| Abstract: | Factors Affecting Adoption of International Financial Reporting Standard in Commercial
Bank of Ethiopia
Developments in the global capital market have made the adoption of International Financial
Reporting Standard more significant than ever before. The adoption of IFRS in Commercial Bank
of Ethiopia like in many countries banking sectors has obstacles and challenges. The purpose of
this study is to identify factors affecting adoption of IFRS in Commercial Bank of Ethiopia, as
well as potential benefits and key challenges that will face on adoption of IFRS. In this regard
from the total of distributed 55 questionnaires to all finance department accountants and auditors
in head office, 53 were valid to analysis and interviews were conducted with accounts director,
finance managers and with experts and also document analysis were used to collect the required
data. To address research objectives and test the hypotheses the study adopted the mixed research
approach. The questionnaire data were analyzed using descriptive statistics, correlations, and
multiple linear regression analysis and data from interview and document reviews were
interpreted qualitatively. The study finds that with the exception of government policy the other
four independent variables which are educational level, professional bodies, company size and
capital market are significantly affect the adoption of IFRS in Commercial Bank of Ethiopia. The
results also show that IFRS adoption in CBE will result in a number of important benefits to a
wide range of stakeholders, Managements and to the bank. High cost of adopting, the complex
nature, lack of proper instructions from regulatory bodies for adopting IFRS, high level training
requirement as well as IFRS’s emphasis on fair value accounting, are listed among the most
important challenges of IFRS adoption. Based on the findings CBE is required to revise the
current accounting policy and procedure of the bank in accordance with IFRS and a number of
recommendations and direction for future research are provided.
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