The readiness and ability of accounting practitioners in Libya to implement IFRS with reference to revenue recognition as a case example

For a considerable time the centralised economic planning and control of business and property has failed to improve the Libyan economy (Otman & Karlberg, 2007). Moreover, during the last fifteen years a number of problems have surfaced, usually related to the nature of economic performance under the control of the public sector (World Bank Group, 2005). The government has begun to introduce economic reforms, privatisation programmes and started to move towards a market economy. Many business and investment barriers and limitations have been removed, and more liberal economic policies have been adopted. Reforms have been aimed at boosting private sector activities and expanding the ownership structures of business. These have generated much local interest in corporate reporting and the need to assess it (Otman & Karlberg, 2007). Economic reform in Libya has brought with it a necessity to reform the Libyan accounting system. The reformation of domestic accounting and financial reporting is based on the tension between the purpose behind the existing domestic accounting principles, with their strict regulation of all accounting procedures on the one hand, and new demands brought by changes in objective in the field of economy and business on the other hand. As a result a reformation of the Libyan accounting system and financial reporting has become a necessity. Two possible alternatives exist: to establish individual accounting standards or adopt some of the existing international standards (Otman & Karlberg, 2007). One of the choices now facing Libya is whether to adopt and use international financial reporting standards (IFRS) they are, or to establish domestic accounting standards based on IFRS, but at the same time adjusted to the national prerequisites, as has been done in many countries. The difficulty lies in the fact that IFRS is regulated by a foreign non-commercial organisation (the IASB), where Libya is not represented nor has any financial input. Therefore, the question of accounting standards in Libya is still not resolved. This study attempts to assess the readiness and ability of accounting practitioners in Libya to implement IFRS, with specific reference to revenue recognition as a case example, because it has a relationship to accounting skills, the legal system, and also has a very important role in moving from socialist to market based economy. Two research phases were undertaken. The first phase was based on a survey designed to explore the perceptions of practicing accountants and auditors operating within the Libyan economy. This was followed by a series of semi-structured interviews. The results from the quantitative analysis were corroborated and developed in more depth from the information gained through the semi­structured interviews with a sample of Libyan academics, chief financial officers, members of the accountants' association and external auditors. In the second phase, a second questionnaire survey was distributed to students (potential practitioners) to gain further understanding and to explore the likely future state of revenue recognition in Libyan. The questionnaire replicated one used in Hoshower & Gupta's study (2009). Their work considered a similar series of research topic, but in a U.S. context. The results of the study revealed that the current and future situation of revenue recognition do not confirm the readiness and ability of Libyan practitioners to implement IFRS. For investors and lenders it is important to have comparable, quality information and this can only be achieved if countries cooperate in creating a common system like the IAS/IFRS. In Libya, a lack of technical capacity poses a significant barrier to the successful implementation of IFRS. The results also showed that foreign companies trading in Libya were affecting Libyan companies by that trade, which was encouraging them to move to adopting international standards. As more Libyan companies trade, the impact of marketisation as a result of be coming involved in such trade, will probably result in collective growth, and push them to force further companies to adopt the same standards, and so that the impetus for adoption of international standards is likely to be bottom-up, rather than top-down from government