Implementation of International Financial Reporting Standards in Ethiopia: Processes, Challenges, and the Way Forward
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Date
2019-06
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Addis Ababa University
Abstract
This study examines the implementation of International Financial Reporting Standards (IFRS) in Ethiopia by focusing on processes, practical challenges and the way forward. The study adopts a qualitative research approach. Specifically, the study uses in-depth interviews with key informants from the Accounting and Auditing Board of Ethiopia (AABE), IFRS conversion consultants, external auditors, IFRS implementation team leaders, and financial statement preparers. In addition, the study employs data obtained through document reviews. The result of the study reveals that implementation of IFRS in Ethiopia benefits the country by enhancing the quality and comparability of financial reporting, reducing the inconsistent and fragmented financial reporting, attracting foreign direct investments, and helping in the establishment of the stock market in the country. The results also indicate that the process of IFRS implementation in Ethiopia started in a rush without considering the minimum requirements and the readiness of the country for the project. As a result, reporting entities in Ethiopia have encountered a number of practical implementation challenges including lack of competent human resources with IFRS knowledge, lack of top management’s support, lack of strong regulatory and enforcement institution, lack of strong accounting practices in the country. The results of the study also show that the implementation of IFRS in public enterprises is more difficult than that of financial institutions due to such additional challenges as the problem of backlog clearances, poor records keeping mechanisms, lack of updated book of accounts and lack of corporate memory. This study suggests that to support the sustainable implementation of IFRS and to strengthen the regulatory body and enforcement institution, adequate resources must be put in place.
Description
A Thesis Submitted to the
Department of Accounting and Finance
College of Business and Economics
Addis Ababa University
Presented in Partial Fulfillment of the Requirements for Degree of
Masters of Science in Accounting and Finance
Keywords
IFRS implementation, IFRS in Ethiopia, Practical challenges