Adoption Of International Financial Reporting Standards in Ethiopian Financial Institutions: Challenges, Opportunities, and Key Benefits

Abstract

This study aims to examine the adoption of International Financial Reporting Standards (IFRS) in Ethiopian financial institution, using descriptive research design. The study focuses on examining the key benefits, opportunities, and challenges of IFRS including the factors that could influence its adoption. To answer research questions and tes 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 interview and document reviews were interpreted qualitatively. The research is founded on questionnaire survey of 132 accounting professionals, IFRS Team, Auditors, and finance officers and applied purposive sampling technique to assemble the data from target respondents from various financial institutions of Ethiopia. The results shows that IFRS adoption in Ethiopian financial institutions, will result in a number of important benefits to a wide range of stakeholders. High cost of adopting, the complex nature, lack of proper instructions from regulatory bodies for implementing IFRS, 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 five independent variables which are Governmental bodies, professional bodies, capital market, educational level and company size significantly influence the adoption of IFRS in Ethiopian financial institutions. Then the collected data were analyzed using descriptive statistics, correlational and multiple regression analysis by Statistical Package for Social Sciences (SPSS) 25 version data analysis. Finally, the thesis displayed practical implications for the government of Ethiopia and regulatory bodies in setting a firm deadline for the IFRS adoption and in following the proper application of all the adopted standards. The findings also suggest that a rigorous IFRS capacity building program should be embarked by the government, all regulatory bodies, firms and training institutions in order to provide the needed manpower for IFRS implementation.