Prem Yapa La Trobe University School of Business Victoria Australia

Accepted for Presentation at the Fourth Asia Pacific Interdisciplinary Research in Accounting Conference 4 to 6 July 2004 Singapore



ABSTRACT The ASEAN accountancy profession cannot be held to responsible for the twisting downturn of economies in South East Asia. This has been partly attributed to the inadequacy of local financial infrastructures and supervisory procedures. But the crisis has nevertheless brought the role of the ASEAN accountancy profession and the ASEAN Federation of Accountants (AFA) into severe criticism. Since 1977 the AFA has been the main proponent of regional accounting harmonisation in the ASEAN. After two and a half decades of AFA’s existence and largely unproductive debate on regional harmonisation, there is a growing recognition of the urgency of enforcing a global accounting model to ensure that the financial information upon which investors and other stakeholders base their decisions is transparent, comprehensive, reliable, consistent and internationally comparable. The major argument is whether each member of ASEAN should be aligned with a regional or global model of financial reporting. This paper attempts to review the development of the professional accounting environment in ASEAN Federation of Accountants (AFA) over last 25 years using the process of colonialism and globalisation perspective.


In Section 4 data collection for the study has been 1ASEAN was formed in 8. In section 3 analytical framework has been explained. Information and money flow more quickly than ever. Yapa. and often markets. Cruz. the professional accounting practices of the ASEAN countries assume significance because they relate to the needs of investors and creditors for adequately prepared financial statements and reports particularly with regard to the overall extent and quality of financial disclosures. Brunei Darussalam joined on 8 January 1984. Saudagaran and Diga. importance in general and then identified the research question.about. Section 2 provides a profile of AFA and its existence.globalization. 1999. 2000. 1997b. 2 People around the globe are more connected to each other than ever before. In this regard the ASEAN Federation of Accountants (AFA) plays an important role in coordinating such efforts. namely Indonesia. especially the belief that the mores of the colonizer are superior to those of the colonized. labor. Vietnam on 28 July 1995. 1993. August 1967 in Bangkok by the five original member countries. Advocates of colonialism argue that colonial rule benefits the colonized by developing the economic and political infrastructure necessary for modernization and democracy (Wikipedia. 1977). 2000. International communication is commonplace. A growing body of literature has examined various aspects of the accounting systems and their implications for ASEAN (Briston 1990. The term also refers to a set of beliefs used to legitimize or promote this system. 1977. The federation originally intended to provide technical services to its member bodies in the formulation and adoption of accounting and auditing standards and practices with the end view of establishing an ASEAN philosophy for the accounting profession (AFA. 2003). the Philippines. the free encyclopedia). often to facilitate economic domination over their resources. The remainder of this paper is organised as follows. This phenomenon has been titled "globalization"(www. Malaysia. 2003). Against such a background. However. The AFA was set up in 1977 as the sole promoter of accounting harmonisation in ASEAN. 2003. 3 3 . Goods and services produced in one part of the world are increasingly available in all parts of the world. Saudagaran and Diga. 1996. this paper attempts to review the development of the professional accounting environment in AFA using a colonialism2 and globalization3 theory perspective. The ASEAN nations are also being assisted in their financial needs by major development financing institutions such as World Bank and the Asian Development Bank.ASEAN FEDERATION OF ACCOUNTATNS (AFA): REGIONAL HARMONIZATION IN ACCOUNTING IINTRODUCTION ASEAN1 has achieved a satisfactory level of economic progress as a region and has attracted a growing number of investors from many countries (AFA. the AFA council has recently decided to encourage its members to go for harmonisation of standards and global practices based on issuances of the International Accounting Standards Board (IASB) and the International Federation of Accountants (IFAC). International travel is more frequent. Laos and Myanmar on 23 July 1997 and Cambodia on 30 April 1999. 1997a. Craig and Diga. one aspect that has not received adequate attention is the ASEAN national accounting associations/bodies and their national differences which influenced on regional harmonisation efforts of AFA. Singapore and Thailand. However. Colonialism is a system in which a state claims sovereignty over territory and people outside its own boundaries. Consequently. with the on going globalisation of services and the aftermath of East Asian financial crisis in 1997-98. Yasuda 1993.

The ASEAN region has a population of about 500 million. The Philippine Institute of Certified Public Accountants (PICPA).5 million square kilometers. a total area of 4. 8 Now CPAA 5 4 4 . indispensable reality in the region. It is also a trusted partner of the United Nations in the field of development” (16 Feb 2000). secure for their peoples and for posterity the blessings of peace. and prosperity (The ASEAN Declaration.Laos Institute of Certified Public Accountants (LICPA).htm 6 Primary member accounting bodies are: Brunei Darussalam Institute of Certified Public Accountants (BICPA).Fact Sheet on ASEAN4). Vietnam Accounting Association (VAA).org/history/overview. ASEAN is not only a well functioning. There are two kinds of AFA members. In With the establishment of ASEAN its declaration stated the aims and purposes of the association as follows: “The association represents the collective will of the nations of Southeast Asia to bind themselves together in friendship and cooperation and. 7 Myanmar Accountancy Council (MAC). Bangkok. In 1999. 2000:2003. Primary members are the national organization of accounting professionals representing ASEAN member countries. It was established to serve as the umbrella organization for the national associations of accounting professionals of the member countries of the Association of South East Asian Nations (ASEAN). Still outside AFA is the accounting association of Cambodia. the first associate member was admitted into the Federation-the Australian Society of CPAs (ASCPA)8 followed by Association of Certified http://www. Ikatan Akuntan Indonesia (IAI). and a total trade of US $720 billions (Fact sheet on ASEAN. the Philippines. 2003). Finally. a combined gross domestic product of US $ 737 billion. A PROFILE OF THE ASEAN FEDERATION OF ACCOUNTANTS (AFA) Over the last decade. Malaysian Institute of Accountants (MIA).aseansec. In the recent past AFA admitted the national accountancy bodies of Vietnam and Myanmar7. Yapa 1999. AFA originally had only five member bodies. The Brunei Institute of CPAs (BICPA) was admitted into the Federation.htm http://www. through joint efforts and sacrifices. These were the national accountancy bodies of Indonesia. Associate members are internationally recognized accounting organizations of countries outside South East Asia. Malaysia. it is a real force to be reckoned with far beyond the region. Singapore and Thailand6. 1996.aseansec. Saudagaran and Diga.Institute of Certified Public Accountants of Singapore (ICPAS). 1977. 20005).described. freedom. a growing number of studies addressed the accounting profession and financial reporting in ASEAN countries (Craig and Diga. 8 August 1967 . which are friendly to ASEAN. Malaysian Association of Certified Public Accountants (MACPA). Section 6 concludes the paper.Institute of Certified Accountants and Auditors of Thailand (ICAAT). The Secretary General of the United Nations stated the importance of ASEAN to the rest of the world as follows: Today. The ASEAN Federation of Accountants (AFA) was set up in March. In Section 5 discusses the issues emerged from the study.

on a comprehensive survey of accounting and auditing practices in ASEAN.1 provided a suitable yardstick against which to compare accounting standards and practices in ASEAN. AFA’s impact on regional accounting harmonization had been demoralized and slowed down (Donleavy.Fundamental Accounting Principles . CAPS would have issued more ASEAN accounting standards focusing on regional harmonization. revealed a wide range of accounting standards and practices existing in ASEAN (SGV. As a result of CAPS.1. We will thus be complementing the efforts of the ASEAN private and government sectors in the economic development of the region (SyCip.1. This inclination of colonial influence gave rise to national accounting professional associations of most ASEAN countries partiality towards the colonial master. According to the report of SGV survey two groups of accounting practices appeared in ASEAN region. Thailand and Indonesia apparently supported U. there have been no substantial differences existed between local accounting standards of ASEAN national institutions and AAS No.Chartered Accountants (ACCA) of the U. This has happened mainly due to the absence of a specific statute or regulation in the case of Malaysia. The Chairperson of the International Federation of Accountants (IFA) at the time of setting up of AFA stated that: “The formation of an ASEAN accountant’s organization…. For example. 9 5 .S accounting practices and the other group mainly Malaysia. as an outcome of this survey. they did not pursue it mainly due to colonial influences and pressures placed by national accounting bodies of ASEAN. Therefore. The Mongolian Institute of Certified Public Accountants was admitted to AFA as an associate member in 2000.e. but also because it was perceived to be more convenient with the regulatory system of their governments. a survey of accounting principles and practices in the ASEAN was conducted and. not only because of their colonial link. 1978(a). one member per country except for Malaysia9. However. 1984).was issued (ASEAN Federation of Accountants. 1977)”. The apparent reason for this practice in ASEAN countries is that they have adopted legal and micro-economic approach with regard to financial reporting practices and regulations. This partiality AFA primary members must have been created under a specific statute or regulation.. among ASEAN members Malaysia is represented by both Malaysian Institute of Accountants (MIA-a government body) and the Malaysian Association of Certified Public Accountants (MACPA. an exposure draft called ASEAN Accounting Standards (AAS) No. As evidenced. 1992). The role of this committee was to undertake programs to develop accounting principles and auditing standards suitable for the conditions in ASEAN. In 1984.K.K. (b)) This exposure draft and AAS No.a private sector body). Although. In this context many researchers have argued that most developing countries including ASEAN have adopted legislation of the colonial powers without due regard to their local conditions even after their political and economic independence (Briston 1978). One group of ASEAN members such as the Philippines. one of the prominent committees set up by AFA in 1978 was the Committee on Accounting Principles and Standards (CAPS). 1991). will make it easier to harmonize the accounting principles and practices in the region. Regional accounting harmonization was an important objective for setting up of AFA (Kondo. Regional harmonization of accounting standards within ASEAN was encouraged through various committees of AFA ever since its inception. Singapore and Brunei adopted practice in the U. Primary membership in the Federation is by country – i.

It is reflected in groups that come together. ANALYTICAL FRAMEWORK The professional accounting model emerged in Scotland in 1853 and it spread to England during the 1870’s and extended up to Ireland during the 1880’s (Stacey. were developed under the direct control of such colonial powers. 1986. the law enforcement. and there was a familial structure in the industrial and in the financial sector just as there was in the ordinary sector (Wolfensohn. 1953). trade and investment in these countries were set up by British. James D. There was little disclosure. Wolfensohn. 1978. consistent and internationally comparable. Almost all developing countries that were British colonies for a considerable length of time inherited the British accounting system (Briston.3). whether the ‘colonising’ power was Britain or the USA). Kedslie. the users of accounting information did not receive the early warning signals about deteriorating financial conditions and were therefore not able to make adjustments accordingly. There were centres of power. 1998. During the past. It seems that. 1990: Walker. cited incomplete financial information. inappropriate accounting standards and inconsistent application of those standards as factors contributing to the seriousness of the crisis or to the delay in identifying and responding to it. Since the crisis AFA has been hampered by the swamping of regional ‘forces’ by global or international forces. In the early years of the colonial period. This is the motivation of this study. as a result of the lack of proper disclosure in the accounting reports of Asian enterprises. 1998). 1995). Wijewardena and Yapa. comprehensive. summarised disclosure problems as follows: “The culture in the region has not been one of disclosure. Dutch and U. government administration as well as the education and training in ASEAN. 6 . These forces cannot be ignored in AFA’s pursuit of regional harmony. It was an agrarian society with a lot of people in the country and some significant factors of power. reliable. Consequently. Analytical framework on the relevance of global accounting standards to developing countries. investors. The British accounting model was exported to the settler colonies of the British Empire (Robinson and Gallagher. Before the 1977 Asian financial crisis AFA’s coordination efforts were hampered by ‘national’ differences reflecting differences in colonial history (i. many developing countries including the Association of South East Asian Nations (ASEAN) have shown significant economic and political effect from the British or U. p.S colonial influences. is explored in the next section. The East Asian financial crisis in 1977-78 also raised questions about the quality of accounting and auditing in the affected countries. President of World Bank. while analysing the causes of the Asian financial crisis.e.towards colonial powers gave a significant influence over AFA’s non-implementation of ASEAN accounting standards (AASs). 1954. Hove. lack of transparency. if you go back further it was a culture of a smallish number of wealthy people. This paper aims to explain as to why AFA has failed in convincing ASEAN policy makers to focus on regional harmonisation. It is reflected in the chaebols. Following from this view and the critics of the accounting and auditing profession. there seems to be a growing recognition of the urgency of enforcing a core set of globally recognised standards to ensure that the information upon which investors and other stakeholders base their decisions is transparent. in general terms. Therefore..S.

. the securities markets of various countries are becoming integrated into a global system through cross-border transactions and listings and the increase in the number of multinational fund managers. For example. In this context. when the problems of a few countries subsequently spread to many others. As a result. many of the amendments that have been made in the Netherlands since 1848 were not incorporated in the Commercial Code in Indonesia. Singapore) was mainly influenced by Britain and non-British group (mainly the Philippines. reflecting its important trading links with these major economic powers during the late 1800s and early l900s (Maolanond & Yasuda. 1971. The experience of the Asian currency crisis of 1997-98. 1990). Globalisation can be defined in various ways (Higgott and Reich. a new Companies law was introduced in 1995 to take effect from 1996 (Samidjo. Brunei. b). the International Accounting Standards Board (IASB) has played a leading role in the development of International Accounting Standards (IAS). Briston. Yasuda. Price Waterhouse. In this context.Some British accounting bodies set up examination centres in a few major cities in developing countries allowing local people to obtain British professional accounting qualifications while working in their own countries (Johnson and Caygill.S. Under this system. have each adopted a Companies Act modelled on the U.S.K. Malaysia. 1990. Accordingly. Companies Act 1948 and the Australian Uniform Companies Act 1961 (Pillai. the tremendous growth of information technology and telecommunications has resulted in increasing globalisation of business activities. 1991. It is basically the international integration of production and markets. 1848. and (4) A mixed-country approach (adopted by Thailand) (Craig & Diga. 1973). British group (Brunei. The instant availability of information on movements in stock markets has caused investment decisions to shift on a global basis. (3) A U. 1972 a. the Companies Act of Singapore has undergone considerable changes since first enacted in 1967 (CCH. Indonesian Commercial Code. 1985. 1985. when a major correction in the American market almost immediately affected other markets around the world (Smith. approach (adopted by the Philippines). Malaysia and Singapore). Thailand and Indonesia) was influenced by U. it is obvious that accounting practice in ASEAN has been structured based on the corporate legal environment created by the colonial powers during their administration without due regard to local needs and conditions. Japan. As Nobes (1994) points out harmonisation is the process of increasing the consistency and comparability of accounts in order to remove the barriers to the international movement of capital and exchange of information by reducing the differences in accounting 7 . The key feature that underlies the concept of globalisation is the erosion and irrelevance of national boundaries in markets. The rapid expansion of cross-border trading and takeovers has effectively effaced state boundaries. 1993). However. Over the last few decades. 1992a. therefore. Malaysia. obvious that company laws in ASEAN have been affected strongly by each country’s former colonial links despite the appropriateness of such legislation to its environment. 1996). Unfortunately. The ISAB has played the primary leadership role in the push for harmonisation of global accounting rules. further signifies the global character of the financial markets. the comparative analysis of national corporate and companies laws within ASEAN suggests four patterns of development: (1) A British approach (adopted by Brunei. It is. However. and Singapore (all former British colonies). law is codified. With this backdrop. 1990). the Netherlands and Germany. The meaning of globalisation of the securities markets was highlighted. 1998). 1984. Indonesia was operating an out of date commercial code adopted in the nineteenth century that is incompatible with today’s commercial environment. and company legislation prescribes rules in detail for accounting and financial reporting. 1997). (2) A Dutch approach (adopted by Indonesia). Diga & Yunus. was patterned on the early Dutch Commercial Code with some minor amendments. b.

S and argued that this was by no means coincidental given the strong dominance of both the U. The most crucial problem is the inappropriate solutions suggested to developing countries by developed nations (Wallace and Briston. p. 1990. Application of IAS without any modifications as national standards in South East Asian countries has been criticised in some of the empirical investigations (Wallace. Perera. Larson and Kenny. Hoarau. some studies conducted in former communist economies have criticised the roles of the Western accounting standards concerning the adoption process of the IASs (Hassan. Apart from the Western countries. 2003. 1990. Whereas. it has 142 member accountancy bodies throughout the world representing over 103 countries.S on the Committee and weaker association of the developing countries. Points and Cunningham. They have argued that accounting should not be treated as the object of providing useful information to the investors only. it is difficult for developing countries to allocate resources for local accounting development projects. Many of those studies have recommended for customized adoption of IAS to meet country’s local needs (Enthoven. Briston. Woolley (1998) investigated the linkage between the adoption of IASs and economic growth in a number of Asian countries. 1995. 1998. the roles and the relevance of the IASs in the developing countries are not clear and still are debatable. He observed that the mean economic growth rates of developing countries when grouped by their approach to adoption or non-adoption of IASs are not significantly different. Samuels. Given other pressing social and economic development projects and priorities.K and U. 1996) investigated the direct relationship between IASB standards and those of the U. Briston. 1993. Hassan. 1998. 1990). Yapa. Several studies (Hove. Accordingly. U.K.and company law. Mason (1978.K and U. 2003).124) had provided evidence that developing countries which are unable to mount their own standardsetting programs are the ones who adopt IAS in many countries. Hoarau. 1982). Previous empirical research offers insight into the relevance and importance of the International Accounting Standards in various countries around the world. it seems apparent that research and development costs associated with adopting IAS are minimal. Perera. 1993). Larson and Kenny 1998) and found that such similarity occurred mainly due to preoccupation of both U. 1995. 1998. 1993.S and the U. ISAB. 1998). 1969 and 1973. Larson (1993) observed adoption of IAS does not necessarily imply that domestic financial accounting systems will be perceived to be of better quality by international investors or will lead to tangible macroeconomic benefits (Saudagaran and Diga. Mirghani.S and IASB standards (for example Hove 1990.K and U. For example.S with strong orientations towards maximising shareholders’ wealth rather than social function of accounting. as yet. After the ISAB’s formation in 1973.K on the IASB and frail engagement of the developing countries. contemporary accounting standards in the ASEAN draw heavily from foreign 8 . Therefore. 1990. Samuels and Oliga. These studies argue that most of the IASB standards were carbon copies of standards originating from the U. Several studies investigated the similarities between the U. 1993. For them. Wallace and Briston. Some studies have examined various alternative harmonisation options for emerging markets in ASEAN and colonial influence over ASEAN accounting education and practice (Saudagaran and Diga. Larson. 1985 and 1989. accounting also serves the purpose of divergent interested groups including the society. 1989. 1998. has promulgated forty International Accounting Standards and a number of Exposure Drafts on a wide range of financial accounting topics. 1997). They further argue that accounting and accountability problem would be unique to each developing country and foreign aid agencies or donor agencies should collaborate more closely with the recipient country to ensure that their assistance is delivered only in accordance with the respective national accounting development plans.

the discussion at each interview was initiated and conducted in a very informal way.S and IASB standards10. As they are very new to AFA they are not included in this study. The questionnaire used an open question format to allow respondents to give more flexibility. adopted IAS are referred to as SAS. All these associations are covered under the umbrella of AFA. accounting training and education. some of the country specific issues required further clarifications. The objective behind the open questions was to give an opportunity for respondents to briefly describe the back ground information to their responses.S standards or IAS standards. U. [Insert table 1 about here] This study covers seven member countries and eight professional institutions of ASEAN as of December 1998. most IAS are adopted as Approved Accounting Standards. The national representatives of the accounting professional association were asked to respond to a questionnaire covering issues relevant to professional accounting issues and regional harmonization of accounting in ASEAN. history of accounting standards formulation. mainly U. Moreover. 17 out of 23 Thai accounting standards are based on the IAS. This is the task of the sections which follow.sources. many more questions were explicitly asked to substantiate on the current professional accounting issues and regional harmonization of accounting in the country of the respondents. AFA’s role in regional harmonization of accounting and globalization and accounting standards setting. After scrutinizing the responses. Hence interviews were conducted in three ASEAN member countries-namely Singapore. Table 1 provides accounting associations that participated in the collection of data in each ASEAN member country. In Brunei Darussalam BICPA is the private sector body and the Ministry of Finance is monitoring the current accounting standards. The next section discusses the outcome of respondents along with national accounting institutions and their influence on IASs to focus direction in AFA. However.K. 10 In 2002. Malaysia (both MIA and MACPA) and in Brunei Darussalam. 9 .K. During these interviews the researcher was able to gain a more in-depth understanding of their independent views. Hence some key officials of the Ministry of Finance also were interviewed. allowing the interviewee to express his/her ideas and observations more freely and independently. In Singapore. no study has ever been conducted to examine the swamping of regional forces by ‘international forces’ in relation to professional accounting environment in AFA. As far as the author is aware. No formal interview schedule (a structured questions guide) was used for the interviews. DATA COLLECTION FOR THE STUDY The study is based on data collected from national accounting professional associations of seven ASEAN members. opinions and suggestions on various aspects of the items covered in the questionnaire. Despite the setting up of AFA in 1977. opinions about the AAS standards against U. Basic questions included in the questionnaire were: the nature of current practice of accounting. In Malaysia. The interviews varied in length from about one to two hours. regional harmonisation of accounting has not occurred apparently due to various influences and pressures. U. Instead. Myanmar and Laos were admitted into ASEAN on 23 July 1997. the discussions at these interviews basically centred on those items which were covered in the original questionnaire.

and Indonesia) was influenced by U. The Philippines has. The U. Malaysia and Singapore appear to have relatively more sophisticated financial accounting system than those in Indonesia Thailand and the Philippines.S group the Philippines accounting system is strongly influenced by U. It is therefore obvious that ASEAN have been affected strongly by each member country’s former colonial links despite the appropriateness of such direction to its environment. from the very beginning. the establishment of British accounting professional bodies’ examination centers. A number of American businesses established themselves in the Philippines during the 1920s and 1930s. for a significant part of its recent history. the involvement of British experts in planning. This seems to be a valid argument for most ASEAN members in the group. During this time. The Spanish brought substantial changes to language and religion. been opened to many foreign influences. it is obvious that accounting practice in ASEAN has been structured based on the corporate legal environment created by the colonial powers during their administration. when Filipinos conducted business with Chinese. Without paying much attention to such colonial influences. AFA proposed moves on regional harmonization of accounting since its inception in 1977(Saudagaran and Diga. However. Thailand. the elites made all the efforts to make it certain for accounting to operate in congruence with their objectives and expectations . Their activities and requirements influenced the establishment and initial growth period of the public accounting profession.DISCUSSION (1). Malaysia and Singapore) in ASEAN have each adopted the British model in their accounting practice. Therefore. As such.S group (The Philippines.and if changes were to take place as required by AFA. the export of British accounting qualifications. 2003).S. 1997a). Furthermore. they would be mobilised in the pursuit of their (elites) vested interests. Indians and Malays from neighbouring countries. the passage of the “Accountancy Act 1923” created the Board of Accountancy (BOA) and gave it the authority to issue Certified Public Accountant (CPA) certificates (Narasimham and Reid. Among the U. 10 . The British system of accounting practice was imposed on these countries during the colonial period in a number of ways: export of British accounting personnel. directing. All former British colonies (Brunei Darussalam. reflecting its important business associations with North America. This has been further reinforced by some of the respondents in this study revealed as follows: "The original members of ASEAN preferred colonial – era accounting systems as it facilitated their business practices. The Philippine’s accounting practices date back to the preSpanish period. teaching and providing assistance in one form or another in the local business development. Therefore. as suggested in the colonialism literature both formal and informal pressures hampered the regional harmonisation efforts of AFA.” As revealed by respondents most vested interests developed by local accounting associations had a negative feeling about the implementation of a regional harmonisation project introduced by the AFA since its inception. These national differences apparently hampered the motives of AFA. the comparatively short American colonial period was the most significant in influencing the Philippines’ major institutions—including the educational system and the formalization of the professions.S.

As evidenced.” “The belief of the member bodies of AFA is that national requirements or practice conform in all material respects with a majority of IASs. Brunei and Singapore stated following: “The member countries of AFA have already taken steps to adopt international accounting standards. The main exceptions are in 'specialised' areas such as inflation accounting. If 11 . is particularly important. 17 out of 23 Thai accounting standards are based on IASs. Malaysia and Thailand) must have an interest in the IASs exercise.” Many opponents of regional harmonization of accounting believed that it is unnecessary and in certain settings even detrimental because of imposition of accounting concepts and techniques that originate in developed countries but are inappropriate in developing countries. measurement and disclosure of transactions. it is evident that Singapore.” This demonstrates that the international financial community and the ASEAN have begun to feel that the use of a common accounting and reporting 'language'. in which investors can compare the results of the largest companies across the world. Singapore and Malaysian professional bodies are trying to convince AFA that IASs are much more suitable for ASEAN region.which would not facilitate the development of the Islamic Capital Market. This view was supported by 70 th AFA Council Meeting (AFA council meeting January 2001). which are not considered applicable in many countries in ASEAN.because AFA has a very limited authority and official support of ASEAN. For example. Committee on Accounting Principles and Standards (CAPS) was set up to undertake this challenge. most of the respondents consistently argued that professional accounting vary widely among member nations hence there is a problem of harmonizing the accounting standards preventing the cross-flow of professional expertise in the region. This effort has been further advanced by Malaysia currently serving on the Board of the IASB. Moreover. Over two thirds of the respondents referred explicitly to compliance with IASs in their accounting practices. the leadership of the AFA has not shown itself capable of responding to regional harmonisation.” “Malaysia has adopted the bulk of international accounting standards but there are also a number of Malaysian rules that accord with national regulatory requirements. Therefore.(2).e Singapore. In this respect. Singapore and Malaysia already had the British pattern in accounting standards. Surely these accounting professional bodies (i. On the regional harmonization process. Some respondents stated that: “It is doubtful to believe that AFA is effectively coordinating the harmonisation activities in the region . However. Malaysia and Thailand have already based on IASs. But IASs are adopted ignoring “Syariah principles” (based on Islamic culture) in Malaysia and in Indonesia . Some respondents from Malaysia. most ‘tiger economies’ have been successful as most of its members have adopted a majority of international accounting standards. The process initiated by AFA in 1978 was to harmonize the accounting within ASEAN region.” “The IAS framework would help to develop financial standards for the recognition. the institutional set up in AFA involves the national accounting associations/bodies of ASEAN countries.

Local commercial law and taxation subjects. inter alia. In the interviews. a major in accounting and finance in 1995 and established a link program leading to an accounting degree with Manchester University in the U. most countries follow accounting education and training based on the auditing profession. Brunei Darussalam and Singapore have inherited their accounting education through British universities and higher educational institutions. Moreover. Moreover.ASEAN countries like The Institute of Chartered Accountants in Australia (ICAA) are admitted as associate members based on the criteria that they make a commitment to train the accounting profession in the less developed countries” “Within ASEAN. It is obvious from the experience of most ASEAN countries that university accounting degree programs have legitimised and created the normative pressure on AFA to go for U.S accounting standards gain the support of both national standard setters and the world's securities regulators. early years of these countries . (4). The British system of accounting education and practice was imposed on these countries during the colonial period in different ways such as export of British accounting professionals. (3). 12 . Historically Singapore. Australia and New Zealand. their general education from primary to university level was inherited from the British education system. export of British accounting qualifications etc. For example in Malaysia ACCA has set up a joint program with MIA to produce accounting personnel. Singapore and Brunei accounting academics proceed to the U. some respondents in this study indicated following: “Institutes from non. the originators had British education and exposure in the setting up process. therefore.K.K. Hence adoption of global system of accounting in ASEAN may result standards be irrelevant to the needs of these countries. Malaysia and Brunei were British colonies for a long period. For example Brunei’s only university revised its undergraduate program in business by introducing. rather than a more holistic approach to accounting in society.” Most ASEAN (British group of countries) countries have student exchange programs and staff exchange programs with some of the British universities.K. there will be a real benefit for companies preparing financial statements domestically and seeking finance in several countries overseas in adopting an 'international GAAP'. There will also be real benefits to investors through an ability to compare financial statements much more reliably than has been possible in the past.S professional bodies have been very much instrumental in setting up and organisation of local accounting associations in ASEAN.K or U. At the setting up of most accounting associations in ASEAN countries.K. Hence they followed a ‘carbon copy’ of British accounting system. Another example is Brunei – where Brunei Shell Company has liaised with the local BICPA to train accounting personnel with a few British 11 Malaysian and Brunei governments are offering scholarships for accounting academics to pursue their postgraduate qualifications in the U. it was revealed that still Malaysian.K. Malaysia. Australia and New Zealand for their higher education such as masters and doctoral programs11. ACCA has adopted local requirements in their accounting training e. Therefore. another important aspect is that the British and U.most of the accounting professionals obtained their accounting education and training from the U. external examiners for accounting degree programs in the University of Brunei are annually visiting from the U.g.

From this time. on a five year contract to the University of Indonesia. “Most significant challenge for the AFA is to combine the expertise of member bodies within ASEAN to bring about a strong and cohesive unit that can contribute towards the enhancement of the skills and standards of the profession. Particularly. some respondents in this study stated that in their view point the development of global accounting standards was not an urgent issue in at least in the near future. The adoption of international accounting standards would benefit in the long run. So why AFA is pursuing a regional harmonization drive? It is time to concentrate national and international efforts to develop and implement international accounting and reporting standards’ Most professional associations of ASEAN have been patterned on Western model.professional bodies. If the AFA can continue as a strong and effective regional body. the American influence began to gain momentum in Indonesia. we will be well-placed to help accountants meet the growing demand for cross-border expertise”. In particular more support from Australia and the United Kingdom to coordinate with the AFA in training accountants and auditors”. (5). following: Singapore and Indonesian questionnaire respondents indicated the “AFA should promote cooperation with more developed countries. which was affiliated with the University of Wisconsin. so far regional harmonisation has been hindered due to various pressures…such as International donor agencies and the World Bank….” In addition. Some respondents confirmed the following: “The AFA should be an ideal forum to discuss ideas and share experiences among member countries…. In this regard Briston (1990) is very much sceptical of the type of accounting harmonisation taken place in ASEAN and asserts that the narrowly based concept 13 .S.S accounting system was started in 1970’s. Another interesting observation by some respondents was that the European Union’s decision on their regional harmonization effort. With the departure of the Dutch system in Indonesia the gradual adoption of U. the University of California (Berkeley. They believed that it would be very difficult to implement them in practice given the knowledge of accountants on IASs. Accounting training in par with IASs is mandatory in Indonesian case. With the assistance of the Ford Foundation.. The Ford Foundation also assisted Gadjah Mada University. Particularly Singaporean and Malaysian respondents indicated the following observation: Already European Union has given up its effort in regional harmonization of accounting standards in their region. at the same time providing opportunities for Indonesians to study in the U. USA) provided the teaching staff. Hence personnel who received their professional training from such institutional set up prefer to apply their competencies in ASEAN business activities with a similar orientation and disposition.

CONCLUSION Based on this study it is argued that AFA is under severe pressure from national accounting associations of member ASEAN countries to focus its direction towards global practice. One important reason is that with the European Union’s decision in 1995 to give up their regional harmonization effort and their decision to adopt IASs.Methee Ratnasri (Thailand). Particularly recent financial crisis and its aftermath raised serious questions on the AFAs role in regional harmonization and criticized the ASEAN accounting profession. At the same token one should not neglect the ongoing politics among national accounting bodies for their cultural and religious interests as well. lack of transparency. educational and economic backgrounds is no easy task and it may create more problems that it can ever solve. which focuses on decision making by capital providers. This study was financially supported by University of Brunei Darussalam. Teo Moreno (Vietnam) for their assistance in collecting data for this study. As discussed in the previous section. According to this study it was found out that this fact has been a significant impediment on AFAs direction on regional harmonization. Ruy Villamayor (The Philippines) and Mr. “Too much emphasis on harmonisation with its attention on financial reporting will most likely divert resources away from other important areas of accounting. Mr. colonial influence inculcated among national accounting associations through university accounting education and training has created a significant pressure and impact on the adoption of global set of accounting standards in the region. Siva Navaratnam (Singapore). There are strong reasons for such a situation. Incomplete financial information. Mr. 14 .of harmonisation. Mr. inappropriate accounting standards and inconsistent application of those standards have been some of the criticisms levelled against the current practice in ASEAN. Lay Choon (Malaysia). ACKNOWLEDGEMENTS Author wishes to thank Dr.” However. the aid receiving country tends to follow donor agency guidelines for financial reporting. Mr. AFA’s effort in regional harmonization has been demoralized due to various pressures from member countries. Based on these circumstances AFA’s effort in regional harmonisation over the last two and a half decades have gained no effective results instead member institutions are favouring for much more sophisticated financial reporting environment based on IASs. This has already taken place in Indonesia. Junaidi Salle (Brunei Darussalam). Those who cherish the thought of harmonisation in ASEAN becoming a reality must appreciate the fact that attempting to standardise the practice in all six countries from different political. is inappropriate for ASEAN. Eko Sukoharsono and Mr. This pressure has been mounted mainly from most influential emerging economies in ASEAN. social. Melly Hindarto (Indonesia). According to donor agencies preference. the Indonesian government decided to develop accounting standards based on IASs in response to the request from international financial institutions and foreign aid donor agencies. such as management accounting and government accounting.

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Indonesian Institute of Accountants Malaysia (1).ASEAN member countries and professional associations that participated in the data collection Brunei Darussalam (1). The Malaysian Association of Certified Public Accountants(MACPA) ( Private sector body) The Philippines The Philippine Institute of Certified Public Accountants (PICPA) Singapore The Institute of Certified Public Accountants of Singapore (ICPAS) Thailand The Institute of Certified Accountants and Auditors of Thailand (ICAAT) Vietnam The Vietnamese Accounting Association (VAA) TABLE 1 20 . The Ministry of Finance – Brunei Darussalam Indonesia Ikatan Akuntan Indonesia (IAI). The Malaysian Institute of Accountants (MIA) (Government sector accounting body) (2). The Brunei Institute of Certified Public Accountants (BICPA) (2).

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