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The impact of conservatism and secrecy on the IFRS interpretation: the case of Tunisia and Egypt

Jihen Eljammi Ayadi (IHEC Carthage, Ligue Iscae, University of Manouba, Manouba, Tunisia)
Salma Damak (IHEC Carthage, Ligue Iscae, University of Manouba, Manouba, Tunisia)
Khaled Hussainey (Portsmouth University, Manchester, UK)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 21 December 2020

Issue publication date: 28 May 2021




The effect of culture, through the accounting values of conservatism and secrecy, on accounting judgments is an area of research extensively studied in developed countries. However, little research has focused on this issue in developing countries, specifically Arab countries. Thus, this study aims to fill this gap by investigating the impact of the combined effect of the culture/accounting dimensions on the interpretation of the probability expressions used in the international accounting standards/international financial reporting standards (IFRSs) in two North African/Arab countries: Tunisia and Egypt.


In the first place, this study determines Hofstede’s cultural index scores for Tunisia, ignored in his original model and updates those related to Egypt, which provides a more relevant understanding of the cultural effect. Then, the study relies on the Hofstede/Gray cultural accounting model to examine the extent to which the accounting values of conservatism and secrecy may affect the recognition of the increase and the decrease of income and the disclosure of this information in the financial statements by postgraduate accounting student in both countries.


The results provide evidence of the generalizability of Gray’s conservatism hypothesis in the North African/Arab countries (i.e. Tunisia and Egypt), at least in the context of income recognition. Moreover, the findings demonstrate that culture, through its influence on the accounting value of secrecy, affects the interpretation of probability expressions used in the IFRSs to establish disclosures.

Research limitations/implications

This study calls for more attention from the standard setters to provide further guidance related to the consistent and accurate numerical value that needs to be assigned to the probability expressions to reduce the ambiguity related to their interpretation. The international accounting standards board (IASB) should pay greater attention to the use of vague probability expressions in developing the IFRSs to promote the true comparability of financial reporting worldwide. Like with any research, this study implies certain limitations specifically related to the sample selection, a sample size, which may affect the generalizability of the results. Thus, future research may rely on a larger sample combining and cover other cultural areas.

Practical implications

The results of this study may give insights into the practical issues faced by the accounting practitioners and which are related to the interpretation and the application of the IFRS including probability expressions. This may trigger their attention toward this issue to reduce the occurrence of these expressions in the revised and newly released standards to guarantee homogeneous financial reporting practices across countries and enhance the IASB’s objective of international accounting harmonization.


This study might be the first one that investigates the issue of the IFRS interpretation in two North African and Arab countries: Tunisia and Egypt. It also provides an original investigation of the cultural effect on accounting judgments based on the actualized Hofstede’s cultural indexes, especially for Tunisia which is ignored in the original country classification.



The authors would like to thank the participants in the fourth edition of the international LEAGUE-ISCAE conference held in Tunisia in December 2019 under the theme “Deep transformations and the future of Organizarions”, where this paper was first presented. Their valuable comments surely helped to improve the quality of the paper. The first author of this paper, Jihen Eljammi, would like to mention that it is a part of her PhD thesis undertaken at the IHEC Carthage University-Tunisia, and would like to thank the PhD committee for their constructive comments and recommendations.


Eljammi Ayadi, J., Damak, S. and Hussainey, K. (2021), "The impact of conservatism and secrecy on the IFRS interpretation: the case of Tunisia and Egypt", Journal of Financial Reporting and Accounting, Vol. 19 No. 2, pp. 234-271.



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