Wednesday, June 12, 2024

GAAP to change to IFRS this year


Organizations like banks, insurance companies and public enterprises will begin using International Financial Reporting Standards (IFRS) starting this fiscal year. The institutions had three years to transition to this from GAAP.
The system is considered to be the latest financial language enabling local companies to easily communicate with each other globally.
Asset revaluation was a critical step in the first stage. Some banks brought consultants and experts from overseas to undertake the process.
In the second stage, banks will start using the software before reaching to the reporting stage.
Ratified in 2014, the Financial Reporting Proclamation gave five years to the entire business to enter the new system.
Companies considered to have high public interest will report during the current year.
The second category which consists of international charity organizations, associations and other related organizations are also expected to report using the new system in the next fiscal year. Specially designed for such organizations, International Public Sector Accounting Standards (IPSAS), will be made mandatory after a year.
Other businesses which don’t fall into the above categories will be using the Small and Medium Entities (SME) version of the IFRS.
The Auditors and Accountants Board of Ethiopia called the bookkeeping taxpayers this year to register and to start the transition process. They are expected to report using the SME version of the IFRS for the 2012 fiscal year.
While implementing the new system the Audit Board has a limited number of experts who are certified in IFRS.
“There were only two experts three years ago and now we are able to train about 100,” said Abebe Shiferaw, PR Director for the Board. “The number is still limited and we are working with the ministry of education to refine its curriculum in line with the IFRS. Accountants graduating from the public and private universities know the Generally Accepted Accounting Practice in the UK (GAAP, which is going to be out of use very soon.”
Addis Ababa University is expected to upgrade its accounting curriculum this year in light of the IFRS.
Failure to meet this reporting mechanism will result in imprisonment and a fine.
After the full implementation of the new system the GAAP will be outdated.

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