Abstract:
This study aims to examine factors affecting the adoption of International Financial Reporting
Standards (IFRS) in Ethiopia. The study focuses on examining the benefits and challenges of
IFRS including the factors that could influence its adoption. To answer research questions and
test the hypotheses the study adopted the mixed research approach. The questionnaire data
were analyzed using descriptive statistics, correlations, and multiple linear regression analysis
and data from document reviews were interpreted qualitatively. The results show that high cost
of adopting, the complex nature, as well as IFRS’s emphasis on fair value accounting, are
listed among the most important challenges of IFRS adoption. The study also finds that with
the exception of government policy the other six variables which are professional bodies,
capital market, educational level, company size, leadership & commitment, and other factors
significantly influence the adoption of IFRS in commercial banks. Finally, the findings suggest
that a rigorous IFRS capacity building program should be embarked by the government, all
regulatory bodies and training institutions in order to provide the needed manpower for IFRS
implementation.
