Accounting Regulations and IFRS Adoption

The International Journal of Accounting
Vol. 55, No. 1 (2020) 2050004 (36 pages)

c Board of Trustees, Vernon K. Zimmerman Center, University of Illinois
°
DOI: 10.1142/S1094406020500043
by THE UNIVERSITY OF WESTERN ONTARIO on 03/27/20. Re-use and distribution is strictly not permitted, except for Open Access articles.
Accounting Regulations and IFRS Adoption

in Francophone North African Countries:
The Experience of Algeria, Morocco, and Tunisia
Hichem Khlif
Faculty of Economics and Management of Sfax
University of Sfax, Tunisia
Int. J. Acc. Downloaded from www.worldscientific.com
hichemkhlif@gmail.com
Kamran Ahmed*
La Trobe Business School
La Trobe University, Australia
k.ahmed@latrobe.edu.au
Manzurul Alam
Murdoch University, Australia
M.alam@murdoch.edu.au
Published 10 March 2020
This paper traces the historical developments of accounting regulations in Algeria,

Morocco, and Tunisia and uses institutional theory to identify factors affecting
International Financial Reporting Standards (IFRS) adoption as the national ac-
counting standards in these countries. We find that the extent of convergence with
IFRS in Algeria is higher compared to Morocco and Tunisia. This has been mostly
due to greater foreign investor flows from Western countries in Algeria during the
last decade, the dominant position of international Big-4 audit firms, and strong
trade relationship of Algeria with the European Union (EU) compared with
Morocco and Tunisia. We discuss the main challenges faced by these three countries
in converging toward IFRS. These are underdeveloped equity markets, switching
from French fiscal-oriented accounting systems to Anglo-Saxon accounting systems,
and are characterized by lack of knowledge of principles-based IFRS by local
*Address for correspondence: Kamran Ahmed, La Trobe Business School, La Trobe

University, Australia. Email: K.Ahmed@latrobe.edu.au
2050004-1
H. Khlif, K. Ahmed & M. Alam
professional accountants. Moreover, the convergence with IFRS in these countries

is confronted by the prevailing small and medium-sized firms in the economic
environment, difficulty in fair-value measurement in these settings, and the cost
of convergence for companies. Our study has policy implications for those
countries sharing similarities with these settings and have undertaken steps to
implement IFRS.
Keywords: Accounting regulations; IFRS; institutional theory; obstacles to IFRS

adoption; Algeria; Morocco; Tunisia.
1. Introduction
International Financial Reporting Standards (IFRS) comprise a set of
accounting principles that have reshaped accounting and financial reporting
throughout the world (Ball, 2006). Prior international accounting literature
has generally focused on understanding and evaluating reporting environ-

ments in developed countries (e.g., Eberhartinger, 1999, on Germany,
France, and the UK) and emerging Asian countries (Craig & Diga, 1996, on
Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand;
Perera & Baydoun, 2007, on Indonesia; Ashraf & Ghani, 2005, on Pakistan;
Mashayekhi & Mashayekh, 2008, on Iran; Al-Akra et al., 2009, on Jordan;
Hassan et al., 2014, on Iraq). Studies of African countries where the legal
systems are modeled on the British include Egypt, Ghana, and Libya
(Farag, 2009, on Egypt; Assenso-Okofo et al., 2011 on Ghana; Boolaky
et al., 2018, on Egypt and Libya). These studies have shown how unique
sociopolitical and economic environments have influenced the development
of accounting and reporting practices within each jurisdiction. Except for
Degos et al. (2019), Elad (2015), Klibi (2016), and Slama & Klibi (2017), we
are not aware of studies analyzing the development of accounting regulations
in Francophone African countries which had colonial ties with France, and
their accounting systems are modelled on long-established French tradi-
tions.1 In this regard, Elad (2015) notes that accounting and reporting
regulations in Africa’s franc zone countries are not well known in the
1
Degos et al. (2019) assessed the development of accounting standards and adoption of IFRS
in French speaking West African countries, but they did not cover French speaking North
African countries. In Africa’s franc zone countries, Elad (2015) highlights the existence of a
distinctive approach to financial accounting that is modeled on long-established French
traditions. In Tunisia, Klibi (2016) and Slama and Klibi (2017) show that Tunisian ac-
counting standards are not updated in line with changes in international accounting regu-
lation (IFRS). This unachieved convergence has led some listed companies to only partly
comply with IFRS.
2050004-2
Accounting Regulations and IFRS Adoption in Francophone
Anglo-Saxon world, and these may create an imbalance in African

accounting literature.
With respect to IFRS adoption, Elad (2015) finds a wide divergence on
the issue of conformity with IFRS in emerging African countries. He suggests

that \[m]ost of the countries fall under the Anglo-Saxon School. . ." (p. 18)
and have higher IFRS conformity compared to countries with French tra-
ditions. Research on IFRS does not adequately address this issue and
assumes implementation irrespective of contextual and institutional set-
tings. Consequently, a significant opportunity exists to investigate the IFRS
adoption process, especially from North African French civil law countries,
using an existing theoretical framework. These settings have been generally
neglected despite their strategic and economic significance, which is evident
from their strong historical ties with European countries, including France,
Germany, Italy, and Spain.

To fill the gap and redress the imbalance in accounting literature, we
assess how three North African countries Algeria, Morocco, and
Tunisia have responded to global and institutional pressures in the IFRS
adoption process. We use institutional theory to understand how individual
nation-states face a global institutional environment where certain practices
and structures are established over time (Dillard et al., 2004; Irvine, 2008;
Judge et al., 2010). Several accounting researchers have used this framework
to understand IFRS adoption in different countries (Irvine, 2008). We begin
with a review of the historical development of accounting regulations in
Algeria, Morocco, and Tunisia and identify the factors that may explain the
difference in conformity with IFRS, along with the challenges faced during
implementation of IFRS in these countries.
Algeria, Morocco, and Tunisia pose a significant opportunity for a cross-
country analysis because, although they share several important char-
acteristics, the outcomes of their reforms are markedly different (Biygautane
& Lahouel, 2011). This is because these countries experienced economic
reforms, privatization of state-owned enterprises, and associated accounting
and reporting regulations at different times and at different paces. Soder-
strom and Sun (2007) argue that there will be cross-country differences in
the quality of corporate reporting even after adopting IFRS because im-
plementation and effectiveness depend on the overall institutional context,
including the legal, economic, and political systems of the country in which
the firm operates. Therefore, it is imperative for the investment community
to understand the role played by socio-economic, cultural, legal, and other
institutional characteristics in the accounting development process in these
2050004-3
three countries. They all share a rich historical heritage influenced by the
Roman, Arab, and more recently, French occupation.
Our analysis shows that Algeria, Morocco, and Tunisia are at different
stages of implementation. For instance, Algeria has only accepted the

Accounting and Financial System, including several accounting standards
based on selected IFRS, and their application has involved several simpli-
fications. Moroccan firms prepare their financial statements under the
General Code of Accounting Normalization, since there is no explicit obli-
gation to prepare them under IFRS except for those required by Circular No.
56/G/2007. Finally, Tunisian firms operate under the Accounting System of
Enterprises, with the layered adoption of IFRS when there is an additional
requirement to the existing reporting practices. Algeria’s adoption of IFRS is
more advanced than that of Morocco and Tunisia. This has been mostly
driven by a combination of institutional and contextual influences, for ex-

ample, the impact of high foreign investment flows into Algeria during the
last decade, recommendations from global Big-4 audit firms, and stimulus
from Algeria’s strong trade relationship with the European Union (EU)
compared to Morocco and Tunisia. As well, an active stock exchange in
Morocco has created a favorable economic environment for IFRS adoption in
listed companies.
Our paper responds to renewed calls to better understand the develop-
ment of accounting and reporting practices worldwide. For instance, Judge
et al. (2010) investigate the factors that affect IFRS adoption from an in-
stitutional perspective in a cross-country analysis and call for further
\understanding of the harmonization of accounting standards across
nations" (p. 172). In the same vein, Albu et al. (2013) and Samaha and Khlif
(2016) have called for more research on the adoption of IFRS in different
emerging countries, since the institutional contexts differ between developed
and emerging countries. It also contributes to the accounting literature in
the following ways. First, it explores how historical, global, and local reg-
ulatory environments influence accounting regulations in Algeria, Morocco,
and Tunisia, which generally represent a typical example of the \French
School." Second, it contributes to international accounting research by ap-
plying institutional theory at different levels, such as global, nation-state,
and organizational field levels, to examine factors affecting the move to
implement IFRS in these settings and identify institutional pressures that
may explain the dissimilarities observed in Algeria, Morocco, and Tunisia.
Finally, by identifying the factors that constrain the adoption of IFRS in
2050004-4
these countries, it alerts financial authorities to the current state of ac-

counting and reporting systems within their jurisdictions.
The remainder of this paper proceeds as follows. In Section 2, we present a
brief profile of Algeria, Tunisia, and Morocco. In Section 3, we discuss the

development of accounting regulations. In Sections 4 and 5, we analyze
factors that may affect the move toward IFRS based on institutional theory.
In Section 6, we present the major obstacles that may constrain IFRS
adoption in Francophone North African countries, while Section 7 concludes
the paper with a summary of the main findings.
2. Algeria, Morocco, and Tunisia | A Brief Profile

The extant literature on IFRS supports convergence to IFRS in developed
and developing countries because it is perceived to generate economic

benefits (Chen et al., 2010). However, disagreements remain on how and to
what extent these accounting standards can be equally applicable to all
emerging countries because of variations in their economic, political, legal,
and cultural factors as well as the level of capital market development and
institutional settings (Singh & Newberry, 2008; Zeff, 2012).
Algeria is the largest country in Africa and is in North Africa, bordering
the Mediterranean Sea and sharing borders with Morocco in the west,
Tunisia in the east, and Mali and Niger to the south. It has an area of
919,594.96 square miles, and the official languages of Algeria are Arabic and
French. Algeria’s economy is largely based on oil and gas, and it supplies
large amounts of natural gas to Europe. According to the Organization of
Petroleum Exporting Countries (OPEC), Algeria has the world’s 17th
largest reserves of oil and 9th largest reserves of natural gas. By the begin-
ning of the 20th century, the population of Algeria was 5.9 million, reaching
40.61 million by the end of 2016, of which around 28.70% lived in rural areas.
The gross national product (GDP) of Algeria increased from US$117,027.31
(million) in 2006 to US$159,049.10 (million) in 2016.
Morocco is bounded on the north by the Mediterranean Sea and Spain,
Mauritania in the northwest, Algeria to the east, and Western Sahara to the
south. It covers an area of 172,413.920 square miles, characterized by a
rugged mountainous interior and large portions of desert. It has 708,500
miles of coastline covering both the Atlantic and Mediterranean Seas. The
population of Morocco rose from 30.60 million at the end of the 20th century,
reaching 35.28 million by the end of 2016. The official languages are Arabic
and French. Its economy is dominated by the services sector (e.g., tourism
2050004-5
industry), which accounts for just over half of GDP, followed by an indus-
trial sector made up of mining (e.g., phosphate), construction, and manu-
facturing. The GDP in Morocco was US$68,640.83 (million) in 2006, and
this increased to US$103,606.32 (million) in 2016.

Finally, Tunisia is surrounded by Algeria to the west, Libya in the
southeast, and the Mediterranean Sea to the north. Tunisia covers an area of
63,170.17 square miles. Geographically, Tunisia covers the eastern end of
the Atlas Mountains and the northern reaches of the Sahara Desert. Tuni-
sia’s land is fertile, and with a population of 11.40 million by the end of 2016,
Tunisia is the smallest country in North Africa. Like Morocco, Tunisia is an
important producer of phosphate, gas, and oil, although in fewer quantities
compared with the other two countries; its economy relies on agriculture,
fisheries, and tourism. The GDP in Tunisia improved from US$34,378.48
(million) in 2006 to US$42,062.60 (million) in 2016.

Table 1 summarizes the economic profile of these countries and the for-
eign direct investment inflows during the period from 2006 to 2016. The
potential impact of these economic features on the accounting system and
IFRS adoption is discussed in Section 5.
3. Development of Accounting Regulations

The process of IFRS convergence is viewed as a global trend (Nobes &
Parker, 2004; Yu, 2009). However, it is evident from prior research that the
influence of various factors, namely, cultural traditions, historical ties, in-
stitutional settings, legal systems, and political structures, are significant in
the IFRS convergence process (Nobes, 1998; Standish, 2003; Zeff, 2012). It
would be useful to identify how historical connections and local institutions
shape accounting practices in North African countries, which ultimately
pave the way for their IFRS adoption. The accounting systems employed in
Algeria, Tunisia, and Morocco are greatly influenced by French accounting
practices due to the long historical ties. In 1947, France established the
\Plan Comptable General " (\National Accounting Plan"), a detailed, cod-
ified regulation of company accounting that was exported initially to
Belgium and Spain and subsequently to Portugal, Morocco, Tunisia,
Algeria, and Peru (Zeff, 2012). These countries have historically exhibited a
poor culture of transparency. Classified as French civil law countries,
Algeria, Morocco, and Tunisia are late in establishing a favorable accounting
and reporting environment. Accounting regulations in these countries were
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Table 1. Economic Profile and Foreign Direct Investments
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Panel A: Economic Profile

(1) GDP (in Millions US$)
Algeria 117027.305 134977.088 171000.692 137211.040 161207.269 200019.057 209058.992 209755.003 213810.022 165874.331 159049.097
Morocco 68640.825 79041.295 92507.258 92897.320 93216.747 101370.474 98266.307 106825.650 110081.249 101187.079 103606.322
Tunisia 34378.437 38908.069 44856.586 43454.936 44050.929 45810.627 45044.113 46251.062 47587.913 43156.709 42062.549
(2) Panel B. Foreign direct investments (in Millions US$)
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Algeria 1841 1686.736 2638.607 2746.930 2300.369 2571.237 1500.402 1691.886 1503.453 403.397 1637.370
Morocco 2366 2806.642 2466.288 1970.323 1240.625 2521.362 2841.954 3360.909 3525.384 3252.913 2318.278
Tunisia 3239.909 1515.345 2600.674 1525.244 1334.497 432.666 1554.269 1058.622 1024.754 970.5218 695.100
(1) Source: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?name desc=true.

(2) Source: https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD.
first enacted in the early 1990s when financial authorities and the investment
community demanded more credible financial reports.
3.1. Algeria
Following its independence in 1962, Algeria adopted accounting regulations
in line with the French General Accounting System (Plan Comptable
General, PCG, 1957) (Sadi, 2012). However, the PCG was considered un-
suitable for Algeria’s economic needs following the privatization of several
state-owned enterprises. Merrouche (2005) argues that
\[t]he PCG was much more finance and statistics oriented. Its uni-
formity was limited to operations expressed in monetary terms.
Therefore, this made it impossible to know the details that will give
real insights into the structure of the production, the costs and prices
composition, and the nature of management methods. (p. 37)"
After the Special Accounting Committee began operating in 1972, new
accounting rules were enacted in 1975 (Plan National Comptable, PNC),
which lasted from 1976 until the end of 2009 (Remmache, 2012). During this
period, Algeria’s financial authorities did not reject the inherited accounting
system but modified the system to suit its socioeconomic and cultural
environments (Merrouche, 2005). Nevertheless, the modified accounting
system did not meet the needs of financial statement users, especially local
financial institutions. For instance, a cash-flow statement was not reported;
the income statement did not clearly differentiate between operating and
financial operations; there was no clear definition of several concepts, in-
cluding historical costs, inventory valuation, and depreciation methods
(provisions) (Remmache, 2012). Given its inability to respond to external
users’ needs, Algerian authorities decided to reform the accounting regula-
tion thoroughly. To this end, they consulted with the French National
Accounting Council, which offered three options: conserving the PNC with
major revisions; including a mix of PNC and some IFRS standards; or
abolishing the PNC completely and adopting IFRS. On 26 July 2008, the
Algerian authorities adopted a new accounting system known as the
Accounting and Financial System (Syst eme Comptable Financier), which
began operations on 1 January 2010 and was mainly based on IFRS with
some differences (Sadi, 2012). For instance, IAS 19 (Employee Benefits),
IAS 33 (Earnings per Share), IAS 40 (Investment Property), and IAS 39
(Financial Instruments) were not contained in the Algerian accounting rules
2050004-8
in any detail; only general recommendations were provided. Furthermore,

the fair value method was not allowed as per IAS 16 (Plants and Equipment)
and IAS 38 (Intangible Assets).
Finally, the new accounting system allows some Algerian companies to

continue using the Cash Accounting System. This simplified accounting
regime is applicable for smaller commercial firms that have total revenues or
total employees of less than 10 million Algerian Dinars or 9 employees for
two consecutive years; less than 6 million Algerian Dinars or 9 employees for
two consecutive years for industrial firms; and under 3 million Algerian
Dinars or 9 employees for two consecutive years for the services industry and
other sectors.
3.2. Morocco
Morocco, following its independence in 1956, also adopted the French gen-
eral accounting system (PCG 1957).2 It published the first homegrown ac-
counting plan in 1986 (Moussa, 2010). Moreover, the establishment of the
National Accounting Council (NAC) (Conseil National de Comptabilite) in
1989 (decree No. 2.88.19 of 16 November 1989) significantly contributed to
Moroccan accounting standards. The NAC implemented the General Code
of Accounting Normalization on 26 July 1993 (Code General de Normal-
isation Comptable; Zoubi & Al-Khazali, 2011). The Code required four fi-
nancial statements to be prepared by companies, namely, the balance sheet,
the income statement, the statement of cash flows, and notes to financial
statements. This code did not refer to the statement of changes in equities as
a separate financial statement or as a part of notes to financial statements.
Several IAS standards were not adopted, for instance, IAS 12 (Deferred
Taxes), IAS 19 (Employee Benefits), IAS 33 (Earnings per Share), IAS 36
(Impairment of Assets), IAS 37 (Provisions, Contingent Assets and Liabil-
ities), and IAS 39 (Financial Instruments) (Ben Otman, 2006). No clear
guidance was provided on how to compute the recoverable amount at the
end of the period. Concerning specific industries, the NAC issued the Ac-
counting Plan for insurance companies on 8 May 1996, followed by financial
institutions on 23 August 1999 and construction companies on 11 March
2003. The convergence with IFRS enabled the NAC to issue its view No. 5 on
2
Merrouche (2005, p. 37) states that the PCG is essentially a chart of accounts with a system
of ledger codes; recommendations of the valuation of assets and the determinants of costs,
expenses and results; model financial statements and statistical reports; and a discussion of
the cost of accounting procedures.
2050004-9
26 May 2005, which required companies to report consolidated financial

statements. Circular No. 56/G/2007 required companies to prepare consol-
idated financial statements under IFRS as follows: (i) subsidiaries of listed
European companies, (ii) companies obliged by their parent firms to report

their financial statements in accordance with IFRS, (iii) companies that
issue long-term debts or obligations to the European financial markets,
and (iv) parent firms of foreign subsidiaries that adopt IFRS. IFRS are
also permitted for companies listed on the Moroccan Stock Exchange
(Elad, 2015).
3.3. Tunisia
Tunisian companies continued to apply the French general accounting sys-
tem (PCG, 1947) until it was revised in 1957. The PCG covered general
accounting bookkeeping instructions, general principles, and rules for

measurement and recording. Under this accounting regime, companies
produced the balance sheet, profit and loss account, and other statements.
Given that it could not provide useful information to external users, the first
national general accounting plan was implemented in 1968 (PCG, 1968)
(Moussa, 2010; Slama & Klibi, 2017). It remained in operation until 1996.
However, the accounting system became outdated when Tunisia decided
to implement privatization policy and moved towards a more liberal market-
oriented economy in the late 1990s. At the end of 1996, the government
promulgated Law No. 96–112 to implement a new accounting system,
namely, the Accounting System of Enterprises (Systeme Comptable des
Entreprises). It provided guidelines on how companies should report their
financial operations (Zoubi & Al-Khazali, 2011). The first version of Law No.
96–112 encompassed 16 Tunisian Accounting Standards (TASs) that were
mainly based on IFRS effective in 1995 (PWC 2012).3 The law also estab-
lished the National Accounting Council (Conseil National de Comptabilite),
which had the prerogative to examine the provisions of new accounting
standards and propose new rules to improve their contents. This Law No.
96–112 requires businesses to publish their annual reports that must include
a balance sheet, an income statement, a cash flow statement, and notes to
financial statements. In contrast to IFRS, the statement of changes in
equities was incorporated in the notes to financial statements.
3
http://www.pwc.com/us/en/issues/ifrs-reporting/country-adoption/country-details/
country-details new/Tunisia.jhtml.
2050004-10
It should be noted here that Accounting System of Enterprises required

two forms of income statements, which classified revenues and expenses by
nature or by function. The second form (by function) required firms to im-
plement cost and management control systems. However, most Tunisian

firms, including listed companies, presented their income statements in
nature format, which confirmed the fact that cost management accounting
remained underdeveloped in Tunisia.4 Moreover, the conceptual framework
(TAS 1) recommends that a company should report its earnings per share,
but Tunisian GAAP do not indicate clearly how to compute it. Zoubi and
Al-Khazali (2011) observe that
Tunisian accounting may differ from that required by IAS because of
the absence of specific Tunisian rules on recognition and measure-
ment in many areas such as accounting for employee benefit obli-
gations, deferred tax, and accounting for an issuer’s financial

instruments. (p. 69)
Several international accounting standards were not adopted, and these
are: IAS 12 (Deferred Tax), IAS 36 (Assets Deprecation), IAS 37 (Provi-
sions), IAS 19 (Employee Benefits), and IAS 40 (Investment Property). The
reason for this was that the Tunisian accounting system is heavily governed
by tax rules (Gabsi, 2006). Like the Moroccan accounting regulation system,
Tunisia’s finance authorities adopted specific standards for the banking and
insurance industries, respectively, in 1999 and 2001.
During the early 2000s, Tunisian companies grew significantly in size,
mostly due to mergers and acquisitions. The National Accounting Council
responded to this development in December 2003 by adopting five standards
(TASs 35, 36, 37, 38, and TAS 39). TASs 35, 36, and 37 provided instruc-
tions on the preparation of consolidated financial statements. These new
standards represent a verbatim adoption of IAS (Consolidated Financial
Statements and Accounting for Investments in Subsidiaries, IAS 28
Investments in Associates and Joint Ventures) dealing with the preparation
of consolidated financial statements at that time. TASs 38 and 39 provided
instructions for business combinations (IFRS 3) and related party disclosure
(IAS 24) applicable at the end of 2003. In fact, since 2003, these standards
have been revised several times, but the respective TASs have remained
unchanged. On 28 January 2008, Tunisian authorities adopted IAS 17
(Accounting for Leases) and rebadged it as Tunisian Accounting Standards
4
Financial statements of listed Tunisian companies are available at: http://www.cmf.org.tn.
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Table 2. Summary of Accounting Regulations Development
Period Algeria Morocco Tunisia

Fifties and sixties In 1962, the Algerian The PCG 1957 oper- Tunisian financial
of the 20th authorities adopt ated from 1956 to authorities adopt
century the French gener- 1993 the French gener-
al accounting sys- al accounting sys-
tem (PCG, 1957) tem of 1957
(PCG, 1957)
From the seven- In 1972, a special In 1989, the Mor- A new general ac-
ties to the end committee of ac- occan financial counting plan was
of the 20th counting was authorities estab- implemented in
century formed, and it lished the Nation- 1968 (PCG, 1968)
implemented the al Accounting and remained ef-
National Ac- Council (CNC). In fective until 1996
counting Plan, 1993, the General At the end of 1996,
which operated Code of Account- Law No. 96–112 of

between 1975 and ing Normalisation 30 December 1996
2009 (CGNC) was pro- implemented a
mulgated, with new accounting
adoption of spe- system, namely,
cific standards for Accounting Sys-
insurance compa- tem of Enterprises
nies in 1996, fi- (SCE)
nancial institu- Law No. 96–112 of 30
tions in 1999, and December 1996
construction firms formed the Na-
in 2003 tional Accounting
Council
The first decade of In 2008, the Algerian In 2005, some com- Specific standards for
21st century authorities creat- panies (financial banking and in-
ed a new account- institutions, surance sectors
ing system, subsidiaries of lis- were initiated in
namely, Account- ted European 1999 and 2001,
ing and Financial companies) were respectively
System, which required to imple- Specific standards for
was applicable ment IFRS the establishment
from 1 January of consolidated fi-
2010 and was nancial state-
mainly inspired by ments were
IFRS accepted in 2003
In 2008, the financial
authorities adop-
ted IAS 17 ac-
counting for lease,
coded as TAS 41
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Fig. 1. Depiction of the accounting framework in Algeria, Morocco, and Tunisia.

Notes: List of Abbreviations: IASB: International Accounting Standards Board; IFAC: International
Federation of Accountants; CMF: Conseil de Marche Financier; COSOB: Commission d’ Organisation et
de Surveillance des Operations de Bourse; CNC: Conseil National de Comptabilite.
(TAS 41). Overall, in Tunisia, IFRS have been adopted through layer-
ing when there is an additional requirement to the existing reporting prac-
tices specified by the Accounting System of Enterprises (e.g., consolidation,
business combination, and lease transactions).
Table 2 summarizes the development of these three countries’ accounting
systems. Figure 1 illustrates a framework for accounting and auditing in
Algeria, Morocco, and Tunisia.
4. Institutional Theory and IFRS Adoption

Institutional theory has been used to explain the convergence of IFRS in
several economies (e.g., Irvine, 2008, in UAE; Judge et al., 2010, for a cross-
country analysis; Hassan et al., 2014, in Iraq). It contends that rules, norms,
and routines play a pivotal role in shaping accounting regulations and sys-
tems over time (Hassan et al., 2014; Scott, 2004). According to Scott (2001),
the concept of \institution" refers to the system of social beliefs and orga-
nizational practices that influence standard-setting processes in each society.
While the central focus has been on explaining how firm- or industry-level
practices are influenced by institutional factors, such an analysis can be
2050004-13
extended to the country level (Hassan et al., 2014; Irvine, 2008). In the same
vein, Guler et al. (2002, pp. 207–208) state that \neo-institutional theorists
have explicitly argued that isomorphism occurs at the country level of
analysis as well as at the level of the organizational field or the industry."

Global phenomena such as IFRS are developed through professional and
technical refinements where various stakeholders, such as members of dif-
ferent accounting professions and country and industry representatives,
share ideas to derive a practical framework. IFRS is often considered as a
broader trend that has influenced nearly all countries across the globe,
ultimately becoming a global trend. Institutional theory is useful for
understanding how global trends influence organizational fields through
country-specific institutions that shape the acceptance of accounting stan-
dards in individual organizations. The question arises regarding how
emerging countries are affected by the global trend that cascades and
permeates firm-level accounting. Even if these countries are less represented
in the global accounting standard-setting process, once a significant devel-
opment such as IFRS standards is settled, it tends to influence all countries,
including emerging countries. The IFRS adoption process can be seen as
occurring in three stages. Institutionalization initially takes place at the
global level, then at the national level, and finally at the organizational field
level. Organizational field is that where organizations in a certain nation-
state adopt local institutional practices to gain legitimacy.
It is interesting to observe the process of a global trend and how it
interacts with an interconnected set of national and international accounting
bodies across different geographical areas. These groups of accounting pro-
fessionals work with different geographical partners and make adjustments
in a sequence of progressions over time, based on technical and practical
considerations. The IFRS development process includes vertically and hor-
izontally interlocking accounting bodies, which cooperate on accounting
harmonization for many years. Institutionalization happens as accounting
standards at the global level are established as authoritative guidelines
(Scott, 2004). The accounting principles are legitimized when powerful in-
ternational bodies such as the World Bank, International Monetary Fund
(IMF), and the Organization for Economic Cooperation and Development
(OECD) endorse these accounting standards and support their adoption.
Institutional theory helps us to comprehend how various nation-states
respond to these global pressures and how individual organizations are im-
plicated with the process at a specific country level. However, such an ap-
proach can be criticized in that it creates inequality when not all countries
2050004-14
and societies may have an equal infrastructure in terms of, for example, legal
support and training facilities. However, those who adopt global trends can
enjoy potential gains by being a member of a network society, which
becomes institutionalized over time.

Institutional forces create an isomorphic atmosphere that induces sub-
ordinate organizations to adopt similar structures. Such an adoption is
transmitted from the higher order environment to lower levels. For example,
once accounting practices are institutionalized, organizations adhere to
these practices by conforming to institutional imperatives. Isomorphism
takes place in different forms, for example, adhering to professional prac-
tices, following international trade partners, and obeying government reg-
ulations. DiMaggio and Powell (1991) posit that institutional theory deals
with three forms of isomorphism: coercive isomorphism, normative
isomorphism, and mimetic isomorphism.

One of the major influences concerning the adoption of IFRS is the
presence of global and local institutions that force and/or influence economic
actors to conform to IFRS (Judge et al., 2010). Such influences are coercive
in nature, and accounting development literature provides support for co-
ercive isomorphism (Judge et al., 2010). Accordingly, the decision to adopt
IFRS in a country may be imposed by international economic actors, such as
the IMF and World Bank, that provide foreign aid. There are, however,
certain \rules of the game" that need to be adhered to if countries are to be
legitimate recipients of such aid and funding (Mouck, 2004). This is par-
ticularly true when the economy is poor or undeveloped (Judge et al., 2010).
For instance, Ashraf and Ghani (2005) suggest that the IMF had played a
pivotal role in shaping corporate reporting practices in Pakistan that led to
direct and indirect coercive pressures exerted by non-governmental organi-
zations to converge towards IFRS. Similarly, Hassan (2008) provides evi-
dence that external coercive pressure from donor agencies such as the IMF
was influential in Egypt’s decision to accept IFRS. Isomorphism also deals
with the collective values that shape conformity of thought and achievement
within institutional environments (DiMaggio & Powell, 1991). Annisette
(2004) suggests that the World Bank imposes the appointment of Big-4 audit
firms for projects financed by the bank. This reinforces the position of the
Big-4 audit firms in the global audit market by establishing offices in dif-
ferent locations around the world, thereby leading to the globalization of
accounting (Perera et al., 2003). Irvine (2008), using the United Arab
Emirates (UAE) context, further suggests that the Big-4 audit firms en-
courage their clients to present their financial statements under IFRS and
2050004-15
promote their image as providers of high-quality accounting services to add

value and credibility to Arab businesses.
Normative values are generally informal, but they have general accep-
tance in the community. Organizations adopt normative collective values to

avoid social scrutiny. According to Scott (1995, p. 40), normative values
emphasize \the stabilizing influence of social beliefs and norms that are both
internalized and imposed by others." Normative pressures can emanate from
the educational attainment of a nation or the degree of professional technical
knowledge. According to Judge et al. (2010), educational attainment in one
country may be predictive of normative pressures. Irvine (2008) posits that
professional accountants and, more specifically, the Big-4 audit firms, play a
significant role in the implementation of market-oriented public sector
practices, and they are instrumental in the adoption of IFRS.
Organizations show a propensity to imitate other practices that are

regarded as successful and legitimate (Judge et al., 2010), and this form of
isomorphism is known as \mimetic." For instance, if a successful multina-
tional, established in one country, adopts IFRS, competitors will imitate it.
This form of isomorphism requires the definition of network effects that arise
from economic relationships that have a first-order effect on financial
reporting, geographical proximity, and connections with erstwhile colonizers
(Ramanna & Sletten, 2014). IFRS, as a globally acknowledged body of
standards, is expected to reduce transaction costs for foreign users of fi-
nancial statements. If a nation’s trading partners adopt IFRS, it can lower
transaction costs (Ramanna & Sletten, 2014). Irvine (2008) suggests that the
European Union was the most influential trading partner operating with the
UAE. The EU’s adoption of IFRS on 1 January 2005 led to a mimetic act by
UAE, which required its banks and listed companies to apply IFRS.
5. Institutional Pressures Affecting IFRS Adoption

The adoption of IFRS is not a simple binary decision (Camfferman & Zeff,
2018). Elad (2015) reports that many differences in IFRS adoption for
Algeria, Morocco, and Tunisia are based on the level of conformity with
IFRS regarding dealing with listed companies, versions of IFRS, and stat-
utory filing for listed and unlisted companies. In his analysis, Elad (2015)
documents that Algeria has the highest level of IFRS conformity (83%),
followed by Morocco (50%), and finally, Tunisia with a nil conformity level.
Given this wide discrepancy, we analyze the institutional pressures
influencing IFRS adoption in this region.
2050004-16
5.1. Institutional arrangements and the IFRS adoption process

Pressures from global financial institutions accelerated the abandonment of
socialistic policies during the 1980s in favor of a different economic paradigm
based on the private sector playing a larger role and having a smaller public
sector bureaucracy (Yousef, 2004). This pressure intensified in the 1980s as
oil prices dropped sharply, and many North African countries relied on the
World Bank and IMF for financial assistance and implemented structural
adjustment programs. Other reasons for considering privatization included
the need to strengthen economic competitiveness and tackle high levels of
poverty (Kauffmann & Wegner, 2007). Support for a regime of global ac-
counting standards was commonly advocated because such standards were
consistent with the broad thrust of globalization initiatives endorsed by
politically influential bodies. These included the IMF, Organization for
Economic Co-operation and Development (OECD), World Bank, and

World Trade Organization (WTO) (Graham & Neu, 2003).
The push for privatization gained momentum during the 1990s and 2000s
in Algeria, Morocco, and Tunisia. Morocco was the first North African
country to formally endorse privatization as a policy and was quickly fol-
lowed by Tunisia. Accordingly, between 1993 and 2005, 102 state-owned
enterprises were partially or totally privatized in Morocco.5 Tunisian au-
thorities also adopted the same policy, and between 1987 and 2009, 217
state-owned companies were partially (114) or totally (103) privatized. The
privatization policies reached their peak in Algeria, and between 2003 and
2007, a total of 419 state-owned companies were totally (192) or partially
(227) privatized (KPMG, 2011). Table 3 presents some statistics about
Table 3. Privatization Statistics in Algeria, Morocco, and Tunisia, 2000–2008 (US$

Million)
2000 2001 2002 2003 2004 2005 2006 2007 2008 Total
Algeria 7 369 360 421 158 161 1476

Morocco 2110 1551 2616 147 650 847 7921
Tunisia 230 227 247 121 2282 61 480 3648
Source: OECD (2012), Towards New Arrangements for State Ownership in the Middle
East and North Africa, OECD Publishing, http://dx.doi.org/10.1787/9789264169111-en
These figures represent the privatization proceeds in the MENA region over the period of
2000–2008. We display only figures related to countries of interest in our paper.
5
https://slideplayer.fr/slide/1172295/.
2050004-17
privatization from 2000 to 2008. The most significant privatization drives

have been witnessed in Morocco (US$7,921 million), followed by Tunisia
(US$3,648 million), and lastly, Algeria (US$1,476 million).
The privatization policies in these three countries were buttressed by

policies of economic deregulation, which in effect meant opening their
economies to short- and long-term foreign investment (see Table 1, Panel
B). Several sectors of the economy attracted vast inflows of foreign capital
from mostly European countries, especially communication, services, and
petroleum companies. The exchange rates of local currencies (Tunisian and
Algerian Dinars and Moroccan Dirham) versus the Euro were much lower,
which in turn reduced labor costs significantly and increased the profit-
ability of foreign investments. As shown in Table 1 (Panel B), the average
foreign direct investments in Algeria were valued at US$68,147,178 (thou-
sands) between 2000 and 2016, followed by Morocco, which had attracted,
on average, US$38,393,295 (thousands) of foreign capital inflows. Lastly,
Tunisia had, on average, foreign investment worth US$16,304,976 (thou-
sands) during the same period. These figures are confirmed by the World
Bank’s Development Indicators in 2011, with foreign investment flows
amounting to US$2,721,000, US$2,521,000, and US$433,000 (thousands),
respectively, for Algeria, Morocco, and Tunisia.6 Overall, the conformity
obtained with IFRS was greater for Algeria and Morocco compared to
Tunisia, which was mainly justified by coercive pressures exerted by
foreign investment flows and privatization policies undertaken in these two
countries.
5.2. Professional bodies and IFRS adoption

Following foreign direct investments in these North African French coun-
tries, international accounting firms (Big-4) established offices in this region,
and they played a significant role in the globalization of accounting (Perera
et al., 2003). Clemençot (2008) suggests that the Big-4 auditors dominate the
audit market in Africa in general and North African countries in particular.7
He adds that multinational firms established in these countries prefer the
Big-4 auditors to conduct audit functions, provide consulting services, and
ensure the regularity of mergers and business combinations. In addition,
projects undertaken by the World Bank or the French Organisation des
6
http://databank.worldbank.org/data/download/WDI-2013-ebook.pdf.
7
http://www.jeuneafrique.com/Article/ARTJAHS 500 p086-088.xml0/.
2050004-18
Nations Unies (ONU) in these three countries are controlled by Big-4

auditors (Clemençot, 2008).
On this issue, Philippe Ausseur, an associate of Ernst and Young France,
states \we are satisfied with our performance in Algeria and we aim to
maintain our leading position in such a market" (Ernst & Young, 2012).
Celebrating the official inauguration of PricewaterhouseCoopers (PwC)
Algeria in 2008, Serge Villepellet an associate of PwC France confirms
that PwC wants to be a key participant in the Maghreb region including
Algeria, Morocco, and Tunisia.8 The two other Big-4 auditors (Deloitte and
KPMG) have been operating in Algeria since 2007 and 2002, respectively.
The Big-4 auditors audit 90% of listed companies in Morocco (L’Économiste,
2013).9 In Tunisia, the Big-4 auditors do not have a similar monopolistic
position in the audit market as in Morocco and Algeria. For instance, Achek
and Gallali (2015) report that Big-4 auditors audited about 18.45% of the
listed firms in Tunisia. Therefore, the normative pressures exerted by the
dominating position of the Big-4 accounting firms in the Algerian and
Moroccan audit markets may justify the move to embrace IFRS in these
countries compared to Tunisia.
With respect to the normative role in accounting education and training,
Algeria, Morocco, and Tunisia have a French-based system and use Arabic
and French languages for higher education. However, important imple-
mentation issues still exist with respect to the accounting education systems
in these countries because there is no continuing professional education
system allowing auditors to improve their conceptual and practical skills
[Report on the Observance of Standards and Codes (ROSC): Morocco
ROSC, 2002; Algeria IMF, 2004; Tunisia ROSC, 2006]. The com-
mittee that prepared the ROSC report for Morocco in 2002 suggests: \The
three-year curriculum needs updating to conform to the educational guide-
lines of the International Federation of Accountants (IFAC)" (ROSC, 2002).
Similarly, Merrouche (2005) shares the same sentiment and states that ac-
counting education and training does not sufficiently provide high-quality
accounting service in Algeria.
Klibi (2016) and Jeriji (2009) suggest that members of the National
Accounting Council in Tunisia represent their departments or their sectors
and do not have clear knowledge about accounting. Yaich (2011) observes
that research activity and professional involvement in continuous training in
8
http://www.djazairess.com/fr/lexpression/58842.
9
http://www.leconomiste.com/article/903382-audit-combien-gagnent-les-big-four.
2050004-19
Tunisia are negligible. Accordingly, the accounting profession and education

are encircled by the principle of \form over substance," which creates an
unfavorable environment where convergence towards IFRS is discouraged.
Accounting professionals in these three countries place less emphasis on

disclosing information to investors and more on providing information to tax
authorities. Consequently, accountants suffer from being perceived as low
status because they are viewed as bookkeepers or, at best, technicians, and
not decision-makers (Ben Otman, 2006; Merrouche, 2005; Yaich, 2006).
Merrouche (2005) adds that there are not many qualified accountants in the
country compared to Morocco and Tunisia, resulting in a shortage of local
accountants at the professional level. Accordingly, the normative isomor-
phism of accounting education and training has not played a significant role
in IFRS adoption in these countries.
5.3. Partnership, contextual factors, and IFRS adoption

It has been suggested that emerging countries are likely to implement IFRS
if their trading partners have also adopted IFRS (Ramanna & Sletten, 2014).
The economies of Algeria, Morocco, and Tunisia are closely connected to
those of EU countries, and given that these countries inherited the same
French colonial legacy and France adopted IFRS in 2005, it is expected that
these countries would do the same. Figures concerning the major EU trade
partners from 2006 to 2011 (Table 4) show that Algeria was the first among
the Maghreb countries, with a worldwide rank ranging from 14 to 22, fol-
lowed by Morocco, with a rank between 28 and 30, while Tunisia’s was
between 32 and 36 during the same period.
The EU is an influential trading partner of the Maghreb countries, and
the union’s strongest economic ties are with Algeria. Given the openness to
its globalized environment and its increasing reliance on international trade
with the EU, it is inevitable that these relationships bring pressure on
Algeria to move toward westernized forms of financial reporting systems,
Table 4. Major EU Trade Partner Worldwide Rankings for North

African Countries
2006 2007 2008 2009 2010 2011
Algeria Algerian Rank 17 22 12 14 18 14

Morocco Moroccan Rank 30 28 30 30 30 29
Tunisia Tunisian Rank 36 32 34 31 32 31
Source: Eurostat (Comext, statistical regime 4).
2050004-20
such as IFRS. This represents a form of mimetic pressure that may justify
the higher score of conformity with IFRS for Algeria compared to Morocco
and Tunisia.
5.4. The institutional role of capital markets in IFRS adoption

Perera (1989) suggests there is a strong link between the existence of an
active capital market and the development of accounting standards to sat-
isfy investors’ needs in terms of information. Eliminating diversity in ac-
counting standards across the world becomes crucial given the large flow
of capital across national borders from one stock exchange to another
(Camfferman & Zeff, 2015).
Adopting IFRS will reduce the transaction costs of preparing financial
statements (Zori & Seny Kan, 2017) and the home bias faced by foreign
investors (Khurana & Michas, 2011). Gray et al. (1984) argue that high-
quality standards of financial reporting are one of the most important
characteristics of developed market economies. Accounting regulators tend
to establish sophisticated accounting standards to guarantee the production
and disclosure of quality financial information that will be potentially useful
for investors in making their decisions (Adhikari & Tondkar, 1992). Salter
and Niswander (1995) and Zeghal and Mhedhbi (2006) provide empirical
evidence that the size and the extent of sophistication of the nation’s capital
markets are positively related to the adoption of international accounting
standards.
Morocco was the first North African country to establish a financial
market, followed by Tunisia and Algeria. The Moroccan Stock Exchange
(MSE) was established in 1929 by private financial institutions and is known
as the \Security and Compensation Office" (Office de Compensation des
Valeurs Mobili eres) (Hearn, 2010). Currently, the Casablanca Stock Ex-
change (CSE) is recognized as one of the most organized and active financial
markets in Africa, with 74 listed firms at the end of 2016. At the end of 2016,
it was ranked as the third largest stock exchange in Africa, following South
Africa and Egypt. The volume of transactions of the Moroccan financial
market was valued at US$3,177,675 (thousands) during 2016 (Table 5).10
This active stock exchange has created a favorable economic environment
10
The volume of transactions and the number of listed companies at the end of 2016 were
collected from the annual report of each stock exchange. The value of the volume of trans-
actions was then converted to US$ using the exchange rate between US$ and local currency at
the end of 2016.
2050004-21
Table 5. Stocks Traded, Total Value (in Thousands US$)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Algeria 3490 124,493 800,347 1,015,347 747,208 558,391 NA NA 629,705 475,984 559,782 967,305
Morocco 7,890,600 9,859,300 23,172,000 13,766,900 7,913,100 6,098,300 4,092,520 3,492,990 3,236,760 3,039,870 2,919,000 3,177,675
Tunisia 455,070 521,990 652,300 1,494,439 1,257,285 1,699,745 1,050,650 1,251,300 461,900 887,200 1,048,774 756,662
Listed 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
companies
Algeria 9 9 9 9 9 9 NA NA 5 5 5 5
Morocco 54 63 73 77 76 73 75 76 75 74 74 74
2050004-22
Tunisia 45 48 51 50 52 56 57 59 71 77 78 79
Sources: For Tunisia and Algeria, data were collected from the official websites of these two countries (http://www.sgbv.dz/?page=
rapport&rap=4&lang=fr and http://www.bvmt.com.tn/fr/rapports-activites).
NA: Not available.
For Morocco, data are available in the World Bank website for the period of interest. https://data.worldbank.org/indicator/CM.MKT.
TRAD.CD?name desc=true.
that may enhance transparency and provide investors who are operating in
the CSE with quality information. Accordingly, Morocco’s financial
authorities have authorized the application of IFRS for listed companies
(Elad, 2015).
The Tunisian Stock Exchange (TSE) came into existence in 1969 (Hearn,
2010). The Exchange was further developed when the country’s financial
authorities adopted Law No. 94–117 of 14 November 1994 focusing on
reforming the Tunisian financial market. The TSE is managed by Bourse des
Valeurs Mobili eres de Tunis (BVMT), which in turn is owned by 24 financial
intermediaries, and it is supervised by the Tunisian Securities Regulator
(TSR). At the end of 2016, there were 79 firms listed on the TSE, and the
volume of transactions of the Tunisian financial market amounted to US
$756,662 (thousands). Companies listed on this stock exchange are generally
characterized by concentrated family ownership (Guidara et al., 2016). This

implies two things: first, family investors have little need of high-quality
information, and secondly, it reduces Tunisian policy-makers’ incentives to
take up IFRS. Algeria was the last country to establish its stock exchange
(La Societe de Gestion de la Bourse des Valeurs Mobili eres: SGBV). Its stock
exchange remains twenty years after its establishment one of the
smallest and least active stock exchanges in the world (Messaoud, 2019). At
the end of 2016, there were only five firms listed on the Algerian Stock
Exchange, and the volume of transactions amounted to US$967,305 (thou-
sands). Accordingly, instituting the stock market in Algeria meant that it
had a very limited role in the transition toward IFRS, which was contrary to
what the Algerian accounting authorities wanted.
Aside from linking IFRS adoption to the size and volume of transactions
in each stock market, Cherif and Dreger (2016) suggest that stock markets in
the Middle East and North Africa (MENA) region (including Algeria,
Morocco, and Tunisia) are less important as a source of external finance
compared to the banking sector. Most stock markets function as public
institutions or state-owned companies (Amico, 2012). Cherif and Dreger
(2016) posit that these markets are partially integrated into the interna-
tional capital market and are dominated by a few large retail investors, while
the role of institutional as well as foreign investors is limited. Similarly, Liste
et al. (2012) note that bond issuance has been very limited in North Africa
apart from Egypt, and hence the private/public debt markets in Algeria,
Morocco, and Tunisia are inexistent or undeveloped. While some reforms
have been directed towards greater liberalization with respect to participa-
tion of foreign investors, a higher level of participation is still limited due to
2050004-23
several investment obstacles, including the cost of access, cost of informa-

tion, and taxation (Paskelian et al., 2013). The absence of an active role for
two investor types (foreign and institutional) may limit governmental
incentives in Algeria, Morocco, and Tunisia to implement IFRS. This is

particularly the case given that IFRS accounting literature has previously
shown that institutional investors (e.g., Florou & Pope, 2012) and foreign
investors (e.g., Gordon et al., 2012) have increased after mandatory IFRS
adoption.
5.5. Institutional complexity and IFRS adoption

In parallel to institutional isomorphism, emerging economies may face in-
stitutional complexity when deciding to adopt IFRS. During the periods of
transition, countries may face institutional complexity due to the rise of

multiple institutional logics, which are shaped by economic and social
structural changes (Alon, 2013). Institutional complexity represents a jux-
taposition of multiple institutional logics, including internal forces con-
straining the adoption of IFRS (e.g., high level of corruption, weak
accounting and auditing infrastructure, family ownership, tax-oriented local
accounting standards) and external forces that push towards the adoption of
IFRS, for instance, the establishment of Big-4 auditors. Institutional com-
plexity arises from incompatible prescriptions from diverse institutional
logics that generate challenges for organizations (Alon, 2013, p. 45). Klibi
(2016) finds that Tunisian listed companies use IFRS to complement the
unachieved nature of Tunisian accounting standards. Adopting this strategy
by Tunisian companies allows conformity with the prevailing national
reporting system while satisfying the requirement of international agencies
for globally recognized financial reporting.
In the context of IFRS in emerging economies, the common professional
environment may represent a constraint on the adoption of IFRS (Alexander
& Alon, 2017). For instance, the old accounting mentality of local accoun-
tants emphasizing the strong linkages between accounting and taxation and
neglecting the tradition of preparing financial statements for the purposes of
market-oriented decision-making still influences North Africa’s modern ac-
counting environment, thus lessening the relevance of IFRS to these coun-
tries. In addition, local accounting standards have been implemented to
serve fiscal authorities and banks as a primary source of finance in emerging
economies, while IFRS are designed to satisfy the needs of external users
such as shareholders and creditors (IASB, 2012). Furthermore, IFRS require
2050004-24
principles-based and professional judgments for application (Alon, 2013),

and these concepts are not common among accountants in Algeria, Morocco,
and Tunisia, where accounting practices are considered to simply be an
exercise in bookkeeping, which does not require professional judgment

(Merrouche, 2005).
Saidi (2013) refers to several examples of institutional complexity in
Algeria that can be extended to Morocco and Tunisia. On the one hand,
Saidi (2013) analyses the general spirit prevailing within the Algerian
economy and suggests that
The Algerian economic, financial and administrative institutions
have been operating for about half a century under particular cir-
cumstances and within a definite state of spirit and mentality.
Expecting that these inherited institutions and culture to converge
smoothly overnight to a new philosophy and mechanisms is quite

unthinkable (p. 139).
On the other hand, Saidi (2013) refers to the weak professional accounting
environment and posits that \The non-existence of a real and active ac-
counting profession in Algeria constitutes a serious issue. There is, in fact, a
quasi-professional body called \l’Ordre National des Expert Comptables"
under the supervision of the Ministry of Finance" (p. 139). He adds that this
professional body is not involved in the accounting regulation procedure.
From an accounting education perspective, Saidi (2013, p. 140) further
suggests that the decision to adopt IFRS has been taken despite a shortage of
accountants, auditors, and accounting educators who are not able to cope
technically with IFRS requirements. Accordingly, the coexistence of
these competing institutional logics may create an institutional void in these
three countries, thereby reducing the likelihood of successful implementa-
tion of IFRS.
6. Obstacles for the Adoption of IFRS in Algeria,

Morocco, and Tunisia
The challenges in IFRS adoption in emerging economies can be extended to
Algeria, Morocco, and Tunisia, and we provide some illustrative examples in
these three countries.
First, the equity markets are not well developed since the institutions
remain weak and professionals are reluctant to embrace transparency. For
instance, Ben Otman (2006) states that most Moroccan managers consider
2050004-25
accounting to be a constraint and not a managerial tool that improves

business operations and effective decision-making.
Second, accounting professionals in these countries are more familiar with
a fiscal-oriented accounting model where the ultimate objective is to reduce

taxes. For instance, Slama and Klibi (2017) and Yaich (2006) assert there is
a strong connection between accounting and taxation in Tunisia, and tax
rules dominate over accounting standards. In countries where taxes depend
on income statement results, earnings may be manipulated to avoid paying
tax (Eberhartinger, 1999). Given the fact that there was no prior harmo-
nization between fiscal and accounting rules when the new accounting sys-
tem began operating, Tunisian companies prefer to be more in line with fiscal
rules to avoid sanctions imposed by fiscal administration (Yaich, 2006). For
instance, Boumediene et al. (2016) surveyed Tunisian Certified Public
Accountants about the main obstacles to the adoption of IFRS. They

reported that
(i) companies prepare their financial statements first in accordance
with tax rules; (ii) the differences between the tax rules of the
Tunisian accounting system and the IFRS are undoubtedly an
obstacle to a better adoption of these standards and the final tax
obstacle deals with the readiness of tax administration for the
adoption of the IFRS (p. 621).
Family-owned firms’ accountants tend to satisfy the requirements of their
senior managers by minimizing their taxes, which leads to recording reduced
profits and exacerbating expenses. Similarly, Morocco has a fiscal-oriented
accounting system (Haoudi, 2015). For instance, the General Code of Ac-
counting Normalization attributes more importance to the income statement
compared to the balance sheet, since the former represents the cornerstone
for calculating taxable income by adjusting gross accounting income
(Haoudi, 2015). In Algeria, accounting professionals operated under a fiscal
oriented system (PNC, 1975) until the move to the Accounting and Fi-
nancial System in 2010. The required financial statements by PNC 1975
represent a set of accounts which was closer to corporate tax return forms
than to genuine financial statements (Saidi, 2013). This fiscal-oriented sys-
tem may also discourage the adoption of IFRS.
Third, professional accountants’ knowledge of principles-based IFRS is
limited due to the lack of ongoing training opportunities (as stated earlier) in
these countries. This is a major issue that can negate the implementation
of these standards. In fact, the quality of public university teaching in
2050004-26
accounting and auditing suffers from a lack of modern curricula, where

undergraduate-level accounting and auditing courses focus on elementary
topics and do not include IFRS. For example, in Tunisia, the ROSC (2006)
states in full that

[T]he Law on the Accounting Profession created the Society of
Accountants, which comprised approximately 1,139 members as of
the end of June 2006. Among those members, the Society includes
422 accounting technicians who meet more stringent education and
experience requirements than other members of the Society. How-
ever, education requirements are more relaxed than those pertaining
to Chartered Accountants and fall short of IFAC International Ed-
ucation Standards, in part due to the lack of professional examina-
tion. There is little evidence that the Society can ensure an adequate
system of quality assurance and effective systems of investigations

and sanctions to detect correct and prevent the inadequate execution
of a statutory audit by all accounting technicians (p. 9).
Morocco suffers from the absence of a quality assurance system and the
lack of continuing professional education and training (ROSC, 2002). Fur-
thermore, IFRS are principles-based, whilst the existing accounting system
is rule-based and is modelled on the French system. To properly implement
IFRS, there would have to be more demand for interpretations of the various
provisions. In most developing countries, only very few professional
accountants have a detailed knowledge of IFRS and the requisite skills to
apply them (Wong, 2004). Given that all three countries are French-
speaking, there is an even greater shortage of competent and skilled people
who are proficient in English. Therefore, the quality of university and college
curricula in accounting and auditing must be improved and more relevant to
recent IFAC-issued International Education Standards. The continuing re-
vision of IFRS (Maradona & Chand, 2018) and the time lag between the
pronouncement of IFRS and the possible adoption of IFRS in Francophone
North African countries may represent another challenge for the conver-
gence to IFRS due to translation issues from English to French or Arabic
languages. For instance, studies dealing with IFRS in non-English-speaking
settings (e.g., Larson & Street, 2004) suggest that translating the IFRS from
English to the local language can postpone the convergence process. There is
also a risk of inaccurate translation from English IFRS to the Arabic lan-
guage, leading to inconsistency between the IFRS and local translated IFRS
(Baskerville & Evans, 2011; Maradona & Chand, 2018).
2050004-27
Fourth, the great majority of companies in emerging countries are small

and medium-sized firms (SMEs) (Wong, 2004). Since the IFRS standards
are more appropriate for the needs of big entities obtaining capital from
capital markets, their adoption in Algeria, Morocco, and Tunisia will raise
concerns about the relevance of such standards for SMEs, and their ability to
comply with IFRS should be considered (Alp & Ustundag, 2009). A good
example is provided by Derbel (2010), who suggests there are approximately
150,000 Tunisian companies obliged to record their transactions. Of these,
1000 are large companies, while the remainder are categorized as small
companies with fewer employees and low profitability.
Fifth, one of the major technical issues is fair-value measurement
requirements, which represent an important characteristic of certain IFRS
(e.g., IAS 16, Plant and Equipment; IAS 38, Intangible Assets; IAS 40,
Investment Property; IFRS 5, Assets Held for Sale). For instance, the
adoption of IFRS will lead to difficulties especially regarding several ac-
counting standards (e.g., IAS 12, Deferred Taxes; fair value method predi-
cated in IAS 40 Investment Property, IAS 16 Plant and Equipment, IAS 38
Intangible Assets). The determination of fair value for these standards is
problematic given its complex and controversial nature, and given different
nations’ abilities to determine fair value based on their underlying markets
and financial infrastructure (Peng & Bewley, 2010). Obtaining such infor-
mation in emerging countries is difficult to achieve since these countries’
markets simply lack the requisite liquidity (Derbel, 2010). According to Alp
and Ustundag (2009, p. 693), fair-value measurements \are likely to be more
consistently and accurately computed by professionals in developed econo-
mies than by those in developing ones."
Sixth and finally, the cost of convergence may represent a real obstacle
that constrains the move toward IFRS. Recent empirical studies (e.g.,
Cameran & Perotti, 2014; De George et al., 2013; Kim et al., 2012) docu-
mented that IFRS adoption is linked to a significant increase in audit fees,
and this is particularly true in a minimal auditing environment, where major
differences between local GAAP and IFRS exist along with poor legal en-
forcement (Kim et al., 2012). Preparing financial statements under IFRS is a
complex business, and it requires higher training costs due to most profes-
sional accountants being more familiar with local GAAP and practices, and
not with IFRS (Chebaane, 2011). These factors may outweigh the adoption
of IFRS in Algeria, Morocco, and Tunisia simply because their business
communities are not receptive to it. This is particularly true in Tunisia,
especially after the Tunisian revolution that occurred in late 2010 and
2050004-28
caused widespread economic and political instability (Arieff & Humud,

2015).11 This situation gives priority to other economic and social aspects
and leads to delays in any accounting reform with respect to IFRS adoption.
For instance, Tunisian Certified Public Accountants confirm in a survey

that IFRS adoption and implementation costs and the costs related to their
enforcement represent major economic obstacles (Boumediene et al., 2016).
7. Conclusion and Future Research

In this paper, we review the historical development of accounting regulations
in three North African countries: Algeria, Morocco, and Tunisia, and ana-
lyze the factors that have impacted the convergence towards IFRS based on
institutional theory. With regard to the development of accounting regula-
tion, Algeria has only accepted the Accounting and Financial System, in-
cluding several accounting standards based on some selected IFRS, and their
application has involved several simplifications. Moroccan firms prepare
their financial statements under the General Code of Accounting Normali-
zation, since there is no explicit obligation to prepare them under IFRS
except for those required by Circular No. 56/G/2007. Finally, Tunisian
firms operate under the Accounting System of Enterprises, with the layered
adoption of IFRS when there is an additional requirement to the existing
reporting practices. We also find that the higher conformity score with IFRS
observed for Algeria compared to Morocco and Tunisia has been mostly
driven by: first, coercive pressures (the high foreign investment flows into
Algeria during the last a couple of decades); secondly, normative pressures
exerted by the dominant position of global Big-4 audit firms; and thirdly,
mimetic pressures resulting from Algeria’s strong trading relationship with
the European Union compared to Morocco and Tunisia. An active stock
exchange in Morocco has created a favorable economic environment for
investors operating in the Casablanca Stock Exchange, with quality infor-
mation leading to the application of IFRS as published by the IASB for listed
companies.
The analysis of IFRS developments in these three North African countries
underscores the need to locate institutional pressures at three levels, these
11
According to Arieff and Humud (2015, p. 12), \[d]eclines in tourism and foreign direct
investment (FDI) have been particularly damaging, and Tunisia’s international credit ratings
have been repeatedly downgraded. Protests and labor disputes, in turn, have hampered
efforts to attract investment. Unemployment remains high at 15.3%, and is reportedly higher
among youth, particularly college graduates."
2050004-29
being global, national, and organizational field levels, to obtain a full picture
of the IFRS adoption process. It shows how concepts developed at the
higher-level cascades to lower levels and how institutionalization forms at
different levels. Our work contributes to the existing literature on ac-

counting convergence in developing countries, especially in the selected
three North African countries.
This study shows how non-Anglo-Saxon countries and former colonial
powers with different legal traditions influenced and accommodated IFRS
accounting standards. Although the existing literature suggests these
countries may find it difficult to embrace IFRS practices, the evidence here
suggests that global institutional influence plays a major role in the con-
vergence process. The findings also suggest that the regulatory authorities in
each country need to assess how IFRS can be applied to all sectors in a
flexible way. There are significant differences, which have cost implications
for different organizations, such as large vs small organizations or businesses.
The regulators also need to assess the effectiveness of IFRS, which could lead
training programs to educate accountants. Further, the findings of this study
have implications for future accounting education in Algeria, Morocco, and
Tunisia in terms of curriculum design to include the IFRS component in
accounting courses in both undergraduate and postgraduate levels.
However, this study’s findings need to be related with caution to other
countries because differences exist in antecedent factors, including country-
specific institutional factors. Moreover, this study is based on secondary data
available from published sources. Further studies should be designed to obtain
a better in-depth understanding at the organizational level concerning how
organizations adopted IFRS accounting standards within their institutional
environment. This area thus demands more research, particularly qualitative
case-based interpretive studies involving primary sources such as surveys and
interviews of key participants to obtain a better understanding of IFRS con-
vergence process. Future studies in the above areas will provide a better basis
to theorize organizational isomorphism, heterogeneity, and variations of the
IFRS adoption process. Nonetheless, this study contributes to the accounting
convergence literature, and the findings have policy implications for countries
sharing similarities with North African and other emerging countries.
Acknowledgments
We are grateful to three anonymous referees of this journal for their
insightful comments and suggestions. All remaining errors are ours.
2050004-30
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Accounting Regulations and IFRS Adoption

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The International Journal of Accounting

Vol. 55, No. 1 (2020) 2050004 (36 pages)

Accounting Regulations and IFRS Adoption

Published 10 March 2020

This paper traces the historical developments of accounting regulations in Algeria,

*Address for correspondence: Kamran Ahmed, La Trobe Business School, La Trobe

professional accountants. Moreover, the convergence with IFRS in these countries

Keywords: Accounting regulations; IFRS; institutional theory; obstacles to IFRS

has generally focused on understanding and evaluating reporting environ-

Anglo-Saxon world, and these may create an imbalance in African

the issue of conformity with IFRS in emerging African countries. He suggests

Germany, Italy, and Spain.

stages of implementation. For instance, Algeria has only accepted the

driven by a combination of institutional and contextual inﬂuences, for ex-

these countries, it alerts ﬁnancial authorities to the current state of ac-

brief proﬁle of Algeria, Tunisia, and Morocco. In Section 3, we discuss the

2. Algeria, Morocco, and Tunisia | A Brief Proﬁle

and developing countries because it is perceived to generate economic

this increased to US$103,606.32 (million) in 2016.

(million) in 2006 to US$42,062.60 (million) in 2016.

3. Development of Accounting Regulations

Table 1. Economic Proﬁle and Foreign Direct Investments

Panel A: Economic Proﬁle

(1) Source: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?name desc=true.

in any detail; only general recommendations were provided. Furthermore,

Finally, the new accounting system allows some Algerian companies to

26 May 2005, which required companies to report consolidated ﬁnancial

European companies, (ii) companies obliged by their parent ﬁrms to report

accounting bookkeeping instructions, general principles, and rules for

It should be noted here that Accounting System of Enterprises required

plement cost and management control systems. However, most Tunisian

gations, deferred tax, and accounting for an issuer’s ﬁnancial

Table 2. Summary of Accounting Regulations Development

Period Algeria Morocco Tunisia

which operated Code of Account- Law No. 96–112 of

Fig. 1. Depiction of the accounting framework in Algeria, Morocco, and Tunisia.

4. Institutional Theory and IFRS Adoption

analysis as well as at the level of the organizational ﬁeld or the industry."

becomes institutionalized over time.

isomorphism, and mimetic isomorphism.

promote their image as providers of high-quality accounting services to add

tance in the community. Organizations adopt normative collective values to

Organizations show a propensity to imitate other practices that are

5. Institutional Pressures Aﬀecting IFRS Adoption

5.1. Institutional arrangements and the IFRS adoption process

Economic Co-operation and Development (OECD), World Bank, and

Table 3. Privatization Statistics in Algeria, Morocco, and Tunisia, 2000–2008 (US$

Algeria 7 369 360 421 158 161 1476

privatization from 2000 to 2008. The most signiﬁcant privatization drives

The privatization policies in these three countries were buttressed by

5.2. Professional bodies and IFRS adoption

Nations Unies (ONU) in these three countries are controlled by Big-4

Tunisia are negligible. Accordingly, the accounting profession and education

Accounting professionals in these three countries place less emphasis on

5.3. Partnership, contextual factors, and IFRS adoption

Table 4. Major EU Trade Partner Worldwide Rankings for North

2006 2007 2008 2009 2010 2011

Algeria Algerian Rank 17 22 12 14 18 14

Source: Eurostat (Comext, statistical regime 4).

5.4. The institutional role of capital markets in IFRS adoption

Table 5. Stocks Traded, Total Value (in Thousands US$)

characterized by concentrated family ownership (Guidara et al., 2016). This

several investment obstacles, including the cost of access, cost of informa-

incentives in Algeria, Morocco, and Tunisia to implement IFRS. This is