The Extent of the Harmonization of International Accounting Standards

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It is apparent that there were many factors that have affected the development of accountancy systems and accounting operations in developing countries. These factors might be divided into:

External factors:

The impact of colonisation, globalisation and Multi-National Corporations (MNCs)

Internal factors:

Such as local laws, taxation, accounting educational systems, and accounting as a profession, besides other political, cultural, and economical factors.

Arabic countries in general, and particularly Libya, have encountered nearly similar kinds of factors, which have impacted the profession of accounting during the pre-and post-independence eras. Regarding the development of accounting before Libyan independence, it is evident that it was under the influence of Turkish, Italian, British, and French occupation, and each occupation impacted upon the establishment and development of most current applied accounting systems in Libya (2).

Moreover, after independence, external auditing experience was the main source of impact on the development and profession of accounting, including international assistance from the United Nations, and the arrival of international companies to work in Libyan market. However, the newly-legislated laws and regulations, and the newly implemented educational and professional accounting systems exerted an internal (Libyan) influence on accountancy (2).

Since there was a paucity of resources for most of the history of modern Libya, there was a need to evaluate the external factors and their effects on accounting via historical audit for some political and economical conditions, which led to the development of Libyan accountancy(2).

The internal factors were studied via chronological historical review of some laws such as law taxation, commercial law, and the establishment of educational and professional accounting in Libya.

According to the current accounting environment in Libya, it is evident that the local accounting system is mainly imported from developed countries, such as the UK and USA; moreover, there was no evidence of any modification of these systems to be convenient to the Libyan environment. British and American accounting systems were identified by being directed towards external auditing, and foreign financial reports, which is the case in Libya (5, 8). There were no accounting principles or auditing standards until the present, besides which there is no code of conduct for accountants. Since most of companies working in Libyan markets are national in origin, they are supposed to achieve economic and social goals, and contribute to the overall developmental rate, so it is pivotal to establish informing accounting systems to assess their performance, however, available accounting data in these companies lack the quality of accounting information standards, for example the ability for comparability; it is evident that financial lists are limited to pure financial information.

In 1973 the first international committee for the coordination of the accountancy and auditing profession, the International Accounting Standards Committee, was established in Sydney, for the coordination of the accounting and auditing professions. The committee issued 39 conventions on international standards until the end of 2001, thus aiming to develop and consolidate the accountancy profession within a unified international scope (2, 7, and 12). A number of states developed and issued local Accounting Standards, whereas some states adopted the guidelines of the International Accounting Standards Committee without any alterations or amendments, at the time some other states recourse to those standards, as in the cases of Saudi Arabia and Egypt (1,3). The General People's Committee for Economy, Trade and Investment, which is supervising the establishment of the stock market, participated in session 35 of the Tripoli International Fair, being represented by workers of the market, and a special wing was organized in order to define Libyan Stock Market importance, to increase the awareness of investors about the dealing approaches in markets, and to direct them towards the optimum investment of their savings (4, 6).

The working group of the market was organized according to individual specialization; a second symposium entitled 'Future Vision towards Investment' was held during the period of session 35 of the Tripoli International Fair. It was also attended by a number of economic experts and specialists interested in economic and investment affairs, in a number of discussion topics and themes aimed at the definition of securities market, the trading movement, and the role of brokers in stimulating trading and regulating the movement of the market, and also responding to all the questions which could open the way for investors, whether domestic or foreign, in securities, because it is the channel granted transparency and credibility in order to optimize the investment in successful companies.

The stock market has taken the necessary arrangements regarding some registered companies and banks, Figure 1.

The first phase of the foundation witnessed holding several intensive meetings with the relevant parties in market activity and the hiring of local and foreign experts in this area (9).

Figure 1, companies and banks at Libyan Stock Market

S. No.




United Insurance Company

10,000,000 LYD


National Company for flour mills & fodder



Libyan Insurance Company

50,000,000 LYD


sahara insurance company.

15,000,000 LYD


Libyan stock market company

50,000,000 LYD


National Cement Company



Sahara Bank

252,000,000 LYD


Wahda Bank

108,000,000 LYD


Trade and development bank.

50,000,000 LYD


Alsary trade and investment bank

33,333,3330 LYD


Tripoli National Bank



Suk Eljuma National Bank



Hay Andalus National Bank


In June 3, (2006) the General People's Committee issued Resolution Number 134, to establish a Libyan Stock Market and issuing its statute. Accordingly, the Secretary General People's Committee for Economy, Trade and Investment issued Decision Number 244 (2006) appointing Suliman Alshahomy as the General Manager of the Libyan Stock Market (9).

The Secretary of the General People's Committee for Economy, Trade and Investment issued resolution Number 332 (2006), regarding the identification of fees and contributions of members of the Libyan Stock Market. Since the issuing of these resolutions, the assigned manager established the stock market draw In parallel with mechanisms that the market should follow after the establishment through external visits to Arab countries, he studied Amman, Dubai, Cairo, and Alexandria Stock Exchanges, to stand on their experiences on spot (9).

The General People's Committee has issued the Decision No. (436) for the year 2008, regarding the new statute for the Libyan Stock Market, it has been raised market capitalization to 50,000,000 L.D., Underwritten by the Fund for Social and Economic Development in full and may be putting part of them for subscription by local and international companies.

Problem of the study:

In Libya, the practice of accounting auditing began in the 1950s with the Law Number 31 (1955) regarding the construction of the Department of Accounting by the state. The discovery of oil was the most important economic incident which attracted a number of the investors in the early sixties. The accounting and auditing offices were directed by foreigners, because of the scarcity of qualified citizens to practice the auditing profession (2).

Since the Libyan revolution in 1969, the nomination of auditors has been assigned to the Ministry of the Treasury. There have been endeavours to organize accounting and auditing, in addition to legal legislation, the Law Number 116 (1973) pertaining to the accounting and auditing profession led to the first syndicate council being formed in 1975 (5, 8).

In 1975 Law Number 79 for the year 1975 regarding the Department of Accounts was passed for auditing the public establishments and corporations in addition to public sector companies.

The above mentioned laws were limited to organizing the administrative and legal points for practicing the accounting and auditing professions in Libya.

Due to the importance of the subject, and lack of local accounting principles standards to be used as a benchmark for Libyan accountants and auditors, a team of researchers conducted an extensive study for inventory and evaluation of the accounting principles in Libya for the National Corporation for Scientific Research, under the supervision of the Committee of Science and Economics Committee, which is considered the first trial to perform an inventory of the accounting principles applied in Libya (2).

The study revealed a group of results summarized as follows:

â- A plain differentiation between similar companies in applying the accounting principles, a matter which lead to differentiation in the accounting data published, in addition to the difficulty of comparing data.

â- A plain difference between similar companies pertaining to the basis and methods of accounting procedures, which is attributable to the absence of an accounting general framework and approved accounting standards for the accounting procedures and methods in Libya, a matter which increased the difficulty of comparing similar companies.

â- Most companies violate the basic components of the objective of financial reports, which leads to minimizing the utility and importance of published accounting data, which seriously inhibits making informed economic decisions.

The following recommendations resulted from the study:

Upgrade the development of accounting levels through extensive teaching of accountancy in universities, and higher institutions, to build a cohort of competent accountants.

Forming an official organization entrusted with the issuing of principles, basis, and procedures, to organize accounting and auditing professions, in addition to solve accounting technical principles problems, which might face accountants in their practice, on condition that it should be subordinated to the accountants and auditors council to guarantee its independence and subjectivity in making decisions.

Extend the subjects of study to accounting principles and different applications guided by the results arrived by this.

In addition to above, the General People's Committee of Financial Audit will contend financial lists for Public companies within the circumstances of the absence of local Accounting Standards, a matter which led to the decision of accounting treatments that must be followed, being personally undertaken by the accountants and auditors within the General People's Committee for Financial Audit.

Based on the above, the problem of study is mainly related to the deficiency of applicable accounting standards in the local environment at present. The research questions which arise are:

Q1- To evaluate the number of companies that have implemented IFRS in their financial procedures in Libya.

Q2- To identify the underlying factors that lead to the use of IFRS in Libyan companies. This involves three sections:

2-1 Explore the compliance of these companies with IRRS.

2-2 Detect regulations, which have been legislated to motivate companies to use IFRS.

2-3 identify the conditions in which IFRS should be used.

Q3- Identify the impact of the use of IFRS on companies' reported profits.

Literature Review:

As mentioned above in the research questions, there is no proper implementation of IAS in Libya, in this chapter a background on Libyan accounting practice, regulation and market finance will be provided, moreover it will involve a review of the academic literature on accounting in Libya, which is expected to be small, so in this case I will investigate the introduction of IFRS in this chapter by other similar countries. A detailed history of IAS in Libya was difficult to obtain, so it was proposed to study similar countries, to support and refine research questions. Which are expected to be Arabic countries such as Jordan, Egypt in the Middle East (10, 11, and 13).

Importance of the study:

To identify the extent of suitability of compliance with the international accounting standards in the local environment of Libya.

To raise interest in the establishment of regulatory bodies in accounting and auditing, to standardize and codify accountancy practices in the public companies in Libya.

It is a step to establish accounting standards that suit the local environment in Libya, which is one of major oil and gas producing countries, and a strategically vital part of North Africa and the Mediterranean, and an important factor in greater Africa and the Middle East.

Purpose of the study:

The study aims to illustrate the environmental variation in the development of accountancy, and to explain the role and participation of the regional and international organizations in establishing International Accounting Standards (IASs), and the extent of compatibility with those standards in different countries.

In addition to this, the study aims (from a practical point of view) to test the viability of IASs to be applied in Libya by using the opinions and expertise of accounting and auditing practitioners.

Assumptions of the study:

The study has been based on the following assumptions; it is not necessary to comply with all IASs in Libya without amendment or alteration, and it is fine to modify standards to be in harmony with the local environmental variation in Libya.

(Relevant to favourite treatment):

In order to test the assumptions, the following branch assumptions were devised:

There is no agreement between the accountancy and auditing practices for choosing the favourite accounting treatment.

The alternative assumption, that there is an agreement between the accounting and auditing practitioners in Libya to choose the favourite accounting treatment.

Methodology of the study:

The methodology of the study is based upon three styles:

1- The library study style: the researcher will depend upon past books and studies, in addition to the specialized courses in this field to obtain the information which covers the theoretical aspects of the research.

2- The scientific study style: the researcher will depend on questionnaire form as a means to collect data and information, which serves the scientific purpose of the study.

3- Interviews with numbers of employees, in different recognized companies in Libya, with special questions which answers the research questions. This part of methodology will focus on the extent of use of IFRS in the Libyan institutes, regulatory bodies, and will investigate how many companies use the IAS, thus will explore reasons of these companies to choose IFRS, and their approach to implement these standards.

Limits and scope of the study:

Location boundaries:

Auditors of the department of production at the General People's Committee for Financial Audit, which is the responsible authority of Auditing and certification of the financial lists for the Public Industrial Companies in Libya.

Financial managers at Public Companies, as most of International Accounting Standards manage companies' accounting cases that are relevant to public Libyan Companies and corporations (5).

The time boundary will be chosen for practical study, according to modern issues and boundaries and amendments for international accounting standards, in order to commence the study and begin distribution of the questionnaire forms.

Contents of the study:

The study contains a general framework for study and four chapters.

The first chapter handles the effect of environmental factors in the development of accounting during the study of the effects of the different environmental changes (economics, social and political etc.) in the development of accounting. In addition to that, the chapter will discuss the conception and elements of International Accounting Standards, and the financial details of companies registered at the Libyan Stock Market.

The second chapter specifies the efforts and participation of international and regional organizations in establishing International Accounting Standards.

Detailed assessment will be applied to this part of the study of international accounting through the study history of its development, style of work, and objectives. In this chapter, accounting professions, the importance of these standards in achieving these objectives, and the current use of IFRS will be studied.

The third chapter concentrates on studying the viability of International Accounting Standards being implemented in the different countries, and considers the conceptual model of the developed, industrial world and North African Arab countries in this.

The final chapter concentrates on the extent of the viability of applying IASs in Libya, through recourse to seeking discussions with accounting and auditing firms' practitioners included in the practical study, and a group of results and recommendations are presented at the end of this study.