ADOPTION OF IFRS IN ETHIOPIAN FINANCIAL INSTITUTIONS: PROSPECTS, CHALLENGES AND LEVEL OF IMPLEMENTATION

Abstract

The development of science and technology contributed for globalization to emerge as a concept. Globalization in its turn, truncates the distance between countries and continents. A global village which we all live in has emerged due to an extensive rise of globalization. Not only creating villages, it also creates different languages in that the villagers to communicate. It is quite difficult to live in the same village speaking different languages. IFRS in this regard had emerged as a language enabling the business community to communicate each other. Ethiopia as a part taker in the global village proclaimed proclamation number 847/2014 to adopt IFRS and integrate its financial reporting with the global system. This study aims to assess the challenges, prospects and implementation status of IFRS by Ethiopian financial institutions. Questionnaires were distributed to IFRS implementation team members of selected financial institutions. Primary data were collected through five point Likert scale questionnaire whereas secondary data were collected through analysis of proclamations, council of ministers declarations, annual reports, legislations, directives and other related documents. The study found that respondents recognized the prospects of IFRS adoption and its contribution for both quality of financial statements, government, investors, reporting entity and financial statement users. Major challenges that hinders IFRS adoption process found by this study include lack of strong Professional Accountancy Bodies, existence of incompatible accounting software with IFRS requirements, lack of markets that provides market information to supplement the adoption process, lack of well-trained professionals like Auditors and Trainers on IFRS, and hiring new staffs and consultants is costly. The study also showed that financial institutions performed both initial, conversion, report and assurance level activities. This study is worth reading due to its various contributions to future researchers, policy makers, and educational institutions.