Chief financial officers (CFO) are displeased with the pace of conversion in corporate reporting standards to international financial reporting norms, as professionals blame a regulatory body for their dismay.
Parliament legislated in 2015 the establishment of a federal agency tasked with regulating and enforcing compliance with the International Financial Reporting Standards (IFRS). According to data from the industry regulatory body, nearly 1,000 public and private companies have complied to date. This represents not more than one percent of companies incorporated under the Ethiopian commercial code.
A survey conducted by a private audit firm revealed that Ethiopia’s IFRS implementation faces shortages of experts and inadequate disclosures. It is shrouded by weak corporate governance, inadequate training, weak enforcement of the regulatory body, and the high cost of migration from the traditional standard, the General Accepted Accounting Principles (GAAP). More than 120 countries have adopted IFRS, a global financial reporting framework adopted by the International Accounting Standards Board (IASB).
A global reporting framework is designed to harmonise national standards for shared understanding and comparability of financial statements.
IFRS is an international financial language for businesses worldwide. Ethiopia is moving towards full IFRS compliance at a snail’s pace; an initial deadline expired two years ago. The Accounting & Audit Board, chaired by State Minister Eyob Tekalegn (PhD), postponed the deadline to 2024.
The second deadline is unlikely to be met, according to CFOs who met at a forum held at the Sheraton Addis on Thursday, October 13, 2022.
“The introduction of IFRS is simply business as usual,” Tedros Solomon, who attended the first forum organised by HST, a private audit firm chaired by Solomon Gizaw, its CEO.
The firm conducted a survey where 49pc of the respondents wanted to see the Board work actively to reduce bureaucratic hurdles.
One of its directors at HST, Gobeze Dessalegne amplified this concern during his presentation of the survey’s results. He highlighted “bureaucratic hurdles” at the Board undermining the conversion pace.
Solomon attributed the slow pace and lack of progress to inadequate training and disclosure.
The financial and accounting professionals were exploring the country's journey since it adopted IFRS seven years ago. They pointed out that the Board lacked vigour in training and doubted whether IFRS conversion played a significant role.
“It’s widely used worldwide,” Mesfin told the Forum. “I doubt it’s an opportunity or loss to the country.”
Hikmet Abdella is the face of Ethiopia’s accounting industry. She was head of Ethiopia’s chapter of the Association of Certified Chartered Accountants (ACCA), a professional body established in London in 1904. It has 241,000 members across the world and provides competence certification. Hikmet runs the Board, assuming office two years ago as director general.
She was concerned that complaints from a few individuals might characterise the Board’s performance.
“They [the complaints don’t demonstrate our entire performance,” she said in the board's defence.
However, 46pc professionals who responded to HST’s survey want the Board to maintain “a user-friendly” and efficient client service desk. About 39pc of the respondents urge Hikmat to refocus the Board’s resources to provide training.
Yonas Estifanos is a professional accountant consulting about 60 companies. He echoes the discontent in his industry over poor disclosure and lack of training.
“Those from our universities were trained in the previous system [GAAP],” he told Fortune.
PUBLISHED ON Oct 15,2022 [ VOL 23 , NO 1172]
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