The Impact of International Financial Reporting Standard (IFRS) Adoption on Key Financial Ratios – The Case of Private Commercial Banks in Ethiopia

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Addis Ababa University


This study examines the impact IFRS adoption on key financial ratios on commercial banks in Ethiopia with objectives of ascertaining the role of IFRS for quality accounting information, identifying the sources of differences in financial reporting experienced by banks, examining whether the differences between GAAP and IFRS exist. The study employs a quantitative research approach based on financial information’s and figures collected from banks annual audited reports. Sixteen banks were selected out of eighteen commercial banks. To understand the impact of IFRS adoption on banks financial ratios and figures, data were collected and summarized in excels, test and analyzed in SPSS. Figures and ratios were tested and analyzed through descriptive statistics, test of equality of means, median and variances and regression analysis. The descriptive statistics result indicates most of the range of values is larger in IFRS compared to that in GAAP. The test equality of means and medians results not statistically rejected for all figures .IFRS adoption does not change significantly, at the aggregate level. The median value of revenue indicates that there is no difference in Revenue between GAAP and IFRS, and Revenue does not have any impact on differences between ratios. Some financial statement figures decreased and others increase after the transition. Profit for the year increase and inconsistent to the research problems that profit decreases after the transition from GAAP to IFRS by banks. The IFRS values are not fully explained by GAAP in regression analysis. The study suggests that at the aggregate level, the analysis of medians and means of IFRS values is generally reliable; the volatility of accounting figures in IFRS is generally higher than GAAP. Various adjustments affect the differences between financial statement figures and ratios in IFRS and GAAP. It may be prudent to rely on cash flows to avoid the subjectivity inherent to accounting adjustments. IFRS adoption is new to Ethiopia, the impact of IFRS on financial statement figures, ratios, and earnings may not be observed and understood at this time and it needs further studies by taking more trend data in the future.


A Thesis Submitted to Addis Ababa University College of Business and Economics in Partial Fulfillment of the Requirements for the Degree of Master of Science in Accounting and Finance


Banks, Financial Ratios, Financial Statements