The status of financial reporting, accounting education and profession in a developing country: the case of Jordan.
Khasharmeh, Hussein Ali
The research for this study started in April 1993. It is a study of the status of financial reporting, accounting education and profession, in developing countries in general and in Jordan in particular.\ud The general study is a literature survey which examines the nature and problems of accounting\ud education, profession and practices in developing countries. In addition, a review of the development of national accounting standards in the UK and USA, and the International Accounting Standards Committee (IASC) was undertaken and reported upon.\ud The main purpose of the study is to evaluate the accounting profession and corporate financial reports in Jordan with reference to national and international practice and to elicit and investigate the views of various constituencies in Jordan about the use of international accounting standards (IASs) recommended by the accountancy profession in Jordan, as a basis for preparing financial statements of Jordanian enterprises. The study also elicited and reports upon the opinions of Jordanians on the current accounting education programmes in Jordan, and how they can be improved if deficient.\ud Two approaches were used in this study. The first was a questionnaire survey of the perceptions of various users regarding the status of corporate annual reports, accounting profession and education to determine whether the opinions of different user-groups on such status diverge or converge.\ud The second was a content analysis of annual reports of a sample of Jordanian companies listed on Amman Financial Market (AFM) to determine the extent and scope of information provided by them and to reveal the gap between what is disclosed and what is required to be disclosed by the IASC. A disclosure index methodology was adopted in the study. Some corporate characteristics were selected and tested to discover if any of them can explain the variation in disclosure index. In addition, face-to-face interviews with selected individuals were carried out to clarify confounding results from the responses to the questionnaire and the analysis of annual reports and accounts.\ud The study revealed that the accounting profession in Jordan is in its infancy and much more resources and attention than is presently devoted to it is needed to develop this profession to the level required to enable it to function effectively and efficiently.\ud The results suggest that slightly over 50% of the respondents support the suggestion that graduates from Jordanian Universities are inadequately prepared. The results also reveal a strong support for the establishment of Accounting Development Centres to improve accounting education in Jordan.\ud Moreover, there is a general agreement by all respondent user-groups that the IASC's standards are appropriate for Jordan when modified to take account of the needs of the local environment.\ud When compared with reporting practices before the adoption of IASs in Jordan, the disclosure indexes of the sampled companies after adoption of IASs in Jordan revealed a strong improvement in the level of disclosure. The results of multivariate regression reveal that there is no significant association in 1988 between any of each of balance sheet index, income statement index, other financial statement index, measurement and valuation methods index and overall index on one hand and the firms characteristics, namely, assets size, gearing, type of industry, liquidity ratio, proportion owned by the government and size of annual sales on the other hand. Regarding 1992, it seems that the type of industry determine the extent of disclosure in Jordan. The results indicate a highly significant association between each of the indexes conveying the quality of reporting in the balance sheet, profit and loss accounts and the notes relating to measurement and valuation methods on one hand and the type of industry. The results for 1992 show that corporate reporting in Jordan is becoming systematic, responding to industry behaviour, gearing ratio and the level of government\ud investment, compared to the circumstance in 1988. Moreover, the mean score disclosure indexes for 1988 and 1992 reveal that there is a strong improvement in "other financial statement index" in 1992 over 1988. Again this improvement may suggest a positive influence of the adoption of IASC's standards on disclosure behaviour in Jordan. Compared to 1988, the indexes of disclosure in the income statements and in the balance sheets of 1992 fell. This fall may suggest that IASC's standards are lower than normal standards in Jordan. However, changes in corporate disclosure between 1988 and 1992 vary from company-to-company. The correlations between the 1988 and 1992 ranks of each company in respect of different types of financial statements indicate a low correspondence between the ranks. For example the coefficient of rank correlation between the 1988 and 1992 balance sheet indexes is the weakest at 0.5120. That for the 1988 and 1992 indexes for income statement is 0.3626; measurement and valuation methods is 0.4530 and overall disclosure is 0.4839. Furthermore, the results highlight the items of information in the annual reports where disclosure is poor (such as proportion of fixed assets pledged, unexpired useful life of fixed assets). Several suggestions are offered for the improvement of the accounting profession, education and practices in Jordan.