Challenges and Opportunities of IFRS Implementation by Private Commercial Banks of Ethiopia
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Date
2021-06
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A.A.U
Abstract
The implementation of IFRS increases the organizations’ competency and creates a unified accounting language internationally. The aim of this study is to assess the opportunities and challenges of International Financial Reporting Standards implementation by private commercial banks of Ethiopia. In order to answer basic research questions, the study employed both quantitative and qualitative (mixed) approaches. The Primary data sources were used for the study and collected by initializing the self-administered (structured) questionnaires and semi-structured interviews of the IFRS implementation team. From the total population of 76 IFRS teams 63 samples are selected. Simple random sampling techniques used in this study, and the collected data analyzed through descriptive statistics, using SPSS software Version 20. The findings of the study reveal that implementation of IFRS has opportunities that enhance consistency and verify the effectiveness of the company’s financial statements, give reliable financial information, management able to understand the financial position of the bank, and detailed employee benefits. However, there are challenges that the finding confirms mainly; high consulting fees, continuous staff training, insufficient practical knowledge and experience, the preparation of IFRS financial statements are more complicated, the banking IT system has not yet integrated with the IFRS process, local regulatory body (AABE) does not provide a financial report review, the absence of the stock market brings the fair value measurement problems due to this reason, there is difficulty exactly measure the fair value of equity investment. Finally, the researcher recommends that Private banks should reduce costs of consultancy by outsourcing new qualified and well-experienced employees, Should design software that enhances a financial report integrating with IFRS system, should make sure financial statements be relevant and comply with disclosure requirements, develop employees’ capabilities and potential to provide regular practical training, and private banks should clearly communicate relevant information with a local regulatory body.
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Keywords
International Financial Reporting Standards, Private Banks, Implementation, Opportunities, Challenges.