which have no adequate codified
standards of accounting and auditing.
3- Time and money saving that is spent to consolidate divergent financial information,
which could lead the international financial markets to be more efficient.
4- The tendency for accounting standards throughout the world to be raised to the
highest possible level and to be consistent with local economic, legal and social
conditions9.
Disadvantages of international harmonization:
1- International standards could not be flexible enough to handle differences in national
backgrounds, traditions and economic environments.
2- It would be a politically unacceptable challenge to national sovereignty.
3- Tax-collection systems vary internationally. Since this requires diversity in
accounting standards and systems used internationally, it creates "standards overload".
4- Corporations that must respond to an ever-growing array of national, social, political
and economic pressures are hard pressed to comply with additional complex and costly
international requirements.

8. Harmonization and the Context of Jordan

Jordan has become a member of the board of IASC since 1988 (IASB, 2005). The Jordan
Association of Certified Public Accountants (JACPA) recommended the adoption of IAS
in the 1988 and 1989 fiscal years but mandated them for 1990 and beyond by its Board of
Management' Decision number (54) on March 13, 1989 (Assa'aideh, 1997).
Moreover, Article number (42) of Chapter (6), which is issued by the Board of
Commissioners of the Securities Commission pursuant to Articles (9) and (53) of the

9
Choi et al refer this point to Turner, John N. (1983). International Harmonization: A Professional Goal.
Journal of Accountancy. January, pp. 58-59.

19
Securities Law, No. (23) for the year 1997, states that all entities subject to the
Commission's monitoring shall apply IAS issued by the IASC, unless there is a conflict
between these standards and the legislation in force in Jordan, otherwise, the national
legislation shall supersede, then the Directives of Disclosure and Auditing and
Accounting Standards issued under No. (1) for 1998 (JSC, 2005). The aims of these
directives, referring to Jordanian Securities and Commissions (JSC), are to maintain fair
dealing in securities, enhance the trust of investors and savers and achieve transparency
in the market in line with international standards.
Furthermore, the Jordanian legislation mandates the application of the international
standards. According to the Articles (62), (75), (184), (195), (201) and (208) of The
Jordanian Companies Law No. (22) for the year 1997 with its latest modifications, there
are explicit indications of subjugating each of the limited liability companies, closely
held (private) corporations and publicly held corporations to provide their accounts and
financial statements in accordance with the internationally accepted standards, at the
same vein, the auditor is responsible to follow the international auditing standards to
examine the companies' appliance of the international accounting standards.
It is fair to mention that economic reform have become a part of the overall economic
package that the government adopted in the early nineties and after the economic crisis
that affected the country.
The economic reform process in Jordan initiated in 1989, through signing arrangements
with the International Monetary Fund (IMF). However, the period 1999-2008 marked
with remarkable reform effort under the new regime of King Abdullah II, who made
economic reform one of his top priorities and launched a many initiatives and projects
aiming at promoting economic development (Alissa, 2007). This period has also
characterized by an accelerated economic developments at the global scene in terms of
globalization, increasing of competition, lifting of tariffs and administrative barriers to
liberate international trade, capital flows, the communications and information
revolution, privatization process and a dramatic involvement of the Jordanian economy in
the global economy (ASE, 2005; MOF, 2005). Thus, the Jordanian choice is to open up
to the world through the international economic tools such as adopting international
standards -including IAS/IFRS- and developing partnership agreements by signing three

20
free trade agreements with the United States, in 2000, and the European Union, effective
2002, and gained accession to the World Trade Organization (WTO) in 2000 (Alissa,
2007).
The concept of glocalization perfectly fits the Jordanian situation. On the one hand, there
are deep national cultural roots, which include Islamic rules, collectivism, social harmony
and integration, and on the other hand the economic reform is consistent with various
economic developments and requirements (i.e. the use of international standards)
imposed at the international arena. This inevitably imposes a type of fittingness on the
international accounting standards. The end result of such modifications (fittingness) is
the glocalization of IAS/IFRS. This allows a compromise to be achieved between the
indigenous and exogenous culture in order to prevent the ultimate social, political and
economic upheavals and uncalculated radical changes brought about by the mere
translation of IAS/IFRS and at the same time avoids being behinds closed doors; thus
missing any opportunity to fit oneself and take advantages of the huge developments in
accounting thought and practice associated with highly developed IAS/IFRS.

9. Conclusion and Recommendations

The international accounting harmonization is perceived as a contemporary phenomenon
with questionable reflections, implications and consequences, especially in the emerging
economies. The increasing debate on this issue ramifies commentators into proponents
and opponents as it has been being viewed as a tool of globalization and creating rigid
standardization following the Western domination. Therefore, it is controversial whether
international standards for a social science like accounting, which are also driven by the
advanced countries, can be installed and are optimal for emerging economies with the
Jordanian case taken as an example. With this example, it is apparent that there are
ambitious steps in applying the economic reform regime on the one hand, however it
lacks the large Jordanian multinational companies (MNCs), which are one of the most
vocal parties in demanding a cosmopolitan set of accounting standards, on the other hand.
Generally, the distinctiveness of each country and the differences among them should be
taken into consideration in the process of setting international standards. A new concept
can illustrate and facilitate this situation, glocalization. In the accounting harmonization

21
literature, we could not find any previous use of this term, which has been intelligently
used by many researchers in the social, political and even psychological sciences to
describe the need of “indigenization” whilst the process of globalization. Therefore,
IASB should permit more flexibility when setting any standards to actually harmonize,
but not standardize, the international standards then international standards should be
examined and tested before adopting them, to ensure their impact and appropriateness
while applying.
Finally, economic globalization could have double-sided effects. While it holds many
economic benefits, it should be dealt with carefully to ensure that this does imply drastic
cultural and economic impacts. These impacts could evolve in case of hosting the huge
foreign MNCs as well. However, going back since the start of economic reform process
in Jordan through integrating the Jordanian economy in the global economy and through
getting the accession into many international organizations and partnerships, it could be
concluded that the Jordanian choice of being involved in the international accounting
harmonization is a justified choice and a consistent policy with the current economic
regime.

22
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