Islamic Accounting

Journal of Islamic Accounting and Business Research
Understanding the dominance of Western accounting and neglect of Islamic accounting

in Islamic countries
Ghada Altarawneh Mike Lucas
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Dominance
Understanding the dominance of of Western
Western accounting and neglect accounting
of Islamic accounting in Islamic
99
countries
Ghada Altarawneh
Department of Accounting, Faculty of Business Administration,
Mutah University, Mutah, Jordan, and

Mike Lucas
Centre for Accounting and Finance, The Open University Business School,
Open University, Milton Keynes, UK
Abstract
Purpose – This paper seeks to explore the reasons for the dominance of Western accounting and
neglect of Islamic accounting in Islamic countries, using Jordan as a case study.
Design/methodology/approach – The paper reports the results of a series of interviews, using a
semi-structured questionnaire, with senior members of the accounting regulatory regime in Jordan.
The interview data are supplemented by relevant secondary (documentary) data.
Findings – The paper concludes that economic dependency on developed Western nations and
their international agencies is the major factor determining accounting policy and practice in
Jordan.
Research limitations/implications – The main limitations of this study are the uncertainty
concerning the extent to which the respondents’ views are representative of accounting policy makers
in Jordan, and the inevitable degree of subjectivity involved in evaluating the relative impact of
economic dependency and other factors on accounting policy in Jordan.
Originality/value – The paper enhances understanding of the neglect of Islamic accounting in
Islamic countries and provides insights into the prospects for and barriers to wider adoption of Islamic
accounting in future.
Keywords Islamic accounting, Western accounting, Developing countries, Colonialism,
Economic dependency, Jordan, Accounting
Paper type Case study
1. Introduction
The idea that accounting is a neutral unbiased technology has long been rejected by
scholars (Scott, 1931) because accounting is influenced by various factors including the
political and economic interests of particular groups in society (Lehman and Tinker,
1987; Cooper, 1980; Susela, 1999). Hopwood and Miller (1994, p. 1) state:
[. . .] accounting is no longer to be regarded as a neutral device that merely documents and
reports “the facts” of economic activity. Accounting can now be seen as a set of practices that Journal of Islamic Accounting and
Business Research
affects the type of world we live in, the type of social reality we inhabit, the way in which Vol. 3 No. 2, 2012
we understand the choices open to business undertakings and individuals, the way in which pp. 99-120
q Emerald Group Publishing Limited
we manage and organize activities and processes of diverse types, and the way in which we 1759-0817
administer the lives of others and ourselves. DOI 10.1108/17590811211265920
JIABR In other words, accounting is an important economic tool reflecting the interests and
3,2 viewpoints of many interested parties. Many studies (Cooper, 1980; Susela, 1999) have
provided evidence of various interests in different contexts. Accounting derives its
usefulness from its ability to reflect the social, cultural, and economic aspects of the
organizations on which it reports. Each country (society) has its own political, economic
and cultural values, which requires the economic goals and the information needed to
100 achieve them to be different in different societies. Thus, transferring accounting that
reflects the socio-economic and cultural values of developed nations to developing nations
has been criticized by various scholars as being unsuitable and irrelevant for developing
nations (Briston, 1978, 1990; Hove, 1986; Samuels and Oliga, 1982; Wallace, 1990) and
particularly to those whose societies are bounded by specific religious principles in their
everyday life, such as Muslim societies in Islamic countries.

From an examination of the relevant literature, including the Islamic
accounting and economics literature, it is clear that Islamic societies do need an
accounting system that suits the ideology and values of Muslims, to assist them in
meeting their religious obligations (Hameed, 2001). However, despite recognising that
Western accounting is inconsistent with the values and principles of Islam, it is still
found to dominate accounting practice and education in Islamic countries. The literature
suggests a number of possible reasons for the adoption of the Western (in particular the
Anglo-American) accounting system in these countries, including the impact of
colonialism, the needs of multinational corporations and the demands attached to the
provision of financial aid (Hove, 1986; Briston, 1978; Cooke and Wallace, 1990). In short,
accounting that has been employed in these nations is intended to serve the needs of
various external parties rather than the needs of local and indigenous people (Hove, 1986;
Samuels and Oliga, 1982).
Case studies undertaken by Poullaos and Sian (2010) indicate that the demands of
British capital in all instances had a profound impact on the requirements of accounting
practice in developing countries (Verhoef, 2011). These writers however, acknowledge
that there is significant variation among countries, implying the need for country specific
histories/studies of the ways in which the imperial legacy interfaced with the domestic
people and cultures. Country specific studies are therefore necessary to establish the
impact of colonial authority and answer the question of whose interests have been
paramount in determining accounting policy and practice and what was the balance
between imperial interests, commercial interests and those of the indigenous population
(Verhoef, 2011).
Although economic dependency on the west has been emphasised by many
writers as the primary reason for developing countries adopting Western economic and
accounting policies, there would seem, logically, to be a number of possible reasons
for Jordan’s adoption of Western accounting and consequent neglect of Islamic
accounting:
.
Ignorance of alternatives, i.e. Western accounting is accounting!
.
In a world of uncertainty and ambiguity, do what everybody else (or at least an
exemplar organization/country) does.
.
The cost-benefit calculus, i.e. the costs of developing and implementing its own
accounting system/standards are prohibitive for a small, relatively poor country
and the limited benefits do not justify the costs involved.
.
Adherence to a widely accepted set of high quality accounting standards (which Dominance
cost millions of dollars to produce) reduces the risks for investors and thereby of Western
reduces the cost of capital for Jordanian companies.
.
Jordan is economically dependent on the west and must therefore adopt economic
accounting
and accounting policies that best serve Western interests.
As the literature review which follows this introduction indicates, a number of writers 101
have suggested that economic dependency is self evidently the explanation for the
adoption and continued use of Western accounting in developing countries. However,
there are as, indicated above, a number of competing explanations, none of which have
been conclusively supported or refuted by previous research and this is the justification
for the current study.

This paper is structured as follows. The next section presents the literature review,
followed by a description of the country context in Section 3. Section 4 describes the
research methodology employed in the current study. Section 5 discusses the research
findings and Section 6 draws conclusions and indicates some limitations of the current
study and future research directions.
2. Literature review
Many efforts have been made to explain the reasons for international differences in
accounting practices and regulation and the factors that influenced the accounting
approach in a particular country (Nobes, 1998; Gray, 1988; McKinnon, 1986; Cooke and
Wallace, 1990, and others). These writers argue that accounting in a country is
influenced by various external and internal factors. Internal variables include the stage
of economic development, goals of society, legal rules, economic systems, and cultural
variables. External factors are “those factors that are likely to make accounting
regulators in a country ignore or give less emphasis to internal factors” (Cooke and
Wallace, 1990, p. 82), such as colonial history, the influence of multinational corporations,
and the impact of regional economic communities such as international trade
communities, membership and participation in international organizations as well as the
effects of international governing and globalizing of accounting around the world.
A number of researchers have also suggested that accounting regulations in
developing countries are more likely to be a result of the demands of foreign corporations
that attempt to invest in these countries. This may be because of the exclusive
dependency of these developing countries on external financial sources and assistance
for survival by organizations such as the World Bank (WB, 2004) and the International
Monetary Fund (IMF). In contrast, countries with plenty of resources, advanced
technologies and professional experience in the accounting field are more likely to develop
their own accounting regulation.
In short, there is a consensus among researchers that accounting in developing
countries is an outcome of various external and internal factors, which have also been
identified as hindrances/obstacles that limit the opportunity for developing countries to
develop or improve their own accounting approach, and consequently contributed to the
dominance of Anglo-American accounting worldwide.
Some researchers argue that imperial legacies are a major barrier to the process of
localizing accounting professional bodies (Annisette, 2000; Bakre, 2005, 2006; Carnegie and
Parker, 1999). Annisette (1996) investigated the circumstances surrounding the localization
JIABR of the accounting profession and training in Trinidad and Tobago. She observes that the
3,2 traditional ways of qualification have been criticized by both the business community and
the government as being irrelevant and unsuitable for Trinidad and Tobago’s
environment. She concluded that the influence of imperialism and the dominance of
Western accounting continue to be the major obstacles facing any localization plans in
many former colonies. Further, the study indicates that the Western accounting framework
102 is inappropriate for the country’s socio-political and economic environment.
Briston (1978) illustrates how accounting systems in Nigeria and Sri Lanka have been
formed by colonialism (British colonization). Accounting in these countries still copies
the British accounting principles and systems even after independence. Briston criticizes
the adoption of “British” accounting (as he refers to it) by other nations that have
different economies, cultures and even values. He points out that British accounting has
been criticized by its own society (Western nations, Western scholars) for not being free
of bias and of causing many problems (Briloff, 1990; Miller and O’Leary, 1987). He adds
that if this accounting creates problems for the economy that it is supposed to serve and
whose values it represents, how can it be employed to serve different socio-economic
contexts. Similarly, Balachandran (2007) provides further evidence on the influence of
imperialism and the colonization legacy on accounting system (particularly management
accounting) adopted in the country even after Sri Lanka achieved its independence.
Some studies, such as that by Loft and Aggestam (2007), are concerned with
understanding the role of certain international organizations in attempting to globalize
and govern accounting around the world. In the colonialist age, accounting techniques
and practices were one of the significant capitalist instruments that had been employed
by the colonizers to support the procedures of accumulating profit by imperialist nations
(Neu, 1999). In order to continue to protect the interests of imperialists after the
independence of many developing countries, different mechanisms are needed and the
formation of international institutions such as the World Trade Organization (WTO), WB
and IMF serve the purpose. These international institutions have insisted that the
Member States (particularly developing countries) employ the International Financial
Reporting Standards (IFRS) as a benchmark for their accounting system. Thus,
developing nations are obliged to adopt this sort of accounting, ignoring its suitability for
their particular socio – economic situation (Loft and Aggestam, 2007).
Ashraf and Ghani (2005) consider the factors that influenced the origins, development
and growth of accounting practices and disclosures in Pakistan. These researchers
discuss how the colonial epoch and more recently, some international financial
institutions, have influenced and shaped the country’s accounting and reporting
practices. They found that besides the colonial milieu of the country, accounting
practices in Pakistan have been influenced by international financial institutions, such
as the WB and IMF, essentially because of Pakistan’s political relationship with the USA
and the Western world. Consequently, as demonstrated by Ashraf and Ghani (2005), the
impact of Pakistan’s cultural values on the accounting system cannot be identified
clearly because of Pakistan’s colonial past and its need for Western financial assistance.
Essentially then, previous studies have tended to suggest the significant impact of
various international capitalist institutions on the accounting policy of developing countries.
However, what is missing in the literature are the possible reasons for Islamic
accounting not being adopted by developing Islamic countries, despite the growth and
global acceptance of Islamic financial instruments.
There are a number of other logical possibilities for the continued dominance Dominance
of Western accounting. First, it may be attributed to ignorance of the alternatives, of Western
including the existence of Islamic accounting. It may be that, for many people, Western
accounting is accounting. Haniffa and Hudaib (2010) are acutely aware of this possibility accounting
in writing the editorial for the launch of the inaugural issue of the Journal of Islamic
Accounting and Business Research. The rationale for their editorial paper (and indeed the
new journal itself) is that “it is useful to new readers of the journal around the world, who 103
are interested but have limited knowledge in the area”.
A variation on the ignorance of alternatives theme, is that the situation may be
explicable in sociological rather than economic terms, in particular, in terms of the
“institutional isomorphism” proposed by advocates of New Institutional Sociology (NIS)
such as DiMaggio and Powell (1983). These authors identify what they describe as
“mimetic processes”. Uncertainty is a powerful force that encourages imitation. Faced
with uncertainty and ambiguity in our interpretation of the world around us, it is
difficult to know what to do. Consequently, it is best to do whatever everybody else does
(or at least what a model or exemplar entity or country does).
Forrester (1996) has discussed how this occurs in the field of financial accounting.
There has, for example, been a strong tradition within continental Europe of looking at
what the neighbours are doing and adopting their solutions for one’s own use.
DiMaggio and Powell (1983) also identify what they call “normative processes”. This
isomorphism stems primarily from “professionalization”: the collective struggle of
members of an occupation to define the conditions and methods of their work and to
establish a cognitive base (i.e. way of looking at the world) and legitimation for their
occupational autonomy. Two aspects of professionalization are important sources of
isomorphism. One is the resting of formal education and of legitimation in a cognitive
base produced by university specialists or professional associations. The second is the
growth and elaboration of professional networks that span organizations and countries
and across which new models diffuse rapidly.
Universities and professional training institutions are important centres for
the development of organisational norms among professional managers and their
staff. Professional and trade associations are another vehicle for the definition and
promulgation of normative rules about organisational and professional behaviour. Such
mechanisms create a pool of almost interchangeable individuals who occupy similar
positions across a range of organizations and possess a similarity of orientation and
disposition (Lucas, 2005). Could this explain the adoption of IFRS by Islamic developing
countries? In 1997, the Arab Society of Certified Accountants called for all of its 22 member
countries to adopt international accounting standards (then IAS, now IFRS) as their
national GAAP, in the “Dubai Declaration”. This would seem to be an example of
“normative processes and/professionalization” in action. Conversely, the Accounting and
Auditing Organisation for Islamic Accounting Institutions (AAOIFI), has not wielded
much influence.
Another possible reason is the rational choice theory or the cost-benefit calculus. It is
prohibitively expensive for a small developing country with limited resources to develop
its own accounting standards, when a set of internationally recognised, high quality
standards already exists (i.e. IFRS) (Allingham, 2002). An example is the AAOIFI’s
decision to adopt existing (IFRS) standards and only address aspects that are not shariah
compliant, rather than to start from scratch, based on the shariah.
JIABR The third reason may be attributed to the cost of capital minimisation argument. It is
3,2 possible that using an internationally recognised set of high quality accounting
standards, such as IFRS, may help reduce investor risk and thereby lowers the cost of
capital for companies (Leuz and Verrecchia, 2000). Globalisation of corporations means
that shares are traded on international capital markets (Dos Santos, 1971) and investors
will choose to invest in countries deemed to have low risk. It is widely accepted that
104 developing countries pose higher risk to investors due to a variety of national differences
in economic structures, policies, socio-political institutions, geography, and currencies.
Since Islamic finance and banking is a relatively new phenomenon, with strict
religious rules, investors are more cautious of the additional risks involved. Hence,
adopting an established accounting system and accounting standards will help gain
investors confidence to invest in the country.

Closely related (although not identical) to the third reason is economic dependency of
developing countries on former Western colonial powers. The need to attract foreign
direct investments (FDIs) and to seek international funds to help finance the
development and growth of developing countries means that developed nations can
exert pressure on developing countries to employ an accounting system that suits
Western interests. The conditional assistance and aid given by international institutions
to the less developed nations depends on the willingness of these countries to undertake
a range of social, cultural, economic and political changes including accounting ones.
This contributed to strengthening the domination of conventional accounting in these
countries, preserving the interests of international financial institutions, such as the
IMF, WB, and developed nations, even if this sort of accounting is not appropriate for
developing countries’ culture, values, economy and environment.
There have been studies concluding that colonialism is the reason for the dominance
of Western accounting, but not studies of Jordan. Verhoef (2011) argue that there is
significant variation among countries in terms of their history and institutional
framework; this implies the need for country specific studies to explain the situation with
respect to a particular country.
In short, the literature review demonstrates that there have been a number of
competing explanations for the dominance of Western accounting and neglect of
indigenous alternatives such as Islamic accounting in Muslim countries. However, the
evidence adduced is inconclusive, necessitating further, country specific research. As
each country has a different history, circumstances and institutions, there is a need for an
accumulation of country specific studies. The current study is one such.
Since Jordan established one of the earliest Islamic banks, it is surprising that Islamic
accounting has not been developed by nor adopted in Jordan. What are the possible
reasons for lack of commitment by those with authority to adopt an accounting system
that corresponds to the principles and values of their own culture and religion? To help
understand the reasons, it is first important to understand the Jordanian environment.
3. The Jordanian context

The Hashemite Kingdom of Jordan is a small developing Arab country located in the
heart of the Middle East. Islam is the state religion and about 98 percent of Jordanians are
Muslims. Jordan is classified by the WB and IMF, as a “lower middle income country”.
According to Jordan’s Department of Statistics, 13 percent (30 percent according
to unofficial estimation) of the Jordanian workforce is unemployed. Jordan has quite
an advanced health care system (World Health Statistics, 2009), education and the adult Dominance
literacy rate are very high (92 percent). Net outstanding public debt (domestic and of Western
external) increased to reach JD 9,432.8 million or 58.2 percent of estimated GDP for 2009.
Total external debt service (government and government-guaranteed) on a cash accounting
and commitment basis amounted to JD 436.2 million at the end of 2008, of which JD
291.3 million were principal payments and JD 144.9 million were interest payments
(Table I). In 2009, the overall budget deficit excluding foreign grants, amounted to 105
$1.975.26 (JD 1,410.9) million (the Ministry of Finance, Jordan, 2009).
As Table I illustrates, Jordan’s debt and foreign aid receipts are extremely large and
increasing, making the country totally reliant on foreign (predominantly Western)
financial aid and assistance.
4. Research method
In order to carry out this research, a number of senior members of the various
organizations constituting the accounting regulatory regime in Jordan were interviewed.
The primary research instrument employed was a semi-structured questionnaire,
constructed using the implied testable propositions of dependency theory/neocolonialism.
Dependency theory has two aspects. First it asserts the fact of economic dependency of
“periphery” (i.e. relatively poor, developing) countries on “core” (i.e. developed, Western)
countries, in particular former colonial powers. Second, it asserts that the “core” countries
intentionally pursue policies to keep “periphery” countries poor and dependent, in
order to continue economic exploitation of them, even after the notional granting
of “independence”.
In this research, we are not considering the second aspect of dependency theory; we
are focusing instead on the first aspect: the fact of economic dependency and whether
this provides the most cogent explanation for Jordan’s adoption of Western accounting
and relative neglect of Islamic accounting.
Consequently, the semi-structured questionnaire used for data collection was
designed to capture the requisite information concerning the testable propositions
implied by the first aspect of dependency theory. The main categories of questions asked
(reflecting the testable propositions implied by dependency theory) are shown in the
Appendix. Data collected by using this questionnaire was supplemented by documental
data (using documents and web sites of the selected case studies (organizations).
Employing multiple data collection methods or data sources facilitates triangulation,
which increases the validity of the findings ( Janesick, 1998). The combination of
different methods, including semi-structured interviews and use of documentary data,
allowed the researchers to match the interviewees’ responses with the documentary
evidence, as well as looking for any contradiction between what the researchers were
told and what was revealed by other publicly obtainable resources.
Semi-structured interviews are conducted within a fairly open framework, thus, the
questions that have to be asked are not always prepared in advance. Many of the
questions are generated during the interview, which gives both the interviewer and
the participant the flexibility to investigate and discuss further details or other issues,
unlike the structured interview, where all questions are compiled and planned ahead of
time. Nevertheless, sometimes the interviews take the form of a conversation rather than
a question and answer technique.
JIABR
Time
3,2 Total debt service External debt Official development assistance
(percentage of exports of goods, stocks, total and official aid
Series services and income) (current US$) (current US$)
1960 – – 88,290,000
106 1961 – – 91,790,000
1962 – – 81,730,000
1963 – – 82,650,000
1964 – – 75,550,000
1965 – – 68,950,000
1966 – – 73,840,000
1967 – – 53,500,000
1968 – – 45,730,000
1969 – – 48,530,000
1970 – 119,092,000 80,080,000
1971 – 153,349,000 57,300,000
1972 7 180,465,000 103,040,000
1973 8 214,802,000 188,860,000
1974 5 270,699,000 273,500,000
1975 4 342,815,000 424,220,000
1976 3 432,464,000 482,220,000
1977 5 796,334,000 368,290,000
1978 6 1,111,303,000 431,760,000
1979 8 1,417,948,000 1,299,800,000
1980 8 1,866,842,000 1,275,370,000
1981 10 2,186,349,000 1,064,470,000
1982 9 2,648,432,000 798,130,000
1983 12 3,021,412,000 786,650,000
1984 13 3,286,370,000 686,360,000
1985 17 3,943,827,000 537,270,000
1986 19 4,831,644,000 562,920,000
1987 24 6,261,594,000 576,490,000
1988 31 5,918,248,000 415,680,000
1989 20 7,316,082,000 275,460,000
1990 20 8,332,910,000 885,970,000
1991 24 9,700,260,000 938,320,000
1992 20 7,966,938,000 424,390,000
1993 15 7,644,546,000 309,480,000
1994 14 7,553,124,000 372,030,000
1995 12 7,660,562,000 539,130,000
1996 18 7,385,455,000 506,580,000
1997 16 7,313,840,000 462,380,000
1998 16 7,560,998,000 411,360,000
1999 10 8,083,091,000 432,050,000
2000 13 7,354,865,000 552,450,000
2001 11 7,534,261,000 449,020,000
2002 8 8,108,224,000 536,810,000
2003 16 8,337,366,000 1,247,760,000
2004 8 8,066,184,000 601,510,000
Table I. 2005 6 7,696,176,000 668,060,000
Jordan’s external debt 2006 6 8,000,140,000 579,980,000
and aid (continued)
Dominance
Time
Total debt service External debt Official development assistance of Western
(percentage of exports of goods, stocks, total and official aid accounting
Series services and income) (current US$) (current US$)
2007 6 8,367,733,000 504,460,000

2008 16.9 6,794,000,000 742,220,000 107
2009 18.2 9,432,800,000 780,435,000
Source: 2009 The World Bank Group, Global Development Finance Table I.
4.1 The selection of the case studies

Each country has its own accounting regulatory body, which regulates the preparation
and publishing of financial statements, according to the country’s rules and regulations.
In the UK, for instance, regulation has traditionally been based on the accounting
profession; the Accounting Standards Board (ASB), which requires use of the IFRS. This
approach is indirectly supported by the government via Company Law requiring
compliance with the rules set by the ASB. In some other countries, a government
department has the responsibility of determining accounting policy in the country. In
Jordan, the government has the responsibility of deciding accounting policy. Jordan’s
accounting regulatory regime (regulators) consists of the following:
.
Jordan Securities Commission (JSC);
.
Central Bank of Jordan (CBJ); and
.
the Insurance Commission (IC).
all of which mandate the use of IFRSs.

The researchers tried to ensure that the selected case studies would consist of all
institutions that influence accounting practices and regulations in Jordan either directly
(JSC, CBJ, etc.), or indirectly, by those governmental institutions that influence the
economic and financial policy of Jordan which in turn influences its accounting policy,
such as the Ministry of Industry and Trade, and this was the main factor that influenced
the researchers’ choice of appropriate cases. However, the researchers also ensured
taking into account the opinion of other parties that are involved in affecting accounting
in Jordan, such as universities and professional bodies (JACPA). Consequently, the
research case studies can be considered to be to some extent representative and provide
reliable information. Table II shows the profile of respondents representing the parties
determining accounting regulation, education and practice in Jordan.
4.2 Pilot study

Early on in the research, the researchers undertook two exploratory interviews as a pilot
study, prior to conducting the major empirical research (semi-structured interviews).
The process began in May 2009 when prominent accounting professors who are
members of the Applied Science University\Department of Accounting and
The Hashemite University were interviewed over the phone and face to face,
respectively.
In addition, the researchers conducted brief interviews with some members of the
Jordan Islamic bank. These interviews concentrated on whether or not Islamic banks and
JIABR
Interview
3,2 code Institution Job title/department
Aca.A.1 The Applied Science University Full professor/head of department

Aca.A.2 The Applied Science University Full professor
Aca.A.3 The Applied Science University Full professor
108 Aca.A.4 The Applied Science University Associate professor
Aca.A.5 The Applied Science University Associate professor
Aca.H.6 The Hashemite University Assistant professor/head of department
Aca.H.7 The Hashemite University Associate professor
Aca.H.10 The Hashemite University Full professor

Aca.H.11 The Hashemite University Assistant professor
Aca.H.12 The Hashemite University Full professor
Gov.MOF.1 The Ministry of Finance Senior accountant/treasury department
Gov.MOF.2 The Ministry of Finance Director/directorate of study and economic
policies
Gov.MOF.3 The Ministry of Finance Head of revenue/directorate of public revenue
Gov.MOF.4 The Ministry of Finance Senior accountant/government financial
management information system
Gov.CBJ.5 The Central Bank of Jordan Senior management
Gov.CBJ.6 The Central Bank of Jordan Executive manager/banking supervision
department
Gov.CBJ.7 The Central Bank of Jordan Executive manager/domestic payment
& banking operations department
Gov.CBJ.8 The Central Bank of Jordan Executive manager/currency issue department
Gov.MIT.9 The Ministry of Industry and Trade Senior management/finance and commercial
accounts director
Gov.MIT.10 The Ministry of Industry and Trade Executive manager/economic policy and
consultation director
Gov.MIT.11 The Ministry of Industry and Trade Executive manager/foreign trade policy and
relations
Gov.MIT.12 The Ministry of Industry and Trade Director/industrial development
Gov.JSC.13 Jordan Securities Commissions Senior management/national financial centre
Gov.JSC.14 Jordan Securities Commissions Senior management/mutual fund and
investment
Gov.JSC.15 Jordan Securities Commissions Head/Amman Stock Exchange
Ind.JACPA.1 The Jordanian Association of Chairman/the board of directors
Certified Public Accountants
Notes: Clarification: Aca. – academic case; Gov. – government case; H – The Hashemite University;
A – Applied Science University; CBJ – The Central Bank of Jordan; MOF – The Ministry of Finance;
MIT – The Ministry of Industry and Trade; JSC – The Jordan Securities Commission; JACPA – The
Jordanian Association of Certified Public Accountants; numbers (1,2,3,4,. . .11,13, etc.): are used as it
Table II. relates to the interviewee of the case studies, for instance, CBJ.5 means that the interviewee is senior
List of interviews management/from the Central Bank of Jordan
other Islamic financial institutions in Jordan need personnel that are qualified and
prepared by academic institutions to work in such institutions. The pilot study revealed
that there is a significant need for developing Islamic accounting, particularly for Islamic
financial institutions. Also, it revealed that the Islamic sector in Jordan representing
banking and insurance companies, does pay a high cost to train and teach its new
employees to work in such an Islamic system, and this difficulty could be resolved if Dominance
policymakers, accounting academics and professionals in Jordan were to take this issue of Western
more seriously.
accounting
4.3 Carrying out the main interviews
During the period of six months from August 2009 to February 2010, 28 semi-structured
interviews were conducted, lasting between one and one and a half hours each. All the 109
interviews were carried out face to face. Most of the interviews were tape recorded and all
were transcribed, translated from Arabic to English and then coded using the Nvivo-7
software package for qualitative data analysis.
Following initial contacts by telephone to determine the willingness of the
respondents to participate, a letter of introduction was provided, outlining the purposes

and objectives of the research study. In general, the researchers started the interviews by
thanking the interviewee for taking part in this study. Permission to record the
interviews was sought and received. The researchers also assured the interviewees of
complete confidentiality and that no single identity would be identified if they so wished;
however, the organizations whose members were interviewed were identified. All the
interviews were carried out in the offices of the interviewees.
At the end of the interviews, most of the interviewees asked the researchers about the
possibility of providing them with the results of the study, which the researchers were
very happy to do. The researchers ended the interviews by asking the interviewees if
there was anything they wanted to discuss, or if there was any document which would
enhance the validity and reliability of the data and later the research findings, as well as
asking them whether they accepted the idea of being sent texts of their interviews to
check whether or not the researchers had correctly understood their point of view. The
interviews were concluded by the researchers expressing appreciation and thanking the
interviewees for their help.
Besides conducting interviews, a review of relevant documents and official web sites
of the institutions involved was also undertaken in order to provide triangulation and
thereby increase the validity of the findings. The results of the interviews were analyzed
using Nvivo software in order to identify any patterns emerging both within and across
cases.
4.4 Data management and the analysis process

According to a number of influential qualitative researchers (Miles and Huberman, 1994;
Yin, 1994), data management and qualitative analysis are based on three elements:
(1) data reduction;
(2) data display; and
(3) conclusion drawing/verification.
Naturally, after finishing any empirical field study, a large amount of data will have been
obtained. This fact made it necessary for the researchers to be well organized in dealing
with the data obtained, in order to keep track of the data and make it easier and more
manageable to work with. This was the first step in the data analysis. The transcription
and initial analysis of the interview data was carried out directly after each interview,
which allowed the researchers to engage with the data provided by the respondents, link
that to other documental data obtained from different sources and, importantly,
JIABR enhance the ability of the researchers to concentrate on some issues that needed more
3,2 clarification in the next interviews, which would fill the gaps and resolve any
ambiguities that might be found in the data collected previously.
A significant step in data reduction after the transcription stage was to code the data.
Miles and Huberman (1994, p. 58) recommend the following:
One method of creating codes – the one we prefer – is that of creating a provisional “start list”
110 of codes prior to fieldwork. That list comes from the conceptual framework, list of
research questions, hypotheses, problem areas, and/or key variables that the researcher brings
to the study.
The interview transcripts and documentary data were analysed using a qualitative
analysis method of coding and re-coding using the Nvivo 7 software package.
A deductive analytical approach using the dependency theory framework generated a
set of codes and helped in the identification of themes/important ideas from the data.
A relevant theory is one whose (predicted) categories fit or come to match the data
which can be employed to clarify, predict, and interpret what is going on (Glaser, 1978;
Yin, 1994).
4.5 Within-case analysis and cross-case analysis approaches

The main aim of this study was to gain a deeper understanding of the particular situation
in Jordan rather than statistical generalisation. Thus, the researchers investigated and
analysed each case very deeply, using an iterative procedure of reading, coding and
noting of patterns and themes. For instance, the transcription texts and documental data
that emerged from the CBJ were examined against the testable categories implied by the
dependency theory framework, in order to understand what was being revealed, as well
as to evaluate the compatibility between the data and the categories of the theoretical
framework. This has been applied to all case studies, of course, using the Nvivo 7 software
(Figure 1).
After examining each case against the theoretical framework, the
primary conclusions were drawn. The second strategy of the research analysis was
begun using cross-case analysis. In the cross-case analysis process, there is a need for
comparable data using common codes, common pattern codes, and common display
formats (reporting formats) for each case, as suggested by Miles and Huberman (1994).
Thus, the result of each within-case analysis was compared to the results of other
cases, to look for comparable and common themes and ideas that cut across cases. “In
cross-case studies, replication is an important part of the basic data collection effort.
Emerging patterns from one case need to be tested in others” (Miles and Huberman,
1994, p. 274).
This sort of analysis, which combines a replication strategy (case-oriented strategy),
that uses the theoretical framework to study each case in depth, and a variable-oriented
strategy, that aims to look for similarities and differences between results, is called
“Mixed strategies” (Miles and Huberman, 1994). These processes can be applied
straightforwardly using Nvivo 7.
5. The empirical findings

The research findings were analysed with respect to their conformity to the competing
possible explanations for the situation in Jordan. This analysis revealed the following.
Dominance
of Western
accounting
111
Figure 1.
Strategies of the research
analysis process
Note: n is the number of case studies
5.1 Ignorance of alternative approaches/isomorphic processes (i.e. copying others due to

uncertainty)
Our empirical findings suggest that all respondents were aware that alternative
approaches were available, including Islamic accounting:
It would be nice if we had our own accounting system, but this is a very difficult task, particularly
for the developing nations with restricted resources and experience (Aca.H.8).
In fact, a number of respondents were sympathetic to the need for an alternative
accounting:
In my opinion, the western accounting approach does not suit our values and society. I mean,
accounting is a social science; it was created to serve societies. But the question is, is the
accounting we use serving our communities? I don’t think so. From my point of view, it has
been applied to suit the capitalist people and economy, to serve a few groups and the new
open economy not the whole community. Thus, we cannot say that accounting in Jordan is
appropriate for general Muslims, it is appropriate for those who believe in the capitalist ideas,
and who concentrate on how to maximise their wealth (Aca.A.3).
We would expect to find accounting that fits the nature of the economy or business which it
represents. Thus, in Jordan, how can you expect to find Islamic accounting or accounting
that’s based on Islamic principles either in the academic, professional and government field
while our economy is reflecting the philosophy of capitalism, not because of our choice but
JIABR because we found ourselves in this situation as a result of various historical, economic and
political reasons (Aca.H.9).
3,2
None of the respondents suggested that adoption of IFRS was due to copying others as a
result of uncertainty. There was no evidence of IFRS adoption in Jordan being the
outcome of the sort of isomorphic processes suggested in the NIS literature.
112 5.2 Minimisation of cost of capital
Not a single respondent mentioned the possible advantages to Jordan’s companies of a
reduced cost of capital resulting from their adoption of IFRS. This possible explanation
can, therefore, seemingly be discounted.
5.3 Rational choice theory

A couple of respondents mentioned the cost-benefit calculus argument:
If we want to create a new accounting system, Jordanian or Islamic accounting no matter
what you call it, there are a lot of barriers and difficulties. Who will bear the very high cost of
this task, taking into account the limited financial resources, who will design it? Promote it?
And approve it? And how can we convince everyone, such as the foreign investors and
donors, that this is the appropriate system? And how can we deal with other parties whose
help and assistance we need, while we are using different systems or principles!! It would be
nice if we had our own accounting system, but this is a very difficult task, particularly for the
developing nations with restricted resources and experience (Aca.H.8).
The adoption of western accounting is to save cost and efforts that should be spent in order to
develop Jordan’s own accounting system, considering the limited financial resources and poor
economy of Jordan. This application of IASs (i.e. IFRS) will benefit the Jordanian economy and
people in general, by making Jordan’s economic and financial system more reliable and
attractive. It will enhance the integration of Jordan into the global economy and encourage the
international financial institutions/donors to provide Jordan with the required fund[s] and
assistance (Gov.MOF.4).
This case (interview) appears to be very limited in support of the economic dependency
argument, by apparently emphasising the cost-benefit calculus argument. However, this
interview produced a clear contradiction and inconsistency. In the beginning the interviewee
denied the impact of international aid and the donors on accounting policy, but later, the
respondent stated that the adoption of a Western accounting approach would help Jordan to
get international loans/aid; he said: “this application will [. . .] encourage the international
financial institutions/donors to provide Jordan with the required fund[s] and assistance”.
Moreover, the rational choice theory, or cost-benefit calculus argument, presumes
that individuals have a certain amount of freedom to choose/decide a particular course of
action. The question is, was this the case when Jordan adopted a Western accounting
approach? Had the policymakers who are responsible for setting accounting policy in
Jordan, a freedom/alternative to choose/decide which sort of accounting should be
adopted and would reflect Jordan’s economy and needs? According to the research
evidence, the accounting and financial system in Jordan had been formulated by British
colonisers, and this still affects the essence of current Jordanian accounting policy. This
means that policymakers did not decide to choose which accounting should be put into
practice as they had no freedom to do so. Therefore, this case has not provided
a convincing argument or a strong explanation in support of any one of the competing
explanations of the situation in Jordan, identified earlier in this paper.
5.4 Economic dependency Dominance
The findings from these case studies indicated predominantly that the most significant of Western
factor influencing accounting regulators in their mandating of IFRS was economic
dependency on the west. All respondents confirmed the need to employ an accounting accounting
and financial system that is acceptable to donor countries and their agencies (the WB,
IMF, WTO and USAID). These organizations all require adoption of IFRS as a condition
of aid/assistance. All respondents (except as indicated above, Gov. MoF.4, which was 113
contradictory) insisted that this was by far the most important factor influencing
accounting policy in Jordan:
“Jordan in hard economic circumstances has no choice but to ask international institutions and
developed nations for their assistance and help (loans and aid), which in turn, means that they
impose different obligations and conditions to be satisfied by Jordan, such as the adoption of
IAS, privatization, global economic policy, etc. Jordan has no choice but to accept these policies
to get the necessary funding”. He added “as I said, we are an economically weak country; we
need foreign funding and loans, so we have to accept the conditions of powerful parties and
their policies” (Aca.A.5).
In general, to get foreign aid and required funding, Jordan does need to adopt the financial and
economic approaches of international financial institutions and donors, to convince the global
economy and international parties of the reliability of its financial and economic policy, thus,
Jordan has adopted the IAS as its accounting system in addition to other international policies
which already have been developed and employed by those developed states and donor parties
(Gov.JSC.13).
Jordan is a heavy beneficiary of foreign aid and dependent on it to cover, for instance,
governmental budget deficits. This crucial need forced Jordan to meet the international
requirements of the international organizations and countries. Thus, Jordan must correspond
with and adopt different international policies and criteria, in order to encourage the donors to
help Jordan through financial aid and assistance. For instance, the World Bank and
International Monetary Fund have required all their members and those countries that asked
them for assistance to adopt the International Accounting System besides many other
obligations (Gov.MOF.2).
Jordan, like many developing poor nations, has to obey the international institutions, such
as the WB, IMF and WTO, and adopt a number of strategies to accomplish its commitment
towards these global organizations, to get the necessary funds and to follow its dream of
improving and developing the Jordanian economy and people’s lives (Aca.H.12).
As the above quotes indicate, the provision of assistance and aid given by
international institutions to the less developed nations relies on the willingness of
these countries to undertake various social, cultural, economic and political changes. In
1999, the WB and IMF instigated the mutual “Reports of the Observance of Standards
and Codes” initiative. This covers 12 areas and associated standards that need to be
adopted by countries receiving aid, including the area of “Accounting and Auditing”.
This mandates the adoption of the IASB’s accounting standards’ and the International
Federation of Accountants’ International “Standards on Auditing”. The WTO also
“encourages” the adoption of IFRS (1996). Effectively, the WTO works with the WB and
IMF to enforce adoption of IFRS by its members:
Different organizations and institutions, such as the IMF, WB, WTO and USAID, have played
a significant financial and technical role in deepening and enhancing Jordan’s adoption of
JIABR international economic and financial policies. Normally, for example, the IMF and WB send
some groups to member states, to review, monitor and observe their financial and accounting
3,2 system and annual economic developments (Gov.CBJ.7).
Thus, Jordan has been guided by various international institutions that work
complementarily, in reforming its economic, legal and financial system to suit the plans
and agendas of a global economy. For instance, Jordan is obliged to integrate the arena
114 of the global economy and open market and adopt the structural-adjustment program
(SAP) specified by the IMF and WB. This has a great impact on the way accounting is
regulated and operated in Jordan:
In Jordan, the World Bank is concerned with reforming the public sector. Thus, the Public
Sector Reform Loan II (PSRL II) has been designed by the World Bank, which specified a
significant amount of its financial assistance, which concentrated on programming and
budget preparation, civil service and administrative reform, expenditure and judicial reform
(Gov.JSC.14).
To fully and properly implement privatization and the policy of an open economy, and
guarantee its accomplishment, Jordan renovated and created different laws and regulations,
such as the 1997 Company Law, the 2002 Securities Law and established three institutions
( Jordan Securities Commission, the Amman Stock Exchange, and the Securities Depository
Commission) which are responsible for several tasks, one of them being the setting and
enforcing of accounting regulations, which in turn has led fully to the adoption of the
International Accounting Standards (Gov.JSC.13).
Furthermore, USAID has assisted the Government of Jordan to satisfy the
requirements of the WTO, US-Jordan FTA and foreign investments, through[1]:
.
assisting with the reform of laws, policies, and institutions to fully support the
objectives of Jordan’s membership in the WTO and its trade agreement with the
USA;
. providing technical assistance and training to the GOJ, particularly the Central
Bank, Ministry of Finance, and trade and investment institutions, to meet market
and framework demands;
.
creating new laws and institutions that can provide efficient and effective public
services for investors;
.
encouraging the continued development of laws, policies, and institutions that
are responsive to private sector issues, particularly those of the financial and
capital markets;
. providing technical assistance and training to support GOJ efforts to modernize
its infrastructure and service efficiency;
.
working with key financial and capital market institutions to introduce more
advanced financial instruments to the market, including tradable mortgages,
securitization tools, various securities mechanisms (e.g. mutual funds, futures,
swaps), and tradable debt portfolios;
.
developing strong systems for financial market regulation, including
(anti-)money laundering; and
. maintaining support for the GOJ’s Executive Privatization Unit’s efforts to
privatize state-owned companies.
In summary, the adoption and persistence of a Western accounting approach (and Dominance
specifically IFRS), and the failure to detect a significant impact of Islam on accounting of Western
practices/education in Jordan, even after independence, is a consequence of Jordan’s
dependency relationship with Western capitalist countries, and Jordan’s integration into accounting
the global economy, in the interests of those capitalist countries. Jordan’s significant
need for international aid and loans has been exploited by developed Western nations
and their agencies to compel Jordan to integrate into the global economy and adopt/fulfill 115
different international policies/obligations, such as the policy of open economy,
privatization and so on as a strategy for serving/securing the capitalist and geopolitical
interests of Western capitalist nations. This has been achieved by various mechanisms
(the “stick and carrot” strategy) such as international aid, loans, trade agreements, debt
amnesty, open economy and foreign investment, which are created and developed by
Western nations as part of their geopolitical and capitalist exploitation and interests:
Jordan has adopted or rather has been compelled to apply different economic and political
changes as a result of the insistence of international organizations, such as the World Bank
and the International Monetary Fund on furthering and demanding the use of such policies.
These policies have done more damage to our society instead of enhancing and developing its
circumstances. From my point of view, if developing countries, such as our country, had
developed their own programmes and policies depending on their national circumstances,
I think the result would be much better than now, and ensure we would have kept our dignity
and freedom, which we have lost owing to international institutions (Aca.A.4).
The WB, IMF, WTO, etc. have been founded to serve the interests of specific capitalist
groups, to draw the world economy into becoming a promoter of some countries to the
disadvantage of others. This fact has contributed to controlling the choices and capacities of
Jordan and limiting its alternatives for developing or adopting the relevant accounting and
economic policy that reflects the values of Muslims in this country (Aca.A.4).
Jordan’s forced integration into the global economy has influenced accounting policy in
Jordan in two ways:
(1) Directly: the adoption of Western accounting is considered an important step to
accomplish Jordan’s integration into the global economy and satisfy the
requirements of the international financial institutions such as the WB, IMF, WTO,
MNCs and dominant partners (such as the USA).
(2) Indirectly, Jordan is still unable to develop or adopt its own economic and
accounting policy that reflects the indigenous values and demands of Jordanian
people, as a result of the negative outcomes of this integration, which has
strengthened Jordan’s dependency on the Western agencies, and impacted
negatively on its economic and financial circumstances. Jordan’s economy and its
limited natural resources are now under the control of Western multinational
corporations and international financial institutions. As a result, accounting and
economic policies in Jordan symbolize the values and principles of the capitalist
system and the objectives of dominant nations and their agencies.
5.5 Colonial legacy

All respondents in both the governmental and academic case studies agreed that
the origin of the dominance of Western accounting in Jordan is to be found in the
colonialism era:
JIABR Talking about accounting in Jordan is the same as talking about accounting in the Arab Middle
Eastern countries that shared the same history and circumstances. Jordan, like many other
3,2 developing and Islamic countries, was under the control of western colonial powers. Those
colonizers did employ their accounting approach in their colonies, which affected and influenced
accounting in these nations, and even after independence, the colonial experience still affects the
accounting system and other systems such as economy and politics (Gov.MIT.9).
116 The long-lasting Western colonial control and power in the region has formed accounting
systems in this area as well as the financial system and company law. Nowadays, the
accounting system in these countries still continues to represent and symbolize western
accounting values and principles. On the other hand, colonial history and its impact on
Jordan, as well as other developing countries, has formulated the type of politics, economy,
education, etc. (even after independence) which also participated in strengthening the
domination and superiority of western accounting in these regions, up to today, and restricted
the opportunity of Jordan and other developing countries to develop their own accounting
system that suits and represents their cultural, economic and social values (Aca.H.9).
6. Conclusions and future research directions

The empirical findings of this research suggest that the adoption and persistence of a
Western accounting approach and the failure to detect a significant impact of Islam on
accounting (professional or academic) in Jordan is a consequence of Jordan’s integration
into the international capitalist economic system, which has been enforced by Western
countries and their agencies (the WB, IMF, WTO and USAID).
The fact of economic dependency on the west has forced Jordan, or rather has left
Jordan with no alternative but to take certain steps (such as an open economy, free trade,
privatization and foreign investment) favorable to the interests of international financial
institutions, such as the IMF, WB, WTO and multinational corporations, even if these
steps are not appropriate for Jordan’s culture and values, economy and environment. As
a result, Jordan is still unable to develop or adopt its own economic and accounting policy
that reflects the indigenous values and demands of Jordanian people. On the contrary,
Jordan’s economic and accounting policy is reflecting and meeting the demands and
priorities of the agencies of Western developed nations.
This study, although providing valuable insights, has of course its limitations. One
significant limitation is the uncertainty concerning the extent to which the views
expressed by the respondents in interviews, are representative of the accounting
regulators in Jordan as a whole. Another is an inevitable degree of subjectivity in
interpreting the findings, particularly with respect to evaluating the relative impact of
economic dependency and other factors (for example the cost-benefit calculus) on
accounting policy in Jordan.
There are several areas for future research that are suggested by the current study.
First, it would be interesting to investigate further the mindsets of those people who
influence the accounting system in Jordan, such as the respondents of the government
and academic case studies, regarding their enthusiasm or apathy towards the adoption
of Islamic accounting. This could contribute to an exploration of potential prospects for
and barriers to developing Islamic accounting professionally and academically.
Second, it could be beneficial to investigate the possible impact of the adoption of
Islamic accounting, economy and financial products such as Islamic bonds, mudarabah,
murabaha, musharakah, on Jordan’s economic performance, by comparing the results of
the adoption of a conventional approach and an Islamic one. This future study may
advance and encourage the attempts to develop Islamic accounting in particular and the Dominance
economy in general. of Western
Third, the case findings indicate that economic dependency on the west is the most
significant factor determining accounting in Jordan and thereby provide a platform for a accounting
future research agenda. Using the research design employed by this study, replication
and extension of the findings may be sought in other developing countries as part of the
process of theory development. 117
As a matter of fact, Jordan’s economic situation has deteriorated, rather than
improved, during the period during which the Western demands concerning economy
and accounting have been implemented. Is this evidence of a cause and effect relationship
and hence evidence of a deliberate policy by Western countries to keep developing
countries poor in order to continue, post independence, economic exploitation of

these countries? Future research could explore whether neocolonialism/dependency
theory can explain the current situation in Jordan.
Note
1. USAID/Jordan Strategy 2004-2009: USAID Mission to the Hashemite Kingdom of Jordan
Strategic Direction of the US Foreign Assistance Program Gateway to the Future 2004-2009.
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120 Appendix. The interview guide

The main issues to be discussed:
(1) The economic and historical aspects, as well as the importance of Jordan’s geographical
location in the Middle East to the core countries.
(2) The extent of Jordan’s dependency on international financial institutions, such as the
World Bank and IMF ( Jordan’s relationship with the agencies of dependency).
(3) The extent of Jordan’s dependency on and relationship with imperialist countries such as
the USA in different aspects, such as financial aid and technological assistance ( Jordan’s
relationship with developed countries).
(4) The impact of Jordan’s integration into the global economy on the economic and financial
policies and affairs of Jordan, mainly their impact on accounting practices. This can be
investigated by looking at:
.
Jordan’s economy, financial and accounting obligations and duties towards IFIs and
the global economy and the results of these commitments, for example, issuing
specific laws or regulations regarding the adoption of international accounting
standards, privatization, investment regulations, financial liberalization and trade
liberalization.
.
The methodology, process or projects of these institutions (WB, IMF, WTO) to
monitor and assess the compliance of Jordan with their (WB, IMF, etc.) criteria or
requirements, for instance, the Report on the Observance of Standards and Codes
(ROSC).
(5) Exploring the potentiality for and obstacles to developing or adopting Islamic
accounting into the accounting system in Jordan (professionally, academically and in the
government).
Corresponding author
Mike Lucas can be contacted at: m.r.lucas@open.ac.uk
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Islamic Accounting

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Islamic Accounting

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Journal of Islamic Accounting and Business Research

Understanding the dominance of Western accounting and neglect of Islamic accounting

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Mutah University, Mutah, Jordan, and

everyday life, such as Muslim societies in Islamic countries.

for the current study.

investors confidence to invest in the country.

3. The Jordanian context

2007 6 8,367,733,000 504,460,000

4.1 The selection of the case studies

all of which mandate the use of IFRSs.

4.2 Pilot study

Aca.A.1 The Applied Science University Full professor/head of department

Aca.H.10 The Hashemite University Full professor

respondents to participate, a letter of introduction was provided, outlining the purposes

4.4 Data management and the analysis process

4.5 Within-case analysis and cross-case analysis approaches

5. The empirical findings

5.1 Ignorance of alternative approaches/isomorphic processes (i.e. copying others due to

5.3 Rational choice theory

5.5 Colonial legacy

6. Conclusions and future research directions

countries poor in order to continue, post independence, economic exploitation of

Readings in US Imperialism, Porter Sargent, Boston, MA.

Accounting Review, Vol. 43, No. 3, pp. 249-50.

120 Appendix. The interview guide

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