CHALLENGES AND PROSPECTS OF ADOPTING INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) BY ETHIOPIAN COMMERCIAL BANKS

Abstract

Now IFRS is in use by most countries of the world and being adopted increasingly around the globe. The goals of the IFRS is to develop, in the public interest, a single set of high-quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles. In Ethiopia, IFRS is adopted officially in December 5, 2014 through enactment of Proclamation. The main objective of this study was to assess the challenges and prospects of international financial reporting standards (IFRS) by Ethiopian commercial banks to provide an input for financial institution, governmental and policy makers and serve as a basis for future researches on this field of study. A sample of seven commercial banks had been selected from the existing seventeen. The study employed a mixed research approach. Both primary and secondary sources of data have been used for the study. Primary data were collected using structured questionnaires whereas secondary data were collected from different governmental organization reports, scientific papers and proceedings relevant to the study, and proclamations and regulations that deal with financial reporting issues in Ethiopia. The collected primary data was coded, edited and cleaned for processing using Statistical Package for Social Sciences (SPSS) – version 20.0. Descriptive statistics such as means, standard deviations and frequency distributions were used to analyses the data. Data presentation was done by use of, percentages and frequency tables. The Results of the study indicates that, the respondents believes the Adoption of IFRS have valuable benefits for both internal and external users. Whereas, legal and regulatory requirements, inadequacy well trained and strong professional bodies and poor IT infrastructure are among the challenges that hindered the adoption process. The study suggests the early adoption of IFRS is fundamental to give credibility for the financial statements. It also suggests the need for upgrading of IT infrastructures, the need to facilitate large training and education opportunities, establishment of strong professional bodies and effective communication with standard setters.